Finance pros see every day how complicated sales tax management is getting. It can feel like a whole separate job sometimes.
But not every company is fortunate enough to have dedicated sales tax experts on staff or a full tax department to handle it all.
And with tax responsibilities primed to keep getting more challenging for Finance, many companies will have to choose a new approach for sales tax management. There are three main options, according to Avalara:
- hire someone new or train an existing employee to handle tax management
- outsource tax management to an external firm, or
- automate tax management.
Which option is best for your company going forward? Review details on each approach from Avalara to help you decide:
1. Hiring or training
If you bring on a new person or select an existing employee to be a dedicated sales tax expert, your finance operations can remain largely the same. The unique benefit of this option is that you have a real human, in-house, focused solely on your company’s specific tax requirements. And if your staffers have quick questions, they can turn to this easily accessible co-worker.
The downside is that finding the right person with the right expertise for the job isn’t easy, especially in today’s competitive job market. You know someone who seems perfect on paper might not be the right fit in actuality.
There’s also the cost: Training could take a lot of time and resources. Plus, you’re either adding a new staffer or taking an existing staffer away to focus on this job (meaning you have to hire someone else to do their old job). Either way, you’re looking at another salary and benefits package, which would likely be more expensive than software.
With this option, sales tax management is off your company’s shoulders and rests with a third party, giving your team more time to focus on their core tasks. And without having to dedicate labor hours to sales tax management, staffers may also be able to take on new strategic responsibilities that are becoming more forefront in the digital age – analysis, reporting, forecasting, etc.
At the same time, your team has less control, and you’re essentially putting your faith in someone else to do the job right. Unfortunately, responsibility for compliance remains on your company, even when you rely on a third party. And like all three options, it comes at a price – one that can be more expensive than an in-house expert, says Avalara.
As CFOs know well, automation can make things much easier for finance staffers. In the past, though, companies have had to spring for whole software packages that then required updates and other add-ons.
Cloud-based automation is a gamechanger. With the cloud, you can typically pay a subscription fee and consistently keep up on current tax rates, rules and changes. It’s a middle ground where you get the necessary expertise but remain in control of the process.
That said, transferring to an automated process, even a cloud-based one, isn’t always seamless. It’ll take time for your team to find the right solution, as well as segue your current operations into the new software. And of course, there are sometimes additional software costs, including fees for deployment, customer support, etc.
Next steps: With these points in mind, your finance team can go over all its options for sales tax management. Weigh the benefits, drawbacks and costs of each. After, you’ll be well-equipped to make the best plan for your company.