Did You Know: VAT Reporting Can Be Automated in PeopleSoft Financials
Why should accountants continue to suffer?
Following on from my last blog, I am keeping on the theme of VAT. Personally, this is not my favourite subject as it is complex and at times very confusing, but as an accountant, VAT returns need to be completed and submitted to HMRC either monthly or quarterly. This task is not optional, it is a legal requirement and always needs to be re-assessed when there are tax legislation changes or dramatic changes to how we do business with other countries, as the UK is now facing the impact of Brexit.
Many organizations struggle with the VAT reporting process because there seems to be a lack of trust in the data extracted from their ERP systems. This can usually be traced back to transactions being entered incorrectly, which ultimately distorts the VAT return submission. The upcoming second phase of the HMRC, Making Tax Digital and becoming a tax mandate in April 2022 will intensify the frustration, especially with the additional tax complications from COVID-19 support offerings.
Does it impact PeopleSoft Financials customers?
There are many UK organizations using PeopleSoft Financials but have not fully implemented the VAT reporting process, and the reasons vary from:
· Not being aware of the VAT reporting functionality available in PeopleSoft Financials.
· Aware of the functionality but deciding it was not a priority to the upgrade or implementation and was dropped off the priority list.
· Aware of the functionality but deciding to implement it after go-live but never got round to it.
· Implemented the VAT reporting process with little involvement from the business experts, therefore not adequately complete for accountants to trust the data in the report.
· Implemented the VAT reporting process but not thoroughly tested for all the operational scenarios, therefore, also casting doubt on the data in the report.
· Implemented the VAT reporting process with the business experts but were unable to provide support for any errors to be fixed or maintained within the system to enable automation of the reporting process. Therefore, accountants return to their manual steps.
Whatever the reasons, there really is no excuse for not implementing the VAT reporting. Especially, when PeopleSoft Financials is a mature product with proven capability to automate this whole VAT reporting process not just for the UK but across Europe too.
Accountants should not have to use the Transaction Loader data and several inadequate queries to hash the VAT report, as this makes the task extremely cumbersome, laborious, and highly spreadsheet dependent.
This diverges from the principles of what HMRC is trying to achieve from April 2021 with Making Tax Digital (read my previous blog). It is important to understand that accountants need to ensure the VAT returns are accurate at any cost, as the failure to comply with the tax legislation can lead to costly penalties to the organization. So, what better way to avoid this than with automation of the process?
VAT Reporting in PeopleSoft Financials v9.2
Most organizations using PeopleSoft Financials have already upgraded to v9.2 which has all the functionality of VAT reporting and the XML file required for HMRC submission. By fully embracing the functionality available, you can eliminate human intervention in the results or the need to make any manual adjustments.
In the diagram below, the top part of the process shows the full potential of Peoplesoft Financials. This can be further automated within PeopleSoft Financials by using Version 1’s digital link so it can directly submit the reports to HRMC to fully satisfy HMRC’s updated Making Tax Digital rules.
The bottom part of the process represents the probable reality for most organizations, of extracting transactional data from PeopleSoft Financials, then employing a considerable effort to manually calculate and reconcile the VAT Return.
With this in mind, let us reduce the effort for VAT accountants, by….?
…automating the process! All this requires is understanding the accountants’ issues with their VAT reporting process, and breaking them down into segments of:
· Transactional issues — if data entry is incorrect, then the VAT default setup needs correcting.
· Processing issues — if processes are considered as cumbersome, then add them to the overnight batch processes.
· Reporting issues — if the reporting data is missing transactions, then VAT report definitions need correcting.
Even if there are customizations in your PeopleSoft Financials environment, all the VAT issues can be resolved by applying standard VAT configuration.
All that is required is a little care and patience. By working closely with the tax/finance team we can identify the issues and categorize them within the above segments. Work through the logic of each issue within each segment and apply the right configuration. The testing should encompass all the possible scenarios for each jurisdiction and ensure all issues resolved before applying the configuration to production.
In some cases, there will be tax complexities in transactional scenarios which will require amendments to processes and training. Overall, all these modifications will reduce, if not eliminate, the risk of human error, enable transparency and facilitate full reconciliation of the VAT report to the transactional data held within the one ERP system.
So, let us be honest, there is nothing that should stop you from using the full functionality of PeopleSoft Financials for VAT reporting as it will not only be easier, but also more accurate.
About the author
Sonal Patel is a qualified AAT accountant (FMAAT), with over 30 years’ experience in audit, forensic and commercial accounting and, for the last 20 years, she has been implementing business processes internationally, using PeopleSoft Financials.
If you have any questions or would like more information on the Version 1’s PeopleSoft Financials MTD extension, or even have topics you would like her opinion on, please contact Sonal at Sonal.Patel@version1.com. Look out for more of Sonal’s “Did you know that” series of blogs in the near future.
