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54 (149) 2022

Digitalisation

VAT IT – Finance and VAT Process Digitalisation

By Kamila Sanders, key account manager, Cash Back Polska
Header kamila sanders foto


When we understand digital transformation at a conceptual level, we can start asking questions about how new technologies might apply to our own businesses. After all, the most important point for any leader is ‘how do these changes affect my organisation?’

Finance functions and processes are perfect realms for digital transformation to trickle through and fill the gaps of mundanity, repetition, and time-wastage; pain points that are often synonymous with working within finance and operational roles.

However, despite the flood of digital solutions at war with Excel’s limitations, human error of any kind and recurring monthly to-do lists, most finance teams are still grappling their way through their month. Lacking resources and overburdened, finance teams are constantly racing against a clock of different deadlines, set by different stakeholders, and providing reports to both internal and external watchmen.

No centralised finance department of any business should ever be expected to understand the intricacies of more than one VAT jurisdiction (even one can be overwhelming!), and then perform the manual administrative task of collating the necessary invoices and expense data to compete a compliant local VAT return or foreign recovery submission. Even large enterprises with tax teams spend a significant amount of time, resources, and cost of previously trying to complete this in-house.

That’s why the introduction of outsourced compliance management and automation to help maximise input VAT recovery while ensuring 100% compliance is a solid strategy. Is your team able to identify where claims may highlight registration requirements to tax authorities, obtain re-issued non-complaint invoices or deal with legal queries? It’s a decision that would set your department free from mundanity and administration, so that employees can focus on deep-thinking areas. So, we have painted the future for you to show you what your finance/VAT department would look like with VAT IT by your side.

The True Cost of Manual Entry

Firstly, for the obvious reason that all that additional hiring or overtime is costly for companies and demoralising for employees. Especially when you consider the opportunity costs: those employees could more productively applying their skills elsewhere.

There’s another more subtle reason. In the real world, there is a trade-off between time and accuracy. The finance team can spend longer hours engaged in manual processing, carefully going through every piece of paper, at the expense of other potentially productive pursuits. Or they can do more, less rigorously, but at what cost to compliance? Misfiled claims can lead to overpayments, fines, and audits, adding further cost and resource usage. As long as you rely on manual processing, this trade-off is all but inevitable.

Reviewing the underlying document image and no employee inputted expense data, our algorithms know the complex international VAT rules and how this is affected by having foreign VAT registrations, to ensure 100% compliance and the correct directive, line-item expense types and documents are submitted prior to deadlines. Imagine having to no longer worry about fines or audits! With learning AI to understand individual supplier invoices and when something is non-compliant or requires further investigation, re-routing the workflow to the correct human invention department for yield maximisation. That’s why digital transformation really amounts to a paradigm shift. With the right technology, you can end the trade-off between accuracy and speed. Digital processing is exponentially faster and much more accurate.

Digitalised document processing for more efficient workflow

Optical Character Recognition (OCR) scans, interprets and files documents. If it simply processed documents and presented them in a digitalised format, that would already be a massive time saver. However, the more advanced OCR systems are part of an integrated digitalised system that interprets the data, flagging anomalies and automatically checking that each document or invoice is complete and correct.

Automation doesn’t just speed up each task, it also optimises the process by which the work is achieved at a systems level. For example, once a document is processed, the next responsible person can automatically be notified. They’ll get instant access to all the information and supporting documentation they need, without having to wait on one or more key individuals.  And again, it’s not just about speed. By ensuring each person is aware of their responsibilities and has a clear snapshot of what’s required – and which data is outstanding – you ensure important documents and deadlines are never missed.

Tax office transformation: VAT compliance

With tax authorities digitising systems, alongside implementing new VAT return processes for digital audit trails, the margin for un-detected errors and repercussions is continually shrinking. Accelerated replication across global jurisdictions requires enabled technological systems and full confidence that compliance is 100% for input and output VAT requirements. Often with multiple VAT registrations, the knowledge and system capabilities aren’t adequate to meet developing requirements, thereby increasing risk. With digitised output VAT assessment, compilation of returns in line with the relevant countries digital requirements such as Making Tax Digital (MTD) and Single Audit File – Tax (SAF-T – or as it’s known in Polish – JPK), direct integrations into tax authority systems for submission can remove process burden and risk.

Unlocking the secrets of data to drive efficiency

Once data has been automatically digitalised, you want to make it work for you. You could sit down with a spreadsheet and a calculator and try to hunt down interesting patterns. But who has the time? And how do you even know what to look for? By contrast, intuitive drill-down dashboards combined with advanced analytics software lets you compare any number of variables in an instant. Why are you spending so much more in one country or expense type than others? You see your input VAT exceeded your output VAT, so did you’ miss opportunities to reclaim? Why are some suppliers or entities constantly obtaining non-compliant invoices?

Even with some of the digital tools used by finance teams, we can see that real value comes through integrating technology to maximise efficiencies. That’s why we talk about digital transformation, rather than simply adopting digital tools on an ad hoc basis. And that’s why we get the best results when we analyse how the company functions as a complex organisation and then carefully consider how to make the organisation more efficient as an integrated whole. In combination with VAT IT’s expansive industry insights of your competitors alongside this reporting, understand where impactful improvements could be made.

End-to-end finance digitalisation

While digitalising the VAT recovery and compliance process is key for business efficiency, there is also great value in businesses digitalising and automating workflows occurring prior. As a result, VAT IT has created a host of partnerships and integrations with solutions in expense management, accounts-payable automation, and travel & expense and accounts-payable audit, creating a fully digital end-to-end workflow and further increasing savings.

Tech doesn’t mean expensive

Operating a contingency fee model ensures VAT IT Reclaim is focused on maximising compliance and recoveries, with no cost to your business on the rare occasion that a claim isn’t successful. Whilst digitalisation seems the ideal, we understand that the financial cost to a business can be impactful. As we only take a percentage of the VAT recovered, there’s no budget requirements, and many clients see the increased returns able to cover the costs of the digital finance systems.

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