Why ERP systems and tax automation make powerful partners

As businesses continue to evolve and expand, they are increasingly demanding more from their Enterprise Resource Planning (ERP) systems.

Beyond core functions like inventory management and financial accounting, businesses are seeking solutions that can streamline operations, reduce costs, and improve efficiency. One area where ERP systems are seeing a surge in demand is indirect tax automation, employing modern technology for the collection, reporting, filing and remittance of tax revenue to government agencies.

This drive towards automation stems from several factors. Businesses are eager to minimise human error, which can lead to costly mistakes and penalties.  Additionally, automating indirect tax processes can significantly lower operational costs by reducing the time and resources required for manual calculation and compliance tasks. Also, automation can enhance productivity by freeing up employees to focus on business building initiatives rather than routine administrative tasks.

Fortunately, ERP platforms have evolved significantly in recent years to meet these growing demands. Modern ERP systems are equipped with advanced functionalities that can automate various aspects of tax compliance, from calculating tax liabilities to generating tax reports. This automation not only reduces the risk of errors but also ensures that businesses remain compliant with ever-changing tax regulations.

The role of tax engines
To further extend the native capabilities of their ERP systems, many businesses are also investing in tax engines that integrate with their chosen ERP. These specialised tools can automate complex tax calculations that may be outside the capabilities of an ERP system, reducing the likelihood of errors, ensuring accurate tax reporting, and adding efficiencies to business processes.

Additionally, there is a growing demand for enhanced data analytics capabilities within ERP platforms, enabling businesses to gain valuable insights into their operations and identify areas for improvement. This is especially important when it comes to tax compliance.

For businesses looking to expand internationally, automation is even more critical. For instance, companies selling online into the U.S. are faced with managing tax compliance across as many as 13,000+ jurisdictions, thanks to newer economic nexus laws across U.S. states. It's no longer a question of whether or not tax calculation and compliance can possibly be handled manually – technology is essential. By implementing a flexible and scalable ERP system with integrated tax automation capabilities, businesses can streamline their operations and mitigate risks associated with international expansion.

Careful implementation is critical
However, the successful implementation of an ERP system with tax automation capabilities requires careful planning and consideration. Businesses should evaluate their specific needs and select an ERP solution and indirect tax engine that align with their goals. Additionally, it is essential to invest in training and support to ensure that employees can effectively utilise the new system.

Beyond the direct benefits of tax automation, ERP systems can also contribute to broader business objectives. By providing a unified view of operations and enabling data-driven decision-making, ERP systems can help businesses improve customer satisfaction, enhance operational efficiency, and drive growth.

Staying in compliance is essential
In addition, ERP systems with tax automation capabilities can also help businesses mitigate risks associated with non-compliance. By ensuring that tax calculations are accurate and timely and compliance technology is in place to reduce human error, businesses can avoid costly penalties and fines.  

As a business continues to grow and expand geographically, the importance of an ERP system with fully integrated tax automation capabilities only increases. By leveraging these powerful tools, businesses can streamline their operations, reduce costs, and improve their overall performance.