With the OECD’s Business Confidence Index (BCI) dropping to below pre-COVID levels before the start of this year, the outlook for businesses across various industries has been driven by the possibility of recession,  rising inflation, and volatile consumer confidence, among other economic factors. As a result, businesses across the globe have shifted their focus to meeting efficiency goals, rather than putting a bullseye on unrestrained growth.

A goal around efficiency includes many of the same practices businesses have been leveraging for years, now coupled with the benefits of digital modernization. To meet new goals around efficiency, businesses are leveraging technology that automates operations and processes; many on the backend. To cut down on added costs, time, and resources spent on low value business requirements, businesses have turned to areas like tax compliance as a part of their operations where they could be more efficient.

Tax compliance is an area especially ripe for automation within global businesses because easy-to-use automation solutions drive both time and cost reduction, protects businesses from harsh fines and penalties from audits, and creates a better overall customer experience. This is especially true for small and midsize businesses, which have fewer resources at their disposal.

According to research from Avalara, small and midsize businesses spend a combined 163 hours and more than $17,000 per month on manual sales tax management. That’s 163 hours that tax professionals could spend on numerous other and more important tasks to support their business’s bottom line. After all, an hour spent on tax management is an hour lost on other parts of the business, which can lead to growth.

The cost of manual tax compliance goes beyond time and money. Like many human-centric tasks, manual tax management is an error-prone process. Using outdated methods, like spreadsheets, makes it increasingly difficult for tax professionals to keep up with constantly changing tax rates and rules. The uncertainty surrounding manually managed tax rates and rules that are used to make tax determinations for a business creates unnecessary risk.

Tax can also serve as a barrier to business growth and expansion. Entering new markets and adding sales channels, employees, products, and/or services can trigger new tax obligations to register and file in more locations.  When businesses are looking for areas to cut costs and resources, and drive overall efficiency, tax compliance can quickly become the poster child for automation because of the low value that managing it provides to a business. Adding in the risk of getting tax wrong and the impact it can have on a business, the decision to automate makes even greater sense.

Automation not only allows businesses to reduce the time and money currently spent on manually managing processes that can be handled more quickly and accurately with technology, but it also reduces barriers to growth and enhances the value of existing technology and systems.

Automation decreases the tax complexity that often comes with business growth. The effort required to remain compliant in a few states is vastly different when you do business in most of the USA. Selling into more countries adds a whole new level of complexity. With automation, it’s easier to scale.

The rise in the adoption of automation signals that more businesses are realizing that tax is simply too complex to manage on their own. However, it’s still important for businesses to understand that not all technology is created equal. For example, if a business is using a solution that only handles tax calculation, they still have an obligation to manage the rest of the compliance lifecycle.

Avalara and Xero have a well-established strategic partnership, which brings sales tax workflows and easier management to the Xero platform. Working together, the sales tax compliance capabilities help small businesses, accountants, and bookkeepers simplify sales tax obligations for small businesses, with more reliable sales tax calculations on invoices, more flexible sales tax reporting, and filing via Avalara.

Xero also recently launched its auto sales tax capability, which was developed in partnership with Avalara. The embedded solution brings advanced sales tax workflows and management directly into the Xero platform, enabling advisors and business owners to automate sales tax calculations, reporting and filing.

This auto sales tax capability is best suited for companies who invoice for their goods and services in Xero, operate across multiple jurisdictions, and have a mix of taxable, non-taxable and exempt goods.

Avalara's expansive tax content database and sales tax calculation engine, coupled with Xero's invoice and reporting capabilities, make it easy for both small business customers and their advisors to benefit from a seamless delivery of tax determinations and calculations on every transaction.