Ask any business leader what they want to spend their time doing, and you?ll get some variation on a theme based on a passion for what they do: I want to change the world by putting x products into the hands of y people that need it most. I want to make lots of money by selling widget z. I want to build a web service that changes the way people do a, b or c. And so on. What they don?t tell you is that they want to be caught in a mire of red tape as national and international regulations change and they have to update their financial reporting and accounting practices and standards to avoid fines or reputational damage. The PAYE shake-up earlier this year ? reportedly the biggest shake-up in PAYE guidance in 70 years ? is unlikely to be the end of it. The current global economic outlook is unprecedented in modern human history. The level of national debt in the UK ? and the rising levels of tax fraud or avoidance, estimated at around ?32bn last year by HMRC ? make improving the efficiency, effectiveness and nature of revenue collection a subject of extreme scrutiny and change that is high on the Government?s agenda. And so businesses need to brace for this accordingly. Is the new regulation good or bad for business? In some cases, there are clearly limitations, with the HMRC already having delayed the process for many organisations thanks to an unfortunately timed computer glitch. Add to this a feeling of ?frustration? among nearly a quarter of SMEs as they grapple with the new legislation and you can understand why the new system, based on Real Time Information (RTI), has not received unanimous support. One major issue many businesses have with the revised PAYE rules is that it no longer allows for the ?benefit? of paying late to manage their cashflow. However, if businesses can get their books in order, some may find they?ve been overpaying and achieve efficiencies there. And with the cashflow benefits of the current PAYE scheme removed, businesses will be motivated to put the spotlight on other areas of their business, potentially eking out operational improvements that would otherwise have gone unidentified indefinitely. However, the degree of transparency required to fully realise such opportunities can be a challenge for a business of any size. Most are struggling with outdated or disparate systems ? for example, using old or multiple versions of an accounting package with different presets for relevant tax rates and so on. This makes it hard to accurately report tax liability, never mind gain a comprehensive view of an organisation that might be distributed over several sites, be trading through multiple subsidiaries, or trying to grow internationally by trading in different markets (with their own tax regimes!). When you take into account that accounting systems might be separate from inventory, warehousing, order systems, not to mention a businesses? own links with the HMRC ? you start to see what a complex web there is, and how much opportunity for error. As far as the PAYE guidance is concerned ? if you can reduce the cost of administering payroll in the first place ? you may be able to immediately re-allocate resources to revenue generating aspects of the business. While many economies are beginning to show signs of recovery and easing the business environment for many, dealing with the changing face of regulation and compliance is going to be an ongoing challenge for all businesses in the months and years ahead, even as compliance officers? salaries soar in large enterprises around the world. Most smaller and growing businesses can?t afford to pay those salaries, but increasingly can?t afford not to get their internal systems and processes in order so as to be one step ahead of the ever- shifting web of red tape. Craig Sullivan is a chartered certified accountant and SVP of product management for NetSuite.Image source
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