Best Practices for Tax and AR Automation for NetSuite Customers

For NetSuite customers, integrating efficient tax and accounts receivable (AR) automation can transform financial processes, reduce errors, and enhance compliance. This blog delves into best practices for achieving these efficiencies, as discussed in the recent Kolleno x Avalara webinar. 

In This Article

• What is Finance Automation
• AR Management: From Legacy Systems to Automation
• Transitioning to AR automation with Netsuite and Kolleno
• What is Tax Compliance Automation
• Tax Compliance Challenges
• The Future of Tax Compliance
• Avalara’s Solution for NetSuite
• Best Tips for Choosing and Implementing Financial Management Tools with NetSuite 

What is Finance Automation?

Finance automation involves using technology to digitize and simplify various financial processes to save time and improve efficiency. By implementing automation, businesses can eliminate manual tasks, reduce human errors, and ensure consistency in financial reporting. This not only speeds up operations but also provides more accurate and reliable data, enabling better decision-making. Additionally, finance automation frees up valuable resources, allowing finance teams to focus on strategic activities that drive growth and innovation.

 Key areas impacted by automation include:

• Expense Management
• Accounts Receivable (AR) Management
• Payments & Reconciliation
• Procure-to-Pay (P2P)
• Financial Planning & Analysis (FPA)
• Tax Compliance

AR Management: From Legacy Systems to Automation

Traditional AR processes often rely on manual, decentralized, and paper-based systems. These outdated methods are not only prone to human error but also require time-consuming manual reminders and offer little visibility into overdue payments. Additionally, non-digital payment methods, such as cheques, introduce friction and complexity into the payment process, leading to delays and potential write-offs. 

Challenges with Legacy AR Processes

Manual Reminders and Chasing Payments

Legacy AR processes require significant time and effort from AR teams to manually send reminders and follow up on overdue payments. This often involves making phone calls, sending emails, and even mailing physical letters, consuming valuable resources. Moreover, the manual nature of these reminders can lead to inconsistent follow-ups, increasing the likelihood of missed payments and delays in cash inflows.

Disaggregated Data

Legacy systems typically involve multiple, disjointed tools and databases, resulting in fragmented information. This lack of centralization makes it challenging to gain a holistic view of accounts receivable hindering effective decision-making. When data is stored in silos, sharing information across departments becomes difficult, leading to inefficiencies and errors.

Higher Risk of Missed Tasks and Write-Offs

Manual processes are inherently prone to human errors, such as incorrect data entry, missed follow-ups, and overlooked payments. These errors can result in inaccurate financial records and increased write-offs. Without automated reminders and tracking, overdue accounts can accumulate, increasing the risk of bad debt and negatively impacting the company’s cash flow.

Time-Consuming Reconciliation Processes

Reconciling payments with invoices manually is a labor-intensive process that can be fraught with errors. This complexity often leads to delays in closing financial periods and creates additional workload for finance teams. Moreover, reliance on non-digital payment methods, like cheques, adds further friction and complexity to the payment process, requiring more time to process and increasing the risk of misplaced or delayed payments.

Transitioning to Accounts Receivable Automation with NetSuite and Kolleno

Implementing accounts receivable (AR) automation solutions, such as Kolleno, especially when integrated with NetSuite, can significantly address the challenges associated with the invoice-to-cash cycle. Here’s how AR automation with NetSuite and Kolleno can transform your business operations:

Centralized and Digitized Invoicing

The integration of Kolleno with NetSuite centralizes and digitizes invoicing, which brings about substantial efficiency gains. Automation simplifies the issuance, tracking, and management of invoices, thus reducing the time and effort traditionally required. By automating data entry and processing, it minimizes the risk of human errors, ensuring that financial records are accurate and reliable.

Automated Reminders and Follow-Ups

Automation enables consistent communication by sending personalized and multi-channel reminders to customers through SMS, phone, and email. This ensures that follow-ups on overdue payments are timely and consistent, ultimately improving cash flow. Businesses can redirect the time spent on manual reminders to other critical activities, enhancing overall operational efficiency.

