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Virtually Print Receipts for Easier Tax Audits
While many individuals will make personal resolutions this December, the New Year is also the perfect time for business leaders to consider what steps they can take to improve operations and performance. It’s a blank sheet of paper and 12 months of opportunity. So, what should CFOs resolve to accomplish in 2016? I recommend eliminating paper piles with a digital transformation of the finance department.
Irrespective of your company size, it makes sense to get rid of paper. Finance departments are charged with managing many documents, including government notices, sales order copies, purchase order copies, contracts, tax paperwork. The benefits of digitally archiving documents are threefold. First, you can no longer lose documents, as they are stored in multiple server locations. Second, you won’t need to hire a company to store your paper records. Finally, and most importantly, digital archives make it easy to text search and query for documents when you need them.
For enterprise-grade distributors, virtual printing is the key to easier tax audits. Right now, many businesses rely on their enterprise resource planning (ERP) system to track customers’ locations, even though this solution only works if every customer remains at a single location over time. This leaves businesses with two options: comb through cabinets--or even buildings--of receipts or risk tax fraud by printing a new invoice.
I was recently chatting with a major distributor who went through a tax audit nightmare. The problem didn’t arise from any system failure; rather, the nature of the system.
The company chose its ERP system because it allows them to ship products in only three steps. The distributor receives an order, generates the invoice and shipping label and ships the product through the ERP system. Changing a customer’s address is a comparably straightforward data entry task--an employee simply overwrites the previous address. Overwriting ensures there is never confusion about where to send an order.
The issue was many of the customers’ shipping addresses had changed over time and the distributor’s ERP system, like most such systems, kept no record of the old addresses. Since any new invoices generated would show the most recent address, the distributor could not guarantee that the receipts indicated the actual shipping location. The distributor therefore could not prove taxes were paid in full, because U.S. sales tax and European VAT rates vary by geographic region.
Very few ERP systems record changes to the customer’s name, address, or VAT or U.S. sales tax registration number in their history. This is a critical flaw given the importance an invoice may serve as a legal document in a tax audit or lawsuit.
The company in my example ultimately had to restore data from backup tapes to unearth the customers’ former shipping addresses. It was a laborious and expensive undertaking, one many distributors and retailers will need to complete come any audit.
As an alternative, why not archive using a virtual printer? Businesses are able to print and archive a digital copy of the original invoice. This invoice is easily retrieved by text search and stands up in court as a point-in-time legal document. Expensive? No! By archiving with a virtual printer into Apache Hadoop, organizations are able to leverage the lowest cost bulk data storage solution available today and eliminate the need for cold storage of printed paper.
This year, resolve to make your finance department folks’ life much easier. Eliminate paper by digitizing documents you typically print, scan or fax.