Supporting the unlikely heroes of global business  

Lyubov Skenderova, Globalisation and Compliance Manager, Tradeshift  comments on the critical role now more than ever played by Accounts Payable divisions toward business continuity and cash flow management


ot every superhero wears a cape to work. Just ask Lois Lane. But every business has a team of heroes who, like Clark Kent, are far more comfortable out of the limelight.

Accounts payable may sound like unlikely saviours, but COVID-19 has made businesses realise just how reliant they are on this function. With revenues plummeting during lockdown and the seizing-up of the international supply chain, enterprises are discovering just how crucial a role AP plays in business continuity, cash flow management, forecasting, budgeting and more.

Smart businesses know that empowering accounts payable is the key to unlocking the insight and agility they need to survive the pandemic and thrive beyond it. But the pandemic isn’t the only reason why accounts payable teams have had heroism thrust upon them. This new role at the centre of business strategy began with changes to global tax regulations that started long before the world started worrying about the news from Wuhan.

Lyubov Skenderova,  Globalisation and Compliance Manager, Tradeshift

Taxing times on the horizon

Champions of globalisation have long dreamt of a single, standardised taxation regime for the whole planet. But even if that prospect remains far in the future, the last few years have seen a move for greater transparency and regulatory insight into cross-border taxation, which could form the foundation of future, global standardisation

National Continuous Transaction Control (CTC) systems are being developed to counter the perennial - and hitherto hard-to-combat - problem of corporate tax avoidance. This isn’t just an issue for countries with a historically lax approach to tax enforcement: in 2018 the OECD revealed that almost half of potential VAT is never collected, with the treasuries of EU member states losing an astonishing $167 billion. That’s well over the entire budget for the European Union.

With the last year’s lockdowns and furloughs drying up national tax takes still further, there is a new imperative for countries to claw back revenue by maximising consumption taxes while clamping down on avoidance. And CTC systems appear highly promising: in Brazil they have helped authorities to harvest an additional $58 billion, while in Mexico collection has increased by a third.

The most popular form of CTC in the world today is clearance e-invoicing, where electronic invoices are cleared directly with a tax authority or its appointed agents before, or as part of, the issuance process.

The benefits of CTC are obvious, but it places a heavy burden on businesses, requiring them to prove the validity of every invoice the moment it’s generated. And this in turn requires superhuman efforts from accounts payable and the IT teams that support them. Global standardisation is still far on the horizon, and for now many countries have their own set of requirements for sending and receiving invoices, different formats and content fields, varying exemptions, and a range of security requirements and non-compliance penalties.

Adapting existing tools and systems to meet the new requirements can be particularly challenging. In fact, this is a common issue among global organizations that must accommodate the shift to mandatory e-invoicing in different markets. Technology can provide a fix, but those who seek a silver bullet - a single application that they simply graft onto their existing tech stack - must learn what such a strategic challenge requires.

Quite often businesses’ legacy ERP or accounts systems aren’t flexible or robust enough to meet the new requirements. Overcoming these problems can often mean painful workarounds and an increase in manual intervention that negates any of the benefits they should be obtaining by transitioning to digital invoicing. In the worst cases, companies that fail to accommodate the changes are finding themselves liable to substantial fines.

Help for heroes

Forecasts are already predicting that by 2025, 75% of all B2B invoices globally will be digitally exchanged in real-time. As global businesses come to terms with this complex new layer of country-by-country compliance, the ones that manage the challenge best are the ones that deploy digitised systems that enable them to scale with speed and full compliance.

There is growing acceptance that taking a more proactive stance to these changes can unlock a number of operational benefits for accounts payable such as greater accuracy, reduced exceptions and errors from manual processing. Software as a Service companies have made great strides in providing embedded tax compliance monitoring and change management capabilities to adapt to new and changing CTC requirements.

Schaeffler is one business that has managed to stay on top of the complex and constantly changing compliance landscape by moving to a fully digitised environment. “Our objective is to keep ahead of regulatory changes whilst also keeping costs low,” explains Schaeffler’s Professional Process Manager, Michael Hofmann.

“Staying compliant is all about having high-quality data. When you’re relying on manual input you multiply the opportunities for error. Time spent fixing these errors adds an extra layer of cost and complexity.

“Today all of our e-invoices come through Tradeshift, which automates compliance validation checks. By receiving data electronically in an end-to-end interface, we ensure 100% reliable data. Any invalid documents are declined before they come to us. We’ve been able to reduce the costs of processing transactions, while also fulfilling all of our compliance obligations.”

Organisations are also recognising that the benefits of digitisation extend far beyond AP’s traditional bailiwick of managing invoices and payments. Even in their most fevered dreams, business continuity practitioners could not have imagined such a colossal, far-reaching and long-lasting catastrophe as Covid. Faced with unprecedented cash flow and budgetary crises, businesses are searching frantically for some tool that can give them instant operational insight and enable them to respond to disruption with dynamism and agility.

The same digital systems that ensure compliance with new CTCs also deliver many of these wider business benefits, and will prove a crucial competitive advantage in the search to open up new markets. And if this places a much greater burden on accounts payable, it’s well within businesses’ ability to give these hidden heroes a new set of digital superpowers with which to fulfil their newly-pivotal role.