7 Reasons to Automate the Tax Exemption Certificate Process

This blog was last updated on July 1, 2019

Tax exemption certificate processes are often a significant, arduous challenge for many larger manufacturers and wholesalers that still manage certificates in a manual and time-consuming manner. This often results in missing, lost or outdated certificates that can lead to significant audit risk. Auditors know this and generally, tax exemption certificate processes are the first and easiest target during an audit.

Some of the problems and questions we’ve heard from tax departments regarding tax exemption certificate challenges are below. How many of these statements or questions can you relate to?

• We don’t have good controls in place to make sure we validate an exemption certificate properly.
• We have a small team and requesting valid exemption certificates takes a lot of effort.
• How can we help customers submit the correct tax exemption certificate the first time without excessive data entry on their part?
• How can we check exempt status quickly without leaving our desk?
• How can we easily request one exemption certificate or thousands by email in a more automated fashion?
• How can we simplify the challenges of tracking exempt drop shipments?
• How can we cut the number of exempt transactions booked in error?
• Can we fit this solution into our existing processes seamlessly?

According to a 2017 Aberdeen Benchmark Report, one of the top drains on the business for manufacturers is the management of exemption certificates, not to mention maintaining the rules for complex product SKU’s and understanding which products are exempt.

Here are 7 ways that automating your tax exemption certificate management process will increase your compliance level and decrease your risk of audits and penalties.

Clean Up Your Existing Disparate Tools, Paper Process for Managing Existing Tax Exemption Certificates

1. Reduce manual work and paper documentation – By importing and centralizing your exemption certificates and customer data into a single location in the cloud your team will have instant access and full visibility into which customers have missing, incomplete, invalid and expired certificates in minutes.

2. Minimize transaction errors and incomplete records – A proper certificate management solution will make it easy to understand when there are certificates that are in need of action and to request a new or updated certificate from a customer, or many customers at once, in a proactive manner. This will reduce the amount of time your team spends collecting and validating certificates and ensure you are only exempting customers who have provided valid documents.

3. Eliminate IT costs of maintaining an in-house solution – Similar to organizations that have recognized the value in outsourcing particular dynamic business functions with providers that are experts in the discipline and have developed technology designed for that task rather than building in-house, cloud-based or SaaS (software-as-a-service) models continue to gain momentum for the low up-front cost, ability to centralize processes, minimal need for IT support and predictable value.

Establish a Proactive Process for Managing Tax Exemption Certificates

4. Adapt your customer onboarding process to ensure proper exemption certificates are received and validated – Streamline your customer onboarding process by providing a simple method of uploading exemption certificates directly into the solution. This will make it convenient for your customers, and ensure you always have visibility into who has submitted their certificates and who has not.

5. Improve customer relationships and loyalty – Preserving client relationships by ensuring accurate tax treatment on invoices and timely order fulfillment can make a huge difference in customer satisfaction. Have you ever had to hold up an order that didn’t have an updated certificate? Have you had to reissue an invoice? Have you been short paid? A proactive exemption certificate management process using the right solution will reduce the need for issuing credits and costly re-work.

Confidently Defend Audits and Save Time with Tax Exemption Certificate Management Automation

6. Significantly reduce audit frequency and time needed to prepare – Eliminate time spent gathering the necessary data at the time of audit and confidently defend audit inquiries with the needed certificate documentation at your fingertips.

7. Maintain exemption certificate compliance as your business grows – As your customer base grows, collecting certificates will only become more challenging. You may try to make the certificate request as part of your billing set-up process but things happen (your customer service, someone from the credit team, your customer service rep or AR accountant for e.g. forget to make the request or the customer just doesn’t fulfill your request). Do you have the resources to track down all of the new certificates? Let your tax exemption certificate management solution free up your time to add more strategic value to the business by focusing on growth and don’t let tax compliance get in the way.

Tax Exemption Certificate Management Solution

Sovos CertManager enables you to import thousands of exemption certificates in minutes. All of your business entities’ certificates are managed in one secure location, eliminating any gaps in documentation. As a cloud-based solution, CertManager’s intuitive interface can be accessed anytime ensuring you always have ready access to the documentation you need, when you need it.

With CertManager you can quickly associate certificates with customers and easily capture the critical information you need to manage compliance. Accounts receivable, credit or other customer-facing staff can easily enter and validate certificates with very little tax knowledge.

You can rest easy knowing that you have accurate customer and exemption data for each customer and business entity. Exemptions are properly applied, you can defend them in an audit, and your customers are kept happy by eliminating needless credits and rework.

Eliminate “surprise” penalties or unplanned adjustments due to lack of documentation. CertManager prepares you for audit, allowing you to search certificates by state, customer, exemption type and more. Easily export results in seconds. CertManager lets you take control of the process, keeping your company out of the auditors’ sites.

CertManager enables your team to be more proactive and improve workflows while increasing accuracy. All certificates are indexed by key data so you can quickly find what you need. Use alerts to identify missing or expired certificates before the auditor calls and easily automate the process of sending emails to clients informing them of missing or expired certificates, maintaining an accurate database. CertManager also grows with you as your company expands into new locations, customer types and product offerings.

Join our solution experts for a March 27, 2018 Webinar, “Automating Tax Exemption Certificate Management to Confidently Defend Against Audits.” Save Your Seat.