Elly Yates-Roberts |
Complying with tax regulations is an enormously complicated yet crucially important responsibility for any business. For domestic companies, this is difficult enough, as they look to navigate the complexity of the many different tax rules that are in force across a single country. For those operating internationally, this task only becomes more daunting.
“Here in North America, there are 15,000 different jurisdictions and at least that number of tax regulations,” says Greg Chapman, senior vice president of business development at Avalara. “This means that just understanding what the right tax rate is in a particular area is massively complex. There’s also been an immense amount of legislation worldwide over the last few years which has changed tax significantly. Businesses are expected to know this and accurately pay their taxes wherever they are in the world, and there’s a lot of downsides for getting it wrong.”
Traditionally, the answer to this complexity would have been a dedicated tax department, whose sole purpose is to ensure that all tax regulations are complied with appropriately. For the largest businesses this approach remains an option, but for small and medium-sized organisations it represents a daunting investment that can leave them less competitive.
The answer to this dilemma comes in digital transformation and automation, says Sanjay Parthasarathy, chief product officer at Avalara.
“I identify three fundamental areas of value in automating tax compliance,” says Parthasarathy. “One, you can grow your business around the world without having to be a tax expert. Two, you don’t need a large, expensive tax department, which is especially valuable if you’re a small or medium-sized business. And finally, you’re managing risk. If you fail to file adequately you can face serious consequences and having a specialist ensuring that you comply with regulations helps to reduce that risk.”
“It’s a changing world,” says Chapman. “Covid has only exacerbated the existing trend. The new norm is digital payments, where people can always access and track their money. That’s where the digital approach to tax really comes into play.”
Avalara’s Compliance Cloud platform helps its customers achieve compliance with transactional taxes imposed by authorities worldwide, processing billions of transactions and filing hundreds of thousands of documents each year. By operating on the cloud, this expertise is available to businesses whenever and wherever they want, an advantage which has only become clearer during the Covid-19 pandemic.
“At Avalara, we’ve been a cloud-first company from day one,” says Parthasarathy. “In order to pay taxes, you need to have lots of documents relevant to the filing, with invoices being just one example. And one of the things that the pandemic has taught us is that if the documents required for compliance are in the office, they can very suddenly become unavailable. The cloud therefore becomes a very natural part of not just the calculating and returns, but every part of the compliance workflow. The best thing you can do with any important tax document is to digitise it, put it in the cloud and make it accessible to all the systems that run your business.”
The Avalara platform also benefits from over 1,000 signed partner integrations across accounting, enterprise resource planning, e-commerce, shopping cart and business applications. This means that Avalara’s solutions can seamlessly work with business applications that companies are already familiar with, including Microsoft Dynamics 365.
“We have worked with partners like Microsoft by creating integrations that are pre-built,” says Chapman. “Therefore, when we onboard customers and they’re using Microsoft Dynamics 365, we’ve got integrations that allow them to plug those in, because our calculation is done within the confines of that application.”
According to Parthasarathy, these integrations are crucial to delivering a smooth customer experience on the platform.
“The service has to be seamless, fast and accurate,” he says. “The key is to bring together the capabilities of the Microsoft Dynamics 365 platform and the Avalara platform through what we call connectors. Connectors take data from one side, transform it, pass it to the other side and then do it all again when the data comes back. This is crucial, for example, when a business is selling to a customer on a different continent, when the connector will take the tax calculation data, do a back calculation, and then pass it back to Dynamics 365 Finance.
“That’s why we have spent a lot of time and effort partnering with Microsoft. The customer doesn’t need to see all those calculations that are happening behind the scenes. To them, it just feels like magic.”
This article was originally published in the Autumn 2021 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.