Tax Payments Automation: Why Financial Companies Need It

Cutting-edge technologies, such as real-time reporting, artificial intelligence, and machine learning have been transforming the financial sector and transform economies. This, in its turn, changes the way taxes are managed and paid.

The old-school tax systems are overly complex, inefficient, inequitable, and costly to administer. Your financial team members are skilled at business valuation or tax strategy, but they’re only doing that 10% of the time with legacy tax-payment systems. Leveraging automation can flip the script so they will be doing the more valuable work 90% of the time.

In this article, we’ll talk about the reasons why financial companies need tax payment automation software, its trends, and the steps to automate your tax payment routine.

Why Financial Companies Need Tax Payments Automation Software

Tax payment automation software calculates and files tax documents, effectively doing your taxes for you. It allows you to set your finance team free from clunky manual processes and let them focus on strategic decisions. Here are the key benefits of automating your tax payment system:

• Reduced Error Likelihood. No matter how professional your finance team is, they are humans who are prone to mistakes. It was estimated that 80% of manually generated spreadsheets contain mistakes and gaps in information. Using different manual systems for tax payments and tracking deadlines will only double your error risks. An integrated tax monitoring and payment software automates data entry and provides you with a single data source.
• Saved Time. Manual tax calculation can be a major sinkhole of time and effort. With sophisticated automated tools, there’s no longer a need to perform these manually.
• More Consistency. Although companies do have best practices, many finance team members continue having their own ways of doing things. Even basic processes can differ between people. Tax system automation creates greater consistency within teams and reduces the chances of mistakes and information gaps.
• Real-time Data Collection. Automated, real-time data collection extensively increases the utility of business information. It allows staff to identify and address problems and inconsistencies at an early stage.
• Reduced Chance of Fraud. Automated tax payment apps don’t leave dishonest employees a chance to commit fraud. Standard finance tasks are made a lot more secure.
• Simplification of Tax Compliance Requirements. The steps involved in fulfilling tax compliance requirements are drastically simplified. By reducing the burden of deadline tracking, automating your tax management tasks, and having your bills paid automatically, you’re optimizing your processes and giving your finance team more time to strategize ways to lower your tax bills.

Technology Trends in Tax Payment Automation Development

• Smart Process Automation (SPA) involves machine learning and enables to automate repetitive tasks. Not all such tasks are straightforward. There are exceptions that can’t be answered by simple business logic and require a more cognitive answer. That’s where machine learning comes in. SPA is not just doing tasks but is thinking and learning how to perform a task by relying on patterns and inference. That means the computer can start to predict what a human’s response will be in certain instances. This way, the activity is performed with a greater degree of accuracy and speed.
• Digitized Paperwork. Team members or service providers can scan documents, turning them into electronic ones. SPA processes extract all the necessary data and send structured data automatically to the tax system. Legacy processes required physical handling and manual document extraction, slowing the process down.
• Print-to-Mail Automation. Old-school mailing processes with spreadsheets for mailing addresses, manual check requests from accounts payable, prints-out of required returns and other accompanying information decrease the effectiveness of your team and your organization as a whole. Instead, you can streamline and simplify the mailing process by digitizing it. Tax automation software stores your tax information in a database and connects your office directly to a print-and-mail center electronically. The mail center completes your mailings for you, as per your instructions. Automatization reduces the chance of human error and the likelihood of incurring penalties. It gives you greater transparency in your mailings, and most importantly, it’s more cost-effective for your organization.
• Flexible Reporting & Audit Trail. Reporting is one of the main responsibilities that eats your time. With automated tax software, you will never get caught unprepared. It will give you live access to transactions and past reports in a matter of seconds.

Steps to Automate Tax Payments

Research and Planning

It’s very important to introduce stakeholders and users into the planning phase to make it effective. The key target spheres to discuss are:

• Potential challenges that could slow down the tax software from implementation. For example, compliance. Automated tax systems should comply with local, as well as international tax rules in case the company has any international activity. Tax payment software should always be up-to-date without monitoring or implementation upgrading.
• Main features that you need. The customer and the service provider should discuss which features are basic and must be implemented in the first place and which features are nice-to-haves.

Main Features

Although the set of features varies from company to company, there’s the core selection:

• Tax Calculation — real-time identification of the most appropriate tax treatment for transactions without disrupting customer checkout flow.
• Tax Collection — instant collection of General Sales Tax (GST) and Value Added Tax (VAT) directly from payment providers.
• Real-Time Tax Rates — accurate, up-to-date tax rates in the local jurisdiction.
• Variety of Payments — the support of different payment types: subscriptions and one-time transactions.
• Reporting & Audit Trail — clarity in all tax records including historical data to current findings.
• Automated Filing and Remittance — complete automation of the taxing process, without stamps, paper, or checks.
• Self-Service Web Portal — an easy-to-use platform compatible with anyone’s skills.
• Print-Ready Tax Forms — ready-to-sign forms with accurate, up-to-date tax rates.
• Automatic Invoice Deliver — synchronizing the data from payment providers and delivering PDF tax invoices to your customers.
• Returns Fillins — automatic preparation of sales tax returns.

Additional Features

• International Support — users are able to choose the regions and countries that they want to take VAT and GST liability for.
• Additional Integrations including accounting systems, ERPs, and CRMs.

Find the Software Development Company

It’s important to find a trustworthy software development provider with vast experience in fintech in general and financial process automation in particular. Itexus has an 8-year experience in consulting clients on the best possible automation solutions, developing financial software, and integrating third-party services. We know how tax payment systems work in different countries and states and can provide the proper security level for all operations.

Summary

Cost reductions, efficiency gains, and greater accuracy are the major drivers for financial companies to integrate automation in their day-to-day processes, such as data entry, data verification, and report generation. If you want to streamline these processes, get in touch.

Originally published on Itexus Blog on March 19, 2021.