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Navigating government trading laws in the age of automation

Navigating government trading laws in the age of automation

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Navigating government trading laws in the age of automation

It’s clear that for businesses, the only way to thrive in a digital commercial landscape is to invest in the right technology. Oscar Caicedo, VP of Strategy and Operations, VAT at Sovos, explains what governments face when they go digital.

All industries have felt the shift towards digital processes and have had to radically adapt and enhance their existing technology. Easier said than done, in many cases. We’ve felt the global anxiety of traditional jobs being replaced by machines, and many jobs have indeed become more cost and time efficient to be handled autonomously. Oxford Economics predicted 12.5 million manufacturing jobs will be automated in China by 2030, so a partially automated workforce is indeed on the horizon.

It’s clear that for businesses, the only way to thrive in such a digital commercial landscape is to invest in the right technology. Arming the human expertise of teams with tools that will enhance said expertise and allow them to broaden the scope of efficiency means that rather than replacing manual labour, technology will support teams and boost productivity tenfold.

This is of particular importance for organisations operating globally, where an extensive knowledge of governmental financial legislation in each country is required – these laws certainly are not easy to navigate and decipher given the fact they are constantly updating. Real time VAT reporting is increasingly prevalent worldwide, with continuous transaction controls tightly constricting many different jurisdictions. In reality, the hours required to manually keep pace with new rules far exceed realistic workloads without the help of automation.

For global enterprises, manually submitting the paperwork for audits and reports is simply unsustainable. Especially for international businesses operating across a multitude of jurisdictions, the problem is how to keep up with the fast pace of changing rules and government regulations required for business transactions, ensuring everything is in the approved formats.

Governments go digital

With the aim of improving economic standards in their countries, global governments have been reviewing how they measure and collect tax returns. Digitalisation of return processes gives way for a much more forensic and accurate view of a nation’s economic health, so it goes without saying that automating invoicing and reporting has increasingly made its way to the top of the agenda in recent years.

How the approach is taken to upgrading many transactions and interactions is contingent on specific country viewpoints – certain jurisdictions enforce varying levels of CTCs (Continuous Transaction Controls), real time invoicing, archiving and reporting of trade documentation. For firms with an international presence, this inevitably puts immense pressure on finance teams to accurately track and obey multiple and complex laws with threatening hefty non-compliance fines. Trading and operating within the law now requires intelligent technology and infrastructure to cope with the strain.

Latin America pioneered mandatory B2B clearance of e-invoices, and Brazil also requires full clearance through a government platform. In Europe, the EU-VAT directive prohibits countries from introducing full e-invoicing – Italy was the first (and currently only) country to buck this trend in 2019, following a lengthy derogation process. Elsewhere, in Finland, a loophole was developed to avoid this while staying compliant with the EU regulation. Moving towards a digital tax regime is set to continue as economies shift to a data-driven business model.

Machine language

Top priority for most governments is to reduce the VAT gap caused by fraud and human error in reporting business activity, so naturally many systems have been adopted across the globe, subsequently creating a patchwork of systems unable to communicate with each other. What’s more, the adoption of e-invoices has been slow on the uptake in many countries causing a completely fractured landscape – VAT information is still being reported periodically in many countries, with each jurisdiction setting its own standard. It’s clear that consistency isn’t on the cards for global digitalisation.

The rules are becoming even more ambiguous and unclear as more countries develop their own specific take on digitising invoicing. Further, with new regulatory legislation constantly surfacing, keeping track can cause headaches and trip some firms up. Keeping tabs on the developments as they happen in all the countries a firm operates in is the only way to maintain compliance, so applied systems must be able to track and update the new legislation as appropriate.

Equally, tech needs to give an accurate picture of an entire businesses’ finances, linking together all the different systems to make sure any tax reporting is accurate. This is why, when adopting any technology, flexible APIs are an absolute must. Programmes with sophisticated APIs enable tax systems to ‘plug in’ to a business and gather vital information, allowing firms to showcase the necessary data from across their activity, generate accurate results and avoid government penalties. When approaching sensitive government interactions, technology must be able to integrate with a number of billing systems, ERPs and procure-to-pay platforms. They all create and handle enormous amounts of data, so much so that humble finance teams simply can’t cope – which is where technology can support and streamline the job.

Automation of formatting and information as per the requests of each country is essential for transaction and reporting digitally. Technology that can monitor and adjust invoice formats, for example, to suit the country a business is operating in can help avoid non-compliance penalties, so is worth the investment. Time is of the essence – and time is usually not on our side – so any tools that can automate admin and allow teams to focus on strategic elements of business finance will pay for themselves in dividends. The fact is, as machines become more ingrained in operations, the more challenging manual analytics become. Both governments and businesses are leaning on automation and advanced technology to ease the resulting administrative burdens.

Automation for compliance

A fully digital way of working is within reach for many economies, but it comes at a price. The only way to capitalise on the rapid wave of Digital Transformation is to arm yourself with technology that can cope with a new realm of complex and data-driven regulations. Meeting varying global audit requirements has always been a challenge, but now software has been developed that can handle labour-intensive analysis and research tasks. It makes sense to invest in tools that will streamline this process and alleviate some of the pressure on finance teams without the need for costly expert staff or outsourced support. Manually submitting the paperwork for audits and reports once they are understood is no longer a viable or practical route to take.

Put simply, all tools applied must be able to synchronise and communicate vital information across a business’ IT infrastructure. The current recession has deepened the pressure on finance teams to perform at their best, safeguard against any financial leaks and strictly monitor expenses and outgoings. With this in mind, there’s a strong business case for investment in automation to manage arduous and complex tasks like international trading activity reporting.

Up against such adversity, machines are guiding and supporting us through the most troubling of times. An armoury of digital tools can only help pave the way for a successful digital future.

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