If the aim of your organization is full VAT automation of AP and AR, it is important to clearly understand your material risks at hand, and your lowest performing processes to define the functional specifications for a solution.
The first step is to understand what exactly makes standard SAP not function optimally from an Indirect Tax perspective. Only then, it is possible to validate whether companies’ objectives can be achieved with upgrading standard SAP functionality and/or implementing a tax engine?
A correct VAT determination of a cross border chain transaction, the VAT relevant data of company code A and B has to be linked in real time as Standard SAP itself is only processing a transaction within one specific company code. That means a helicopter view is needed to make that happen. This is only possible if tax logic is based and generated on a higher SAP’s hierarchy: Client Level, combined with implementing the basic tax rules into the logic. Client level includes all the company codes working on the same SAP platform.
Questions to ask before you commit
If you know the underlying weaknesses of SAP, your own indirect tax risk areas that exceed your company’s risk appetite, and your underperforming processes, it is important to get a clear understanding of whether solutions that are available in the market are actually closing the spotted gaps.
The following is a non-exhaustive list of questions that could be raised during tax software vendor selection. For readability, we use ‘Solution’ to refer to the product of the respective tax software vendors.
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