Procurement activities and indirect tax processes intersect at numerous junctions. How effectively organizations manage these touch points is an important consideration.
Optimizing indirect tax compliance for procurement transactions requires an understanding of the various points where tax management processes and procurement processes intersect.
Created by KPMG and Vertex, this concise paper explores five key procurement-tax touch points in a post-COVID context:
- Master data setup and vendor setup: The objectives of this touch point are to ensure the accuracy of vendor addresses, ship-to addresses, and more. Commodity codes also need to be sufficiently detailed, or granular, for tax purposes.
- Requisition and purchase order: Procurement system users must clearly identify correct delivery locations (i.e., the ship-to address) and select appropriate commodity codes when making a purchase.
- Goods receipts: It is important to keep in mind that goods receipts may include indirect taxes.
- Invoice verification: At this touch point, taxes charged by vendors should be validated; tax tolerances and thresholds should also be established.
- Invoice posting: Once the invoice clears validation and is approved for payment, that data (including the vendor-charged taxes along with any self-assessed tax accruals) must be conveyed to the general ledger in an enterprise resource planning (ERP) system.
Read more to discover the benefits of aligning procurement and tax.