By James Ford, Managing Director, SALT Sales & Use Tax Compliance
The management of sales and use tax compliance can be complicated. Every month during the close cycle, you need to quickly summarize, compare and transform data from multiple sources in the fastest, most accurate way possible. After data is prepped, returns need to be prepared via paper and EDI; checks must be cut; and ACH payments must be executed. Once that’s complete, accounts must be reconciled, and any adjustments must be rolled forward to the next month. This is a time- and labor-intensive exercise that’s prone to errors and inaccuracies, especially if you’re still using manual processes.
The good news is this: you can make your sales and use tax compliance process more manageable, either by streamlining your in-house process or by outsourcing it. But first, you need to ask – and answer – the right questions about your data, your process, and your resources to learn how you can save time, money and resources, while reducing risk.
A Q&A for Internal Process Improvement
Before seeking a path of improvement for your internal processes, you first need to take a hard look at the current state of three key areas. Ask yourself these questions:
How are you filing – manually or through automated processes?
Are you keying data into state websites? Are you using software to generate the forms?
If nothing else, implementing software to help with the preparation of forms is a must. Once data is prepared there are a multitude of solutions that can be implemented to help streamline the return prep, supporting schedules, and may even produce up-loadable filings. Educate yourself and your team about available software solutions to make sure you implement the right solution for your filings.
Are you gathering the right data? How is your data validated, archived, and retrieved?
Returns solutions are great at producing signature-ready returns. But they are not data warehouses or transformation tools. If your source data takes a lot of massaging to get it ready for your returns software, you may need to consider that process as one that takes place outside the system before data is ready for returns.
During your process, are you reconciling along the way to ensure that your data agrees with your general ledger?
It’s common for companies with complex systems and multiple general ledgers to run with transaction-level data to begin their process each month. But that transaction-level data needs to be reconciled back to the general ledger in order to account for any adjustments. Most companies do this process after compliance is complete, double checking the data that was filed agrees with what was accrued. With the right tools and automation in place, the reconciliation process becomes self-sufficient and is completed with the filings in real time.
WEIGH AND MEASURE YOUR OPTION TO OUTSOURCE
Sales and use tax compliance consumes a great amount of your tax staff’s time. There is software to be maintained, data to be manipulated, payments to be made, and returns to be filed. In the meantime, you may already be understaffed, or worse yet, your tax staff may not have sufficient experience in sales and use compliance. This could cause a greater margin for error, and even missed payments. If this resembles your tax department, outsourcing could a strategic option for you.
Based on your responses to the three questions above, the benefits of outsourcing your sales and use tax compliance processes can be substantial. They include:
- If you have existing sales tax software in place, you can say goodbye to annual renewals, hardware upgrades, and support. Your outsourced partner will use the software and license it directly so there is no software implementation, maintenance, or annual fees for support.
- Your data can be accepted as-is. There will be no manipulation or conversion required, saving you many man hours and headaches. We have dedicated Tax Technology professionals that support data warehousing and transformation of source data files on a monthly basis.
- Our process starts with general ledger alongside transaction level detail. The combination of the two allow for easy return filing and adjustments on the fly. Once returns are filed the reconciliation process is done, as any adjustments to returns have been identified in the data when returns were prepared.
MINIMIZE RISK AND COST, NO MATTER YOUR APPROACH
Whether you decide to streamline your current in-house sales tax process or outsource, there are ways to minimize risk and cost in your compliance process. Immediately realize the benefits of:
- Streamlined and validated data
- Reduced tax liability and audit risk
- Return deadlines monitored and met
- Tightened internal controls
- Increased tax return accuracy
- Reduction in overall internal costs
Learn more about Sales and Use Tax Compliance Services.