When you hear about automating that VAT reclaim process, it’s very easy to think that implementing that structure into your company automatically is the smart move. However, there are a lot of hidden factors you might not think about immediately. That’s not to say digital VAT management is not the right way to go; it just might not be the right vendor or it just might not be the right time yet, depending on the needs of your company and the provisions of the software.
Let’s start with a quick list of the major benefits of switching to VAT automation:
- VAT automation reduces the risk of human error.
- It provides a quicker VAT return than if the paperwork was done manually.
- Gives full compliance with automated implementation of new rules and regulations.
- The VAT recovery technology can easily generate an accurate report for financial records, and you can ready your company for audits or other financial reviews very quickly.
- Manual processes are expensive, cumbersome, and put a lot of pressure on the handful of people who fully understand the system.
- The program stores the information about all the little intricacies of VAT rates so that financial managers don’t need to worry about remembering every relevant detail.
However, this does not mean the system is perfect yet. There are still flaws and issues with setting up an automated VAT system for your business. While the process has come a long way, here is what needs to be fixed to improve digital VAT management.
When companies decide to implement VAT systems, all employees need to understand how to input the relevant information in existing T&E systems, or provide the correct information to the financial manager. There is a learning curve with these systems, and employees may be confused and submit the wrong data. Therefore, whatever program you use, needs to be easily adaptable for both small and large companies, and for both people who understand technology and people who may be behind the curve in their technological skills. It will take a lot of effort to make sure every employee understands the process, and even then, you might still receive incorrect information. Human involvement still exists for these programs to some degree, and therefore human error is always a possibility.
VAT reclaim is one of those most complicated processes that you, as a business person, must engage in. Beyond knowing where the transaction took place, there are many more questions that have to be answered regarding the location and nature of the transaction. Global VAT compliance is extremely difficult when VAT rates vary from country to country and sometimes city to city. In the European Union alone, there are 28 member states, and while there is some coordination of VAT rates, each country still has their own rules and regulations surrounding VAT reclaims.
Even VAT management tools can have trouble keeping up with not just current policy, but the constant changes in VAT regulations in each jurisdiction. A strong system is one that would be connected to a central database that keeps track of all the changes, but there is always the risk that the central database will not be able to keep up with the frequency at which the policies are changing.
Building the Infrastructure
Installing VAT automation technology is not a one-step process. It is not only very involved, but there are a lot of details when it comes to financial reporting. Depending on when you have your system, when do you plan to track your fiscal year? Do you need to re-enter transactions that were completed prior to the installation of the hardware?
In addition, incorporating and learning new technology can take up valuable time and money. Is the installation worth it in the end? It’s all very likely, but everyone in your company has to be ready to make the commitment to making sure the system stays in place and is not neglected or ignored.
The Future of VAT Automation
With the way technology develops, chances are that very soon, all of these limitations of VAT automation technology will be worked out and installing VAT management tools will be commonplace and instinctual for businesses of all sizes. Even now, the current technology can work wonders for a company that is drowning in paperwork from trying to keep up with VAT rates and regulations, but in the future, automated VAT technology will most likely be the greatest tool for any company working on an international scale.
If you want to make sure that your VAT reclaims are getting processed quickly and according to the local rules and regulations, choose a VAT tool that you know you can rely on. VATBox’s automated technology has helped businesses around the world improve their VAT recovery rate. VATBox’s technology provides complete transparency to the VAT recovery process and always stays up to date on the latest technology and regulation changes. VATBox can help ensure that your company is always in compliance with the latest VAT laws and always has access to the most current VAT-related information. Request a free demo here.