Every business wants to stay compliant. However, the road to compliance has been challenging due to frequent changes in rules and regulations. The evolution of compliance is undoubtedly rapid and transformational. This makes a strong case for real time compliance as the future, let’s explore why real-time compliance technology is a ‘must-have’ for Indian businesses.
The shift to comply with technology: From option to necessity
Previously, tax filings were fewer, far apart, and manually intervened. The paperwork continued to be tedious while digitization involved high costs. Accordingly, digitizing compliance was never a concern of a Finance or IT Head as they considered teams less adaptive to such changes. Further, the tax authorities did not widely adopt technology or automation to trace tax evasion.
With many tax reforms in the last decade, we see that businesses today have shifted their focus to continuous compliance using technology, as traditional ways are not helpful.
There are risks with conventional compliance routes, such as excel sheets and disjointed tools, as they involve manual intervention at multiple points with no single source of truth. These do not give comprehensive visibility across the finance ecosystem due to siloes between teams, such as accounts payable and tax. It further impacts the profitability with the cash leakages due to a lack of real-time vendor compliance visibility for return filing.
An example of why this shift is necessary.
With the shift, Indian businesses aim to ensure compliance and while also effectively managing cash flows. The government has also embraced AI to trace and prevent tax evasion. Fresh tax laws are being passed that allow authorities to monitor tax evasions in real-time using technology.
In one of the instances, the authorities block GSTR-1 filing (i.e., the return of outward supplies made by a business) where taxpayers fail to file a suggested form for a significant tax/ITC difference between previously filed returns. It would not have been possible earlier for tax authorities to manually track or ensure the blocking of GSTR-1 for failure to receive a certain response on time.
On the other hand, it becomes difficult for businesses to track 100% of tax credit claims and reporting of entire tax liability without administering rigorous reconciliations and continuously communicating with non-compliant vendors using technology.
Simply, businesses must adapt to the latest technology for 100% compliance. Compliance technology is no longer ‘Good to have’ but is a ‘Must have’ for Indian businesses.
Decoding compliance technology
So, what is compliance technology? It consists of innovative solutions, real-time or integrated software to automate and enhance regulatory compliance along the business operations, thereby reducing risks.
CEO,
Clear.
Accordingly, compliance technology strives to auto-pull and keep data in the requisite compliant format, validated, and used for timely and accurate return preparation. It also allows the archival and retrieval of data at scale while providing vital insights instantly to leaders for faster and more efficient decision-making. It could also streamline upstream and downstream finance processes along the supply chain with a single source of information.
Benefits of real-time compliance technology
Let’s look at some of the key benefits of using compliance technology in real-time for your organization-
- Streamlines and automates various compliance processes, reducing the need for manual intervention.
- Automates compliance processes to promote significant cost savings by reducing the need for manual labor, paperwork, and administrative overheads.
- Allows real-time monitoring of changes in compliance law so businesses can stay up-to-date with evolving requirements.
- Provides finance leaders with visibility on the compliance status of the business through insightful reports.
- Helps mitigate non-compliance risks proactively through exceptional reporting to prevent legal penalties, reputational damage, and other adverse consequences.
- Involves secure data storage and handling and assures data integrity and confidentiality of sensitive information.
- Communication tools within compliance technology allow teams to engage efficiently and potentially can allow a single information source.
Ultimately, real-time compliance technology will allow businesses to prepare ahead of time and stay on top of notices/audits.
