Meeting the New Indirect Tax Challenges of Accounts Payable Automation

Alex Forbes
September 26, 2019

A substantial number of companies are unaware of the full challenges around tax compliance and their procurement processes. Part of the challenge is that tax compliance must functionally sit with procurement and other business functions in the enterprise that own the data interchange, while the ultimate responsibility for tax compliance remains with the tax department. This creates new dependencies among stakeholders within larger organizations that previously had no reason to interact and could each control processes within their sphere of responsibility. 

Multinational companies would like to have homogeneous global control in their accounts payable processes, but ultimately, in many cases, what happens is they will not have enough time to adjust their global process and localize it to new country tax compliance mandates. 

Modernization, consolidation and integration challenges of AP automation

Broadly speaking, there are two primary components to meeting the challenges of AP automation. The first is modernization and consolidation of disparate AP systems and integration into SAP. 

Companies don’t want to face the digital tax tsunami with disparate and antiquated AP automation systems that rely on manual workflow and document images, such as those invoices digitized through Optical Character Recognition (OCR) techniques, rather than end-to-end structured data. 

SAP shops need to work with their suppliers and software vendors to architect approaches that take advantage of structured orders, logistics data and invoices so as to set up two-way and three-way automated matches that create a basis for consistent controls and high-quality data across the extended enterprise. 

Accounts payable at the speed of regulatory change

The second component of managing AP is ensuring all applicable tax requirements are met, including updates for country tax compliance mandates. Specifically, that means being able to move at the pace of regulatory change as mandates shift and develop globally. As data processing and end-to-end transaction support increasingly move to multi-tenant third-party cloud platforms, and as tax controls are increasingly performed in real-time, it becomes impossible to keep up with new regulations through resource-intensive in-house or local advisory partners. 

Finding a method for automatically updating all AP systems for tax compliance, essentially automating compliance, is a necessity for companies looking not only to avoid audits but also to cut costs, and protect supplier relationships and cash flow. This isn’t a simple task, as the business will always be driven towards using different types of AP automation systems, whether built in-house, licensed and run under the company’s own control, or performed on a cloud vendor’s procure-to-pay or similar platform. 

SAP customers can only operate efficiently and with peace of mind if they can ensure a common approach to the challenges of digital indirect tax in a uniform manner, regardless of which applications or hosting methods are used to benefit the business. Such a common approach should be based on choosing a single vendor that, at its heart, monitors all applicable legislation and that offers ways for any system the company chooses to use to comply with indirect tax requirements, regardless of changes to business systems and processes and regardless of the evolution of all the different forms of digital reporting and clearance e-invoicing in all jurisdictions.

Potential trouble lurks in AP systems and processes to a much greater extent than many realize. AP tax compliance is no afterthought. It is a critical component of any SAP shop’s implementation strategy, including the move to SAP S/4HANA. 

There is an alternative – a global approach. You can turn this tsunami of digital tax initiatives and real-time controls into a positive, supporting your own digital transformation while your competitors get dragged down in local, individual country implementations.

AP leaders ignore this opportunity at their own risk. 

Take Action

Download the eBook, “Accounts Payable Tax Compliance: 5 Challenges SAP Shops Must Overcome,” and overcome supplier errors and AP system diversification while ensuring domestic and international tax mandates don’t derail your SAP S/4HANA digital transformation.

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Alex Forbes

Alex Forbes is Senior Manager, Content Marketing, at Sovos. When not helping readers navigate their tax-related digital business transformation journeys, he enjoys day tripping around New England with his wife.
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