Making tax digital or MTD is a critical requirement in the UK Tax Administration Strategy as it helps streamline and automate most taxation functions. Businesses and individuals must keep digital records, use relevant automation software and submit real-time reports on the tax system. When done correctly, the automation results in cost reductions, greater data accuracy, and improved efficiency in your financial operations.
Implementing the right ERP and accounting software will provide the ideal configuration to make tax digital while automating other core functions.
GoldFinch ERP and Xledger make the perfect pair to help you achieve tax digitization, and here is how.
How Can ERP Automate Your Business Processes?
The perfect ERP software should integrate your business applications and functions into a centralized data-sharing platform. It centralizes all vital systems, improving efficiency by eliminating tasks like redundant data entry and lack of performance visibility. This section explains the different ways ERP automates, including taxation.
Automates Manual Tasks
Much of your staff’s time goes into handling manual and repetitive tasks like data entry. In a highly-competitive industry with other companies leveraging streamlined operations, your team will most likely fail to keep up. Implementing an ERP allows you to unlock your business’s full potential by automating tasks like:
- Restocking inventory using the preset order quantity levels
- Creating sales orders
- Locating files and information
- Coordinating workflows in the different departments
Standardizing Business Processes
ERPs also create the perfect opportunity to standardize your business process according to the industry’s most efficient practices. You’ll need to find a solution specific to your industry to access the built-in standard methods and best practices.
Doing this makes it easier to bring new talents as you’ll hire for proficiency, based on the ERP data.
Streamlines Inter-Departmental Communication
Implementing an ERP in your business also supports communication between departments. Departments that significantly rely on each other include accounting, order processing, contact management, and inventory management. The software eliminates the need for manual data submission by accurately syncing data across the different operating units in real-time.
Automates Reporting and Business Forecasts
Unlike the human brain, machines can effectively manage massive data amounts. Having an ERP in your manufacturing operations provides access to dashboard visualizations and data analytics tools. These features help you better understand the business’s performance while improving cash flow by forecasting demand.
Why Your Business Should ‘Make Tax Digital’
The number of companies considering tax automation is rising, especially after the MTD requirement in the UK. Research by the PwC Pulse Survey in 2021 showed around 38% of tax leaders invest in technology for tax digitization. Other reasons for moving towards automation include efficiency gains, cost reductions, and improved accuracy.
Here is why you should make tax digital in your business:
Improved Efficiency in your Tax Team
Your tax team handles many manual and repetitive tasks, from data entry to report generation and verification. Around 80% of their time and effort goes into data preparation, wasting time.
Implementing an ERP provides the best approach to maximize the value of your tax team. The software allows your tax analyst to use their skills and knowledge to challenge auditors while identifying tax opportunities. It also handles tax compliance so your professionals can focus on other core functions.
Every business must manage its finances effectively for better success and profitability. It is among the main reasons companies invest in technology to control costs and maximize efficiency.
For example, you can reduce tax accounting errors through ERP and accounting tax automation. The software allows you to optimize the resources allocated to each unit. It also helps identify potential errors faster, corrects them, and makes your audits as accurate as possible. By automating these functions, your tax team can refocus their time on other value-adding activities.
Accuracy is critical when calculating, remitting, and auditing your company’s sales tax. The best approach to increasing accuracy in your tax responsibilities is through ERP and accounting software implementation. The package handles all tax calculations and keeps them safe in centralized storage. It builds on accuracy and provides information on your tax rates, codes, and rules.
Common Tax Compliance Challenges and How ERP Helps
Every business must pay its taxes. However, keeping up with the tax obligations of an established firm requires more than a competent tax team. You’ll need enterprise resource planning software integrated with the right accounting platform to help streamline your operations while managing efficient tax compliance.
Here are some of the common tax compliance challenges and how implementing an ERP helps deal with them:
Late Filing of Taxes
With all that goes into your business, you will likely forget when your taxes are due. For businesses, delayed filing of taxes attracts penalties and fees. Implementing an ERP and accounting software in your operations ensures timely tax payments by sending alerts before the due date.
Depending on your business’s nature and tax rules, you may pay less taxes than you owe. It could be an internal error or tax code complexities. Having a functional ERP means your team doesn’t have to deal with all the intricacies of calculating your tax debt.
Another problem that ERP can help address in making tax digital is poor record-keeping. ERPs use centralized storage, meaning all transaction receipts and documents are safe and organized.
Multi-entity organizations operate under different tax laws. In the US, taxpayers must disclose foreign financial assets to the IRS if their value exceeds $10,000. Integrating your ERP to practical accounting software like Xledger makes reporting and analytics easier using built-in features like multi-language and multi-currency.
Leveraging technology and innovation positions you in the right trajectory for scalability. One of the essential functions you can digitize is taxation, and what better tool than ERP? GoldFinch ERP and Xledger are the perfect pair to make tax digital in your business. The combination also automates other functions like inventory management and accounting automation.