Large retailer saves millions by tax optimising their enterprise resource planning system

Unlocking tangible value from your ERP implementation

Enterprise Resource Planning (“ERP”) provides an opportunity for companies to track and monitor business flows. While this creates a significant benefit across the highly regulated and diverse landscapes in which companies operate, there is additional value to be unlocked through a carefully designed ERP system.

If you have any questions or require a more detailed discussion, contact Clinton Eidelman (Associate Director – TMC Technology – Deloitte South Africa) at ceidelman@deloitte.co.za

Organisations in the midst of implementing or upgrading an ERP system often overlook the importance of the tax department as stakeholders of the system. The organisations invest in deep operational improvements, but ignore broader issues of structural tax planning or they make supply chain decisions without understanding their full tax implications.

Taxes are directly affected by a company’s overall operating model and as such, constitute a structural cost. The choices made today – how contracts are negotiated, who controls manufacturing processes, how inputs are sourced, how products are distributed – determine the structural tax obligations in future. Only when strategic tax planning forms an integral part of the overall business vision will it be possible to drive down a company’s structural tax rate.

However, effective and long term tax planning requires an understanding of the group’s strategic objectives, goals and constraints. Simultaneously, businesses increasingly require their tax functions to provide insight for critical decisions. Fast, accurate delivery of the tax provision and tax calculations for financial reporting purposes, as well as reporting on tax compliance filings and for management decision making, are all minimum expectations today.

Frequently, the unique needs and requirements of the tax function are not adequately addressed when implementing an ERP system, as the current “as is” tax structure is implemented with the new ERP system, relinquishing potential tax benefits and forcing the tax department to continue inefficient manual processes for tax compliance, planning and forecasting.

Therefore, according to Forrester, “Smart (technology) buyers have started to include a new factor in their sourcing decisions: tax implications. Understanding how taxes will be affected can help companies make better sourcing decisions and fund new projects.” In many cases cash tax savings can often deflect the cost of the overall ERP system implementation.

Tax Enabled ERP Solutions: Direct and Indirect Tax Benefits

A well designed Tax Enabled ERP Solution can increase speed, accuracy and data integrity — all of which are important, particularly when working through last minute updates at either quarter-end or year-end.

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