Automated sales tax platforms have grown tremendously in the past couple of years in the public accounting realm. These platforms can ease the time and effort many public accounting firms face in their sales tax responsibilities to their clients, but they are not without their drawbacks.
At the end of the day, you have to determine if automation is right for your firm. There are a few things to consider in order to do this.
Traditionally, sales tax returns are prepared by staff during their clients’ filing period. These returns can take the form of either a paper return or through an online portal from the tax jurisdiction. This process involves researching the sales tax requirements of that jurisdiction, collecting and assembling relevant invoices and receipts, entering the data on the paper return or in the online portal, and, finally, filing the return with the tax jurisdiction.
Automated sales tax platforms greatly diminish the amount of time needed to prepare and file returns. There are several reasons for this, but most notably, sales tax platforms are built to integrate with the current accounting, e-commerce, and ERP systems, such as QuickBooks, Amazon, and eBay.
Additionally, because sales tax platforms are supported by the vendor company, this means they handle the tax research to keep their product in compliance. This cuts down on the amount of time needed for research on new jurisdictions, as well as any new rulings and tax codes on existing jurisdictions, because these changes are built into the platform.
Finally, the biggest time-saver when it comes to an automated sales tax platform is sales tax audits. These costly and time-consuming activities take up valuable staff time, as they are forced to go through prior years’ files to retrieve requested items. By utilizing an automated sales tax platform, this data is easily organized and, therefore, retrieved for whichever return and year may be in question.
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Diminished Error Risk
A large reason for errors on sales tax returns boils down to human error. A mistake on data entry or a missed invoice can wreak havoc down the line and may lead to an audit. Automated sales tax software can prevent this by diminishing the risk of human error. Whether it’s the invoice or tax calculation, or even something as basic as client information, using automated software provides an extra layer of control that just may prevent an audit from occurring.
Even though automated sales tax software greatly diminishes error risk, there is still a chance errors may occur. This is why many automated sales tax platforms have workpaper support built in. This allows supervisors, managers, and owners the chance to review the work performed by staff in a timely and efficient manner.
Often, a public accounting firm is limited to new work due to a lack of existing staff on hand. There are only so many preparers, and in order to give clients the best service possible, new clients may be turned down in order to service existing clients. By utilizing an automated sales tax platform, growth and scalability can be achieved through a well-defined onboarding process. As covered earlier, automated sales tax platforms have built-in integration with many commonly used programs on the market today. This allows for adding new clients with only minimal need for increased staff.
Additionally, some software provides referral partnerships. This means you can simply refer a client, still earn a profit for your firm, and ensure your client is protected from sales tax liabilities.
Who Should Continue With In-House Preparation?
Automated sales tax platforms are not for every public accounting firm. There are many other factors to consider when choosing whether to add an automated sales tax platform.
The biggest proponent for any business is always cost. In some instances, there can be a larger upfront cost when implementing automated sales tax software. In addition to this, several sales tax platforms charge a monthly fee rather than a fee per filed return. This fee could prove costly if revenue from returns do not justify the expense. There are ways to structure this process, though, that can alleviate the costs.
Another reason for continuing with traditional in-house preparation may be the complexity of the returns prepared. If a firm files a zero-balance sales tax return as a favor for its clients, it may not be worth it to prepare the return in automated software, as it would be just as quick and easy to do it by hand.
Finally, like all new software, there is always a learning curve and process disruption involved when adding a new tool to a firm’s arsenal. If the current sales tax process is working efficiently and without any errors, then that’s a pretty convincing argument for staying the course. It’s important to note, however, that the industry is changing. Staying up-to-date with practices is an important need for many small accounting firms.
Automation vs. In-House Preparation
If you’re facing complex returns in various jurisdictions, desire to grow your sales tax operations, or have a desire to reduce the human element of your sales tax preparation, then automation may be right for you. However, if your existing process is working as intended at minimal cost, then it doesn’t make much sense to change.
At the end of the day, it comes down to what is best for the client and the future of your firm. If you’d like to learn more about selecting an automated sales tax tool, you can do so here.
About Matt Graham
Matt Graham is a CPA with more than 10 years of experience as an in-house and an outsourced accountant. To flex his creative muscles, Matt spends his free time writing both fiction and nonfiction books and essays.