Automation is beneficial when it allows you to streamline tasks that don't add value to your business. The pass-through activity of indirect tax management is a great example of this: it doesn't benefit your business's growth or bottom line, but it is a time-sensitive requirement that carries ongoing risk. Automation with technology is the best way to mitigate that risk and ensure a high level of compliance for your business.
Here's a buyer's guide to tax automation software, including the main features to look for in a solution and how they can save businesses time and money.
What's in this article?
- What is tax automation software?
- Evaluating tax automation software
What is tax automation software?
Every transaction that a customer makes on your website requires a tax calculation. Tax responsibilities can be affected by your customer's location, the product or service being purchased, where the product is being delivered to and from, the monetary value of the purchase, and the frequently changing tax rates and rules. Once you've collected tax, you still need to report, file and remit by a set due date.
Outsourcing your tax management workflows by partnering with a tax automation provider that handles calculation, reporting, filing and tax threshold monitoring can solve a variety of operational challenges. With tax compliance handled, you can focus on growing your business. Additionally, tax automation software can minimise human errors and help to avoid costs that come with incorrect filings.
Evaluating tax automation software
Deciding on new software is an important task that affects multiple departments and employees. Businesses that purchase the wrong software or deploy the right software but improperly could face issues at a later stage. We've outlined some considerations that will provide a good baseline of information as you research potential tax automation tools.
Product-market fit
Tax compliance looks different for every business. Because products and services are taxed differently depending on location and varying product tax codes, a one-size-fits-all approach won't work. Here are some questions to help you determine whether a vendor is a good fit for your business's needs:
- Do you have experience with my industry, product, service and business size? If so, can you provide relevant case studies or customer references?
- How much do you know about the regulatory landscape of my industry?
- What sort of education/resources can you provide to help fill the knowledge gaps on my team?
Accuracy and reliability
Rate accuracy, system performance and reliability are significant factors in choosing tax automation software. Additionally, a fully dedicated tax research team provides product tax code content to help you determine the taxability of your products and ensure that you're charging the correct tax rates at checkout. To assess a vendor's accuracy and performance, start with these questions:
- How does your engine determine tax calculations?
- Do you rely on postcodes or full addresses?
- Do you validate addresses?
- How does your team keep the tax rates and product tax codes in your database up to date?
- What is the average uptime and average response time of your API?
Pricing
The right tax software solution should provide transparent pricing that adapts to the increased needs of your business without hiding fees and unnecessary charges. Discuss pricing with prospective vendors starting with these questions:
- How is your pricing model structured?
- Given our estimated transaction volume, what can we expect to pay monthly or annually?
Implementation and support
Implementing a new tax management solution isn't always easy, but with dedicated technical onboarding, multiple support channels and self-service learning, it can be. Look for a tax solution that offers an excellent customer experience. Whether you want to find an answer on your own or dig into details with an expert, your tax provider should offer you options such as clear documentation, online learning, and email or phone support. Here are a few questions to ask:
- What's your service-level agreement (SLA) regarding support questions?
- Can you share reviews or customer testimonials about the quality of your customer service team?
Whether you're searching for a new tax software solution or switching from a previous one, knowing what to look for up front will help you to find the vendors that are the best fit for your business. Doing research now can save you time and help you to avoid the costs of switching if you select the wrong vendor.