Credit.org recently released an excellent article on the five dangers of credit card use. In reviewing the factors that author Melinda Opperman puts forth, it was impossible to ignore the parallels in which many businesses approach their compliance management practices.
As credit cards are something that most people have and use regularly, we thought this was an excellent way to illustrate how the use of point solutions for businesses in managing their compliance obligations functions much the same way. A perpetual cycle of increasing costs and poor returns while kicking the problem down the road to solve it later while you fall further and further into what we will call compliance debt.
With that background in place, we present to you the five dangers of using point solutions and why you should stop putting compliance on credit immediately.
Perpetual solutions
Regulatory compliance is complex and always changing. Countries update, alter and introduce new mandates continuously. If your strategy is to acquire and activate point solutions to manage each of these compliance obligations, there is no end in sight for the number of products you will need to acquire over time.
Pro tip: Centralize on one platform capable of scaling to meet all your changing needs.
Resource fatigue
Every installation of a new point solution creates an additional burden on your IT team to install, manage and maintain. Most often point solutions employ manual updates that require systems to be brought down, updated and reactivated, typically outside of normal business hours. This is not only time-consuming, but it distracts IT from more strategic projects.
Pro tip: Use an automated system that makes updates in real time with no added burden on IT.
Excessive costs
Businesses often turn to a point solution to solve an immediate problem because it looks to be faster and cheaper. However, when considering Total Cost of Ownership (TCO), point solutions represent a much higher price point that continues to represent a drain on company resources long after the product is installed. Getting caught off guard about changing compliance laws and mandates highlights a lack of strategic planning that will end up costing you more overall.
Pro tip: Have a strategic plan for tax compliance endorsed by the C-Suite.
Scalability issues
Point solutions are just what they sound like. They can solve one point, one issue. However, what happens when tax mandates evolve, new ones are introduced, or your business grows or expands? Because they are not capable of scaling to meet these needs, you are back into the market for another point solution and all the negative organizational impacts that come with them. Because compliance never stops, neither will the cycle of endless point solutions being introduced into your tech stack.
Pro tip: Systems capable of scaling to meet the changing realities of governmental compliance, as well as your business, are a smart investment.
Lack of a global view
Perhaps the most damaging point of all for businesses in using a litany of point solutions to address compliance is the lack of a centralized view into your overall compliance posture. Frequently, the use of multiple point products will give you, inconsistent at best and contradictory at worst, information as to where your business stands in meeting your compliance obligations. With no reliable standard of data and information in which to base decisions, your chances of running afoul of regulators increase exponentially.
Pro tip: Invest in a solution that provides a global dashboard of all compliance positions and provides accurate, actionable data.
Take Action
Regulatory compliance is difficult enough. Do not complicate further by introducing an unlimited number of point products into your organization that increases costs, drains resources and leaves you vulnerable.
Sovos experts are ready to discuss the advantages of a complete compliance solution. Contact us today.
