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How Ariba and Vertex Can Reduce Tax Risks In Procurement

The underpayment or overpayment of tax significantly impacts a business’ bottom line. In dealing with procurement, a company needs to be vigilant to avoid losses due to poor management of vendors. If a business seems to be underpaying or overpaying, local authorities may invoke audits, which can severely damage the efficiency of the business’ operations. To ensure that this unfortunate situation doesn’t arise, companies have taken to adopting SAP Ariba to help manage their procurement processes. SAP Ariba offers companies a way to verify their vendors’ invoices as well as accelerate their payables processes.

Designed as a one-stop-shop, SAP Ariba is an end-to-end automated system that pulls on the experiences of thousands of suppliers and consumers around the world. Businesses adopting SAP Ariba can use it to deal with anything from contracts to payments in a single application. The most important part of this system from a tax perspective is the invoice validation system. SAP Ariba can be used to ensure that the details of an invoice match that of the purchase order before it clears payments, keeping the business risk of paying excessive taxes low.

Tax Validation is a Game Changer

Many countries in the world, most recently Europe and Latin America, have started utilizing real-time tax reporting to verify that invoices agree with the tax the business is supposed to pay. Using real-time tax reporting systems puts an added strain on companies that don’t have a proper validation system for ensuring that their invoices and purchase order values match. The resulting fallout could lead to the business being ground to a halt as local authorities sift through data to verify tax information.

SAP Ariba manages all of this in a single location, making it a lot easier for businesses to do their verification. Ariba can be combined with a third-party extension called Vertex to help manage its invoice system by ensuring that the system classifies vendors by the level of tax attributed to them by the local authorities. The setup for the system can be done by in-house tax professionals that would be responsible for ensuring that the vendors are categorized correctly and that the rate of taxes attributed to them match what the local authorities suggest.

Furthermore, Vertex can be used as a balance to ensure that the tax calculated by the vendor is correct for their class. The validation process protects the business since, in some jurisdictions, the purchaser can be held liable for erroneous tax reporting by vendors. The system can automate the checking process, flagging those invoices that don’t match the purchase order tax value for review.

Making Life Simpler for Tax Calculations

As more and more countries move towards a real-time tax system, having an automated method for managing tax calculations becomes ever more critical. SAP Ariba provides businesses with a means of managing all their vendor information in one place and provides a smooth, searchable method for recording transactions between the vendor and the company. Software escrow services can protect all parties involved in a transaction by using software to hold code until an agreement is made. These records can be instrumental if the local authorities ever audit the business.

Integrating Vertex with SAP Ariba ensures that the chances of an audit occurring becomes even less. By using the verification methodology developed by Vertex in Ariba, the system will only pay those invoices that fit the values of the purchase order. If a vendor continues to submit false invoices, the business personnel can then inform them of the discrepancy. The accounts department could then withhold payment until the vendor complies with the purchase order tax estimate or moves to have their vendor class changed within the business system. This methodology makes it less likely that local authorities will call for an audit, and if they do, the verification will back up the submitted figures.

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