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How to extend your transactional scope to optimise cash flow recovery

How to extend your transactional scope to optimise cash flow recovery

During these uncertain financial times, VATBox remains committed to keeping the tax community connected through a series of TaxTech Connect webinars. In this series, we candidly discuss the most urgent challenges currently facing our community of global organisations: Unlocking additional cash-flow and accelerating the recovery of funds during the COVID-19 era and beyond.

The second webinar in our series, entitled How to extend your transactional scope to optimise cash flow recovery, focuses on some unexpected potential cash-flow generators. Co-hosts Roderick de Greef – VP Sales for VATBox, and Joe Hyams – Director of Product Management for VATBox, use their expertise to cover:

  • How to find savings opportunities in additional domains’ activities
  • Transactional data analytics overview and insights
  • The value of tax digitalisation during the COVID-19 era and beyond

The full webinar is also available on-demand here:

Joe opened the conversation by quoting PwC,“The keys to success are preparation, agility, accurate data and a willingness to harvest good ideas from every layer of an enterprise.” He asks Roderick to address that statement and discuss what steps corporates are taking in an effort to recover from the pandemic”.

Roderick outlines four areas of focus in the market:

  1. Increased demand for technology solutions: Shared service centres are working in a limited capacity due to COVID-19, and enterprises need immediate solutions to recover VAT or process reports for domestic VAT.
  2. A resurgence of new expense types: There are many more types of employee-driven transactions with people working from home—for example, Uber Eats, office supplies for home, etc.
  3. Demand for VAT savings projects: Every CFO is searching for ways to unlock cash-flow and is expecting indirect tax departments to create VAT savings from historical transactions or from new opportunities for recovery.
  4. Uncertainty about new global rules and regulations: Enterprises are unsure how the global pandemic will impact existing regulations and struggle to keep up with changing deadlines.

How to find savings opportunities in additional domains’ activities

Roderick says, “Europeans today now spend more than €4 trillion per year on payment cards. While most companies have a clear process for VAT recovery of expenses, the P-cards marketplace and Accounts Payable are the current challenges because they are procured by employees themselves, not by the standard enterprise systems. You need a process in place to recover this spend because we see an 85% qualification rate in these types of transactions.” Joe recognises that the potential for recovery is huge and asks Roderick to elaborate on how to find those savings in additional domains’ activities.

Roderick illustrates using a real-world AP example from one of VATBox’s clients: a pharmaceutical company. The company came on board with a focus on T&E and recovered €10.3 million by submitting 615,000 invoices. VATBox did a deep dive into the company’s data and found an opportunity in Accounts Payable. Roderick says, “We found 986 invoices that amounted to €6.21 million in VAT  recovery for Account Payable.”

The company had not previously claimed foreign AP because they did not have the resources to deal with the tax authorities. With VATBox contracted to liaise with the authorities on their behalf, the company recovered more than €6 million more, emphasising the importance of ensuring you are reclaiming all eligible foreign VAT on Accounts Payable.

Transactional data analytics overview and insights

Roderick highlights the increase in employee-driven transactions. “Nowadays, everybody wants to procure in their own way. Working from a home office, no one wants to go through a whole PO system to get some supplies. We just want to go to Amazon and benefit from same-day delivery.”

With VATBox contracted to liaise with the authorities on their behalf, the company recovered more than €6 million more, emphasising the importance of ensuring you are reclaiming all eligible foreign VAT on Accounts Payable.

 This growth of P-Cards presents some challenges to corporates as well.  Similar to T&E, many corporates do not yet have a process in place to handle P-Card appropriately. Statements are often missing supplier information, tax codes are not assigned, and tax calculations are incorrect. There may be no line items, and no checks are being performed on these invoices because often there is no qualified evidence. This problem can be resolved relatively easily with technology.

The value of tax digitalisation during the COVID-19 era and beyond

Every T&E software system has a built-in payment card module. Employees can simply scan in the invoice to the Travel & Expense/P-card system, and VATBox receives the invoice via the API. VATBox technology then takes care of the analysing the invoices, doing the calculations, and reclaiming the VAT. It’s especially relevant for companies that have unclaimed VAT on historical transactions. He notes that “Historical data can bring in cash flow right now and cash flow is the most important thing right now – during the pandemic – for every company, no matter the size.”

He offers an example from one of VATBox’s clients: a global beverage company with an entity in the Netherlands that did not realise they were not reclaiming domestic VAT. VATBox was able to reclaim VAT on four years’ worth of historical transactions, uncovering a total of €1.6 million in VAT. Creating an immediate cash-flow to the company’s bottom line, and this was only one of the company’s entities. The same exercise can be performed in every country, according to their rules.  As Roderick puts it, “There is so much potential.  Millions and millions are waiting for corporate customers.”

 Tax Tailor by VATBox

Roderick describes VATBox’s unique solution called Tax Tailor that can be added onto their standard VAT recovery solution in order to generate additional cash-flow from domestic VAT recovery. He illustrates the benefits of this solution with a real-world example.  VATBox had been working with a Fortune 500 company that had recently acquired nine other companies. In the first few years, many invoices were disqualified for VAT refunds because the invoices had the old company names/addresses listed. VATBox’s consultants worked with the company to resubmit the invoices that could still qualify, and the company saw a 24% drop in their disqualification rate. This resulted in an added recovery of over €500K, adding 25% to the company’s bottom line.

He explains that VATBox can go back in time and reprocess all the historical transactions, enabling VATBox’s machine learning algorithms and AI to store this data for future analysis, and further improving compliance over time.

3 Easy steps to optimise cash flow recovery

The time has come.

  1. Identify opportunities
  2. Evaluate your recovery potential
  3. Take action to unlock cash-flow

Existing VATBox customers can expect to hear from their Customer Success Managers to help evaluate any untapped recovery potential. New customers can have their business cases created from their data within 48 hours and can start unlocking cash-flow immediately.

If you’d like to learn more about how VATBox can help you extend your transactional scope to optimise cash flow recovery, you’re welcome to contact us. We’d be happy to provide a free evaluation of your transactional data (current and historical) whether you’re using an ERP system or via shared service centres. As Roderick states,“There is nothing that can stop you now from recovering VAT!”

 

 

 

 

 

 

 

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