Enhanced Data Visibility

Enhanced data visibility is another significant advantage of AR automation. Businesses can gain real-time insights into the status of invoices, payments, and outstanding balances. This comprehensive visibility facilitates better decision-making and financial planning. Centralized systems eliminate data silos, promoting seamless information sharing across departments and improving overall efficiency.

Automated Reconciliation

Kolleno automatically matches payments with invoices, significantly reducing the time and effort required for manual reconciliation. Additionally, offering digital payment options such as online transfers and payment gateways accelerates the payment process and enhances customer convenience.

Scalability and Flexibility 

Scalability and flexibility are inherent benefits of automated AR solutions. As businesses grow, these solutions can scale to accommodate increased transaction volumes and complexity without compromising efficiency. Customizable workflows allow businesses to tailor the system to their specific needs, ensuring that the automation adapts to their processes rather than the other way around.

What is Tax Compliance Automation? 

Tax compliance automation simplifies the complexities of managing taxes by using advanced software to handle the various tasks involved. This includes calculating taxes accurately, filing returns on time, providing real-time updates on tax rates and regulations, and generating detailed reports and documentation. By automating these processes, businesses can significantly reduce human error, stay compliant with ever-changing tax laws, and save time and effort previously spent on manual tax management. These automated systems seamlessly integrate with financial platforms like NetSuite, offering a centralized and efficient way to manage tax obligations, ultimately enhancing accuracy and operational efficiency.

Tax Compliance Challenges

Governments are increasingly aggressive with their tax compliance policies, driven by the need to reduce tax gaps and ensure timely revenue collection. For example, in the US, businesses face challenges with physical and economic nexus laws, which determine tax obligations based on physical presence or economic activity within a state. These laws can vary significantly, making compliance complex for remote sellers.

For example, California requires a sales threshold of half a million dollars before tax registration is mandatory, and certain products like digital goods may be tax-exempt. Such nuances necessitate a robust tax calculation system to ensure compliance.

The future of tax compliance

The future of tax compliance is increasingly driven by automation, real-time reporting, and advanced technologies like AI. Governments worldwide are implementing stringent regulations to ensure accurate and timely tax collection, necessitating businesses to adapt quickly. Comprehensive tax solutions integrated with ERP systems, such as Netsuite, provide platforms to handle diverse tax requirements across multiple jurisdictions. E-invoicing and real-time reporting are becoming standard, allowing immediate data exchange with tax authorities and reducing administrative burdens. This trend enhances transparency and minimizes errors and fraud.

Avalara’s Solutions for Netsuite

Avalara’s AvaTax integrates effortlessly with Netsuite, automating tax calculations and compliance. ses. This integration ensures that businesses can manage their tax obligations with greater accuracy and efficiency, reducing the risks associated with manual tax calculations and filings

Comprehensive Tax Calculation

AvaTax provides precise tax calculations for various types of taxes, including sales and use tax, VAT, GST, and consumer use tax. For sales and use tax, AvaTax ensures accurate calculations based on the latest rates and rules, which can vary significantly by jurisdiction. This is particularly important in the United States, where there are over 14,000 taxing jurisdictions and frequent rate changes. For businesses operating in Europe, AvaTax simplifies the complexities of VAT calculations, ensuring compliance with regional tax laws. In regions like Canada and Australia, AvaTax handles GST calculations, making sure businesses charge the correct tax rates on their transactions. Additionally, AvaTax supports consumer use tax calculations, helping businesses account for taxes owed on out-of-state purchases where sales tax was not collected at the point of sale.

Automated Returns and Reporting

One of the most time-consuming aspects of tax compliance is the filing of tax returns. AvaTax automates this process by preparing and filing tax returns, ensuring they are submitted accurately and on time. This automation reduces the administrative burden on finance teams and minimizes the risk of errors. Furthermore, AvaTax provides comprehensive reports that give businesses insights into their tax liabilities and filing status, aiding in audit preparation and ensuring ongoing compliance with tax regulations.

