Running a business requires great management skills. The vast amount of tasks to be done seems endless; inventory management, product pricing, marketing, and then there are taxes.
Living in a civilized society requires us to pay taxes. This enables the government to provide services that we all enjoy especially those that aid us in business operations.
Benefits of Software in Tax Preparation for your Business
The shift to using computers in the workplace sped up the pace we all work at. It lessened the amount of manual paperwork that people have to file and line up for. If you’re filing cabinets, the following list shall give you a glimpse into a more productive future:
1. Legal terms and math
The introduction of spreadsheet software made it a lot easier to compute our taxes than using the old-school desktop calculator. There are still lots of manual intervention required as compared to simply using a tax filing software.
The actual computation of taxes are buried behind the legal terms in tax laws. Since Excel files do not usually have preexisting formulas to account for each and every rule in the law, you still need to provide those. Manually creating formulas from these words are prone to misinterpretation.
Excel templates reduce the complexity of memorizing formulas but manual entry is prone to human error. According to a study by Bloomberg’s BNA, 17% of accounting errors are from accidentally deleting a custom Excel formula used to calculate corporate tax data.
A tax filing system has all the computations necessary, reducing the number of files that need to be maintained on your end.
2. Storage
Having reproducible digital copies of your transactions and tax computations saves you time on retrieving these in case of emergency and disaster.
In case you get under the IRS’ radar, surviving a tax investigation involves retrieving historical data. Depending on how you archive your files, it may involve cabinets, papers, and dust! Worse yet, corrupted files. Using a tax software simplifies this process for you.
Tax solutions in the cloud also make use of automatic and secure backups.
3. Expansion
If the laws in your state already confuse you, what more if you’re going to expand your business elsewhere. Adjusting to the local market of a new location requires not just knowing the customers but also abiding by their tax regulations. Having to keep track of each and every one of these rules takes away precious time that you could’ve been spending to further optimize your business procedures.
4. Efficiency and process improvement
Being battle-tested from usage by different clients adds some assurance that a tax software’s processes are efficient and effective.
Statistics from 236 Polish companies in 2016 show that although 69% of companies document internal processes, only 4% measure and manage them. A complete tax compliance solution lifts some burden of further improving tax compliance processes from you as it is already being done at their end. It also uses data analytics to aid you in optimizing your process flow.
5. Integration and automation
Some tax filing software provide integration with other tools you already use. These avoid the need to manually input data from one software to another, saving your staff time and energy to do more productive work.
Citing the aforementioned Bloomberg’s BNA study, incorrect tax data entry accounts for 27% of accounting mistakes. Automatically feeding data between systems minimizes the amount of human interaction involved, reducing susceptibility to human error.
6. Speed of computation
Depending on the size of your business and the amount of transactions that you engage in, it may take millions of computations to compute your taxes. Some tax filing software do their computations on the cloud, using millions (if not billions) of parallel processing power that your office computer will probably have a hard time catching up. That also means, having fewer computers that you have to maintain yourself.
7. Ever-changing tax laws
Even if you have every rule in your head right down to the smallest details (which is highly unlikely), the thing is, laws change over time, including the tax code. This means updating lots of excel formulas including those past files that will be affected by any change in tax regulations.
In October 2018, the new rates and regulations introduced in the 2017 tax law forced 15 million individual taxpayers to file for extensions according to the IRS. Some of these changes (especially regarding offshore income) had a long list of additional requirements with which the companies had to comply.
Using a tax software automatically accounts for and notifies you of these changes.
Conclusion
The benefits of using a tax software more than make up for the overhead of integrating it into your business. Keeping up with the times is a requirement for every business, to avoid being left in the dust by those who adapt to faster and more efficient business practices.
