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Author's profile photo Denys Ilyich

How To Reduce Tax Risks In Procurement With SAP Ariba

Businesses around the world have had situations where, in dealing with taxes, they have ended up submitting erroneous invoices which led to either the company paying more fees than was necessary or the tax authority levying fines for wrong tax information. Because of the way tax systems work in different parts of the world, having an updated policy to deal with tax payable is a necessity for a business operating across international borders.

Even in places where federal and state laws apply across those borders, knowing what a company is liable for and not responsible for is one of those hidden taxation details that some companies overlook to their detriment. Procurement departments have turned to SAP Ariba to aid in fulfilling the requirements of tax authorities through correct invoicing of transactions. Additionally, SAP Ariba helps to accelerate their payables processing, ensuring the company meets its obligations as efficiently as possible.

SAP Ariba’s inherent draw is the end-to-end system it provides to its users. The taxation and invoicing system can be complicated in a large business, but by simplifying this process, SAP Ariba delivers a means for a company to focus on the contracts and payments rather than the detail-oriented taxation calculations. Additionally, SAP Ariba does transactional verification, which is an essential check for proper invoicing. If the invoice value matches the purchase order value, then the transaction is permitted to go through. Otherwise, the company should return the invoice to the vendor for correction.

Tax Validation Reduces Risk of Fines

The cost control to the company must have an equal appropriate tax risk control. Vertex tax solutions combine with SAP Ariba, using the internal transactional data to perform validation on the vendor’s tax information. The use of the validation system ensures that the right tax category applies to a particular vendor. The process operates at an optimal level when the data recorded by the business by the business plan consultant is in keeping with what is expected by the tax authorities. Invoices are then only cleared if the tax information attached to the invoice conforms to the authorities’ classification for the vendor.

What this means for a business is that tax calculated through SAP Ariba will always have the correct rate, and therefore the company won’t end up paying extra in taxes or be at risk of an audit because of erroneous tax values. The system ensures that the payments that are verified are processed and those that aren’t are flagged for review, ensuring that the company is aware of the situation with its suppliers. SAP Ariba can also utilize advanced functionality with Vertex tax solutions, ensuring that restricted deductibility requirements and reverse charges are both identified and recorded in compliance with the authorities’ recommendations.

Reduction of Complexity

In business, having a complex and complicated operation is undesirable. The more complexity that a company has in its system, the less efficient the system is at processing. In the case of SAP Ariba, the complex system is a requirement, but a company should attempt to simplify the complexities in the system as much as it can. The partnership of Vertex with SAP Ariba is a step in this direction, offering sophisticated transactional checking to ensure that the company is paying the right value for its taxes.

By reducing the time taken for the company to perform its tax calculations, the business can bring closure to outstanding invoices in a timelier manner. Vertex and SAP Ariba together reduce the amount of time spent doing tax calculations as well as the original cost to the business. Fines and penalties for non-payment of tax can sometimes be as expensive or even more so than if the company paid too much in charges because the tax verification system uses the wrong information for the vendor.

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