Management of Exemption Certificates

For businesses that sell to exempt entities or resellers, managing exemption certificates is crucial. AvaTax maintains a centralized repository of exemption certificates, making it easy to retrieve and validate them during transactions. It also automatically applies the correct tax exemption to transactions, ensuring that exempt customers are not charged tax. This feature is particularly useful in the U.S., where businesses must collect and manage a large number of exemption certificates to remain compliant.

E-invoicing and Live Reporting

With global trends moving towards greater transparency and real-time reporting, AvaTax supports both e-invoicing and live reporting. AvaTax facilitates the generation and transmission of electronic invoices in compliance with various international standards, helping businesses meet the invoicing requirements of different countries and reducing the complexity of cross-border transactions. Additionally, AvaTax enables real-time reporting to tax authorities, which is becoming increasingly mandated in many countries. This functionality helps businesses stay ahead of regulatory changes and ensures the timely submission of required tax information.

Quote from Dan: Implementing tax automation solutions with NetSuite isn’t just about meeting compliance—it’s about transforming your entire financial operation. By leveraging advanced technology, businesses can simplify complex tax calculations and reporting, ensuring precision and mitigating the risk of penalties. This allows businesses to reclaim valuable time and resources, empowering finance teams to focus on strategic growth initiatives.

Best Tips for Choosing and Implementing Financial Management Tools with NetSuite 

Selecting and implementing the right tools with NetSuite is crucial for enhancing business processes and ensuring seamless integration. Here are some best tips for making the right choices and successful implementation:

1. Assess Business Needs: Begin by thoroughly understanding your business requirements. Identify the specific processes that need improvement or automation and how they will integrate with NetSuite.

2. Evaluate Compatibility: Ensure the software tool you choose is fully compatible with NetSuite. Check for pre-built connectors or APIs that facilitate seamless integration and minimize the need for custom development.

3. Scalability and Flexibility: Choose tools that can scale with your business as it grows. They should be flexible enough to adapt to evolving business needs and integrate with other systems you may use in the future.

4. Vendor Reputation and Support: Research potential vendors to ensure they have a solid reputation and a proven track record with NetSuite integrations. Look for vendors that offer robust customer support and regular updates.

5. Data Security and Compliance: Ensure that the tools comply with data security standards and regulations relevant to your industry. This is essential for protecting sensitive business information and maintaining compliance.

6. User-Friendly Interface: Select tools with intuitive and user-friendly interfaces to facilitate adoption by your team. A tool that is easy to use will reduce the learning curve and increase productivity.

7. Cost Considerations: Evaluate the total cost, including implementation costs, and training costs. Ensure the tool provides good value and a solid return on investment.

8. Training and Documentation: Ensure that your team receives comprehensive training and they understand how to use the new tools effectively. Ask your software provider for the detailed onboarding documentation and resources to support ongoing learning and troubleshooting.

9. Continuous Monitoring and Improvement: After implementation, continuously monitor the tool’s performance and gather user feedback that you can report back to the software provider you chose.

About Avalara

Avalara helps businesses of all sizes achieve compliance with transactional taxes, including VAT, sales and use, excise, communications, and other tax types. They offer more than 500 pre-built connectors into leading accounting, ERP, ecommerce and other business applications. Each year, we process billions of indirect tax transactions, file hundreds of thousands of tax compliance documents and tax returns, and manage millions of exemption certificates and other compliance-related documents.

About Kolleno

Kolleno is an all-in-one AR management platform used by companies like 1Password, Dealer-FX, and Marshmallow and trusted by partners, such as Tipalti, GoCardless, and Adyen. It is built for and by finance professionals to automate and optimise finance back-office processes with AI-powered features. Kolleno simplifies the management of client payments, ​​related communications, and financial reporting by keeping everything in sync – data, systems, and people. It offers a comprehensive suite of AI-powered tools to automate invoice tracking, payment reminders, and collections, making it easier for businesses to manage their cash flow.