In a recent survey, researchers found that half of all surveyed businesses were scared that auditors would be likely to find a mistake in their tax compliance practices. That’s a lot of businesses that are terrified that their paperwork is faulty. Because managing an audit has an average total cost of $96,552, that also means that a lot of CEOs out there spend an inordinate amount of time worrying about audit expenses—but not feeling like they can fix their situation. Yes, taxes are terrifying, but they don’t have to be. We at SWK Tech think that now is that time for the small businesses we work with to gain more tax confidence. Life’s too short to worry about taxes, so today’s post is all about the common tax errors your business is probably making right now, and how you can rethink your tax compliance procedures to reduce your audit worries significantly.
Here are the 3 errors you’re already making
- Entering sales tax rates once: You heard that taxes are complex, so you spent 40 hours setting up all your tax rates in your system before you opened your doors for the first time. Whether you opened your doors last week or ten years ago, if you haven’t yet updated your tax calculations, you’re charging the wrong rates.
- Manually updating your tax info: Okay, you realize that your tax responsibility requires you to update your tax rates all the time. That means that you’re spending a lot of time manually tracking down the new tax rules and rates, and entering them in by hand. This process takes an average of 11 hours per week—wouldn’t you rather spend that time (572 hours per year) following up on leads?
- Applying an average rate across all transactions: If you’re charging all your customers a flat sales tax rate, you’re making an error. Sales taxes not only change based on the product being sold and the rules being applied to that product, they also change based on the time of year and the latest tax regulations and laws.
A new way to think about your company spending
We’ve established so far that taxes take up a lot of time, that they change frequently, and that there is no one-size-fits-all solution for your taxes. In short, you have a lot more work to do.
…Or maybe you don’t.
Terry Carlton, a channel development manager at Avalara, recently introduced me to his view of how businesses run. He has an agriculture background, and he sees all businesses as following either a “Factory” model or a “Farm” model.
Factories vs. Farms
According to Carlton, the “Factory” business focuses on all the operations that must be done the same way, all the time, in order to keep a business rolling. The factory business focuses their time, money, and attention on “dotting their ‘i’s and crossing their ‘t’s” in areas such as:
- Payroll
- Taxes
- Accounts payable (AP)
- Government compliance procedures
- Systems management
These are all important things to focus on, and they all take a commitment to strong time and resources management. Factory companies may be less worried about audits, but their growth can be slower than their Farm counterparts.
“Farm” businesses don’t stress the paperwork as much. They focus on nurturing their products, their customers, and their reputations, and because of that focus, they frequently grow at astronomical rates. And they don’t necessarily worry about audits more often, either.
Farm businesses know that paperwork is an important part of running a business, but they choose to outsource their paperwork, instead of doing it in-house. Farm businesses may outsource their payroll to ADP, their AP to accountants, their systems management to overseas IT companies (or great IT consultants nearby)…and many also outsource their tax calculations, too.
How tax outsourcing works
To outsource your tax calculations, you would simply connect your Sage ERP X3, Sage 500 ERP, or Sage 100 ERP system to Avalara (AKA Sage Sales Tax). Avalara’s cloud-based system is kept consistently up to date by their team of sales tax experts, and Avalara calculates the correct taxes for each individual sale that you ring up. The calculations are fast, too: they usually only take 4/10 of a second.
When you outsource your taxes to Avalara, you save time at the end of the month as well. Instead of running reports and determining what checks you need to cut, you simply log in to Avalara and approve your payments. Avalara does all the time-consuming work for you.
Conclusion
Life is too short and the pace of business moves too fast to spend time and resources on taxes. Whether you have outdated tax information, spend 11 hours a week manually entering your tax information, or have applied a “one-size-fits-all” formula to your tax rates, your business is probably doing your sales tax calculations wrong. To save time and refocus your attention on growing your business revenues, you can outsource your tax calculations to Avalara. Learn more about Avalara by clicking the button below.
