Will Procurement Automation be Transformed by Compulsory Real-Time Tax Controls?

By Christiaan van der Valk, TrustWeaver

Companies should be preparing for a world where government requirements for real-time transaction controls will be a major force in shaping the business-to-business (B2B) transaction automation systems of the future. With cloud becoming the principal deployment model for managing different types of B2B transactions, this revolution toward much-reduced freedom for companies to specify their process requirements can be expected to transform the way companies interact and contract with solution vendors.

Let me explain through a couple of scenarios. This first one will sound familiar and perfectly logical to many readers:

You're a large enterprise and you want to purchase a third-party solution that can help you better control your indirect or strategic spend. You require end-to-end process automation, and therefore elimination of paper, as a way to maximize the effectiveness and cost savings to be achieved through such a service.

Obviously, this includes dematerializing supplier invoices wherever that's legally permitted. So once you've preselected a number of procure-to-pay vendors, you ask your tax or legal team to make sure they're comfortable with the legality of the e-invoicing included in the services offered.

This scenario no longer reflects the reality of leading global enterprises though. In just a few years, major developments in tax law around the world have reversed the vendor assessment logic.

Here's a more realistic scenario demonstrating what’s changing:

You're a large enterprise and your management team just spent half a day in yet another escalation meeting. Once again, a country subsidiary has sounded the alarm because it has only a couple of months left to adopt electronic invoicing due to a local tax authority mandate. If the mandate deadline isn’t met, your local business, and therewith x% of your global sales and/or y% of your critical supplies, will grind to a halt overnight. For months, the subsidiary has been exchanging angry mails with your procurement, supply chain and/or IT department where the latter insisted on the subsidiary using a corporation-wide strategic IT solution. The subsidiary has repeatedly explained that that solution doesn’t even come close to meeting the very specific technical and process requirements laid down by their tax administration.

Caught between a rock and a hard place, your management again had no option but to grant the subsidiary approval to install a local IT solution to meet the mandate deadline. And with that, a good part of the control, best practice, business intelligence and economies of scale benefits that you work so hard to achieve with global business-to-business process platforms will not be achieved for that subsidiary.

I see the above scenario happening, sometimes several times at companies TrustWeaver ends up helping. Our partners often involve us when the dialogue with such companies becomes all about compliance. This recent change in market behaviour is being driven by the fact that more and more tax administrations are experimenting with real-time controls. Governments have realized that real-time controls can strike that long sought-after balance between maximizing tax collection and minimizing expensive and disruptive audits. Unfortunately, we’re not seeing any real standardization between the national systems yet.

So how are companies responding?

When the second scenario happens a few times, corporate management often steps in to make radical changes to the way business-to-business IT solutions are sourced. From now on, they decide, e-invoicing compliance will be the litmus test and a non-negotiable precondition before even considering a vendor's automation and savings capabilities.

Some global companies are taking even more radical steps. They are going through every corner of the company with a fine-toothed comb to draw up a map of all invoicing processes in every department, subsidiary, brand and business line. Armed with that map, a global RFP is then launched to find a vendor that can guarantee that the enterprise will never end up facing a similar business risk again.

How is that Affecting B2B Process Automation Procurement?

We’re seeing that the number of RFPs seeking business-to-business process automation but starting with a vendor preselection based on global compliance capabilities is exploding. The average value of such RFPs is consequently a very large multiple of the trend in the past 15 years. Whereas a few years ago, an opportunity representing 0.5 million to 2.5 million invoice transactions annually was considered very large by most vendors, today’s RFPs often exceed 10 million and may even encompass a significant multiple of that yearly transaction number.

This jump in the size of available deals comes with the need for B2B automation solution vendors to be able to demonstrate that they have a robust approach to compliance monitoring and change management in a number of key areas:

  • Legally determined invoice formats and content
  • Archiving that meets all localization, timing, privacy and other requirements
  • Demonstrable long-term auditability of e-invoices in geographies where real-time controls are not yet (fully) applicable
  • The ability to integrate with tax administrations' real-time control platforms using varying authentication protocols, electronic signature specifications, document format specifications and transaction orchestration types

 

The simple conclusion is this: any B2B transaction automation vendor that wants to become or remain a market leader three to five years from now needs to step up its compliance game.

No solution vendor can at present meet these requirements alone. This is perfectly normal since we’re in the eye of a regulatory tsunami with colossal numbers of moving parts and uncertainty. However, it does raise this question: what should companies do to ensure they can handle inevitable e-invoicing mandates in a growing number of countries?

There is an answer. Make sure that whatever solution you choose, whether tactical or strategic, includes an always up-to-date e-invoicing compliance service that automatically manages regulatory changes from anywhere in the world into the world’s leading B2B automation platforms. In other words: ask for TrustWeaver.

Christiaan van der Valk is President and Co-Founder of TrustWeaver ,a provider of cloud-based trust and compliance services for invoices and other legally critical electronic documents. Trustweaver has announced the publication of the 9th edition of its white paper on international trends in tax-compliant e-invoicing and e-archiving. The white paper features a summary of the regulatory status in some 90 countries, as well as an in-depth analysis of the ways tax authorities around the world use e-invoices to increase collection rates. The White Paper can be downloaded directly from TrustWeaver’s website here: https://www.trustweaver.com/white-paper

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