Keys to a Successful Procurement Platform Implementation

MS. SCHAWBENBAUER:  Hi, I'm Kristin Schawbenbauer.  Welcome to Tax Today, a Vertex Podcast series.  On today's episode, we'll be exploring keys to successful implementation with Axel Knaf from PricewaterhouseCoopers. 
    Axel is the east region indirect tax operations practice leader at PwC.  He has 24 years of consulting technology and strategic management experience delivering global IT projects to Fortune 200 companies.  
    Over the course of his expansive career, Axel's primary area of focus has been on the automation of sales and use tax, value-added tax, telecommunications tax with SAP.  
    So, Axel, thank you for joining us today.  We really appreciate you taking the time.  
    MR. KNAF:  Yeah, glad to be here.  Thank you.
    MS. SCHAWBENBAUER:  Great, great.  So we can go ahead and get started.  And I know you have a ton of experience, obviously, with PwC and working with clients, and I think we really value that experience.  Generally, how do you recommend that clients really get started with a P2P type of implementation?
    MR. KNAF:  Well, I think the first thing that's really important is that when the tax department hears that there's an ERP upgrade coming, you're moving to Oracle cloud, or S/4HANA, or putting in a procurement platform, that's the instant that you want to get engaged and you want to find out who the IT stakeholders are and the busines stakeholders so you can talk to both sides so that you can make sure that you get a seat at the table. 
    MS. SCHAWBENBAUER:  Oh, that makes sense.  Yeah, you know what?  We're hearing a lot of that.  I think it's even -- it doesn't necessarily happen at the evaluation standpoint, but when projects get kicked off, you really need to be working hand-in-hand in order to really find true success, and uncover a lot of the issues and things like that.
    Now, would you also recommend having your procurement and tax folks kind of get together and take a look at some of the issues and the state of affairs as they are today?  
    MR. KNAF:  Absolutely.  Absolutely.  I think in the beginning, as you gear up for something like this, you should really assess your pain points that the tax department is dealing with because usually, it comes down to data and usually that data is owned by the ERP.  So if you can identify all those different touchpoints where the data that you're getting at the end of the day so that you can do your compliance end of the tax function, that's, I'll say, a starting point.
    And then identify, okay, this type of transaction isn't working over here when we are sourcing for this department.  This breaks down because we can't tell the difference between software.  We can't tell the difference between printed materials, what have you.  And once you identify some of those pain points, you are then in a better position to have meaningful conversations with the different stakeholders in the workshops that would be occurring at the very beginning.  
    MS. SCHAWBENBAUER:  Oh, okay.  Okay.  Yeah, and you would have to go into that level of detail.  I mean, you really need to, to look at, hey, what are we buying, where is it going, who's using it, how is it going to be used, what cost centers, all of those kinds of things.  So I guess without those workshops, you're really going to have a hard time piecing that all back together again.  
    With your experience and your relationships with the clients and everything else, do you also prepare them for some of the challenges of these implementations?  Because they aren't easy.  They definitely aren't easy.
    MR. KNAF:  We do.  I think it's important to sort of set the stage at the beginning of the project.  There are going to be speed bumps.  You are going to run into some issues that you didn't think you had as an organisation, or as a tax department, or even as an IT department.  There are going to be some requirements that are going to be flushed out that might not fit squarely in the box right at the outset.  So I think we like to prepare our clients for that.  We do hold a lot of workshops in the beginning where we bring in the different groups, so we bring in the IT technical, the IT functional, and then the business owners and the tax department, and we'll have some workshops so that we can all get in alignment and understand who fits where into the puzzle, if you will.  
    MS. SCHAWBENBAUER:  Oh, that's great.  That really helps.  And then you've got your core team members and I'm sure I can take you through setting up -- configuring, I should say, I wanted to say customising, but configuring testing and then go live.  
    So in your opinion, and I'm really interested to hear what you have to say about this, is automation 100 per cent possible?  Can you automate everything to the fullest extent?  What is your experience with that?
    MR. KNAF:  So my experience is that on the sales side, when you're trying to sell your products to your customer, you can generally get 100 per cent there because you know the who, the what, the where, and you know where the customer is, you know what you're selling them, and what have you.
    It gets a little more complicated on the procurement side because, as you mentioned earlier, the who, the what, the when, the where, and the how, those are five questions that need to be answered in real-time as your passing data between an ERP and a tax engine.  And if you can't identify those five touchpoints, it's very hard to approach 100 per cent automation.  
    At the end of the day, I think, a tax department should be ready to pick their battles; where do they need to be higher than 90 per cent, higher than 95 per cent, but where's AD 20 okay?  You could have lots of low volume transactions, low dollar amounts that might not be worth capturing two or three additional data points because the overall risk to the business is low, even if you were to be caught under audit for having not accrued or paid at the right amount of sales tax. 
    MS. SCHAWBENBAUER:  Right, okay.  Yeah, and I think that's what I'm hearing a lot of too.  I mean, you hear a lot of this touchless AP and catchphrases like that.  I think if you take a look at things from a technology standpoint, a lot of people, and clients included, are used to the standard oracles and the SAPs, that have been those integrations and relationships haven't been together for a long time.  And there's more robust functionality that'll help to automate things to a pretty high extent.  But then you take a look at some of these Aribas and Coupas and everything else, and they're in a growth phase as far as that's concerned. 
    I'd be interested in your opinion on this.  I still think that even in those situations, automation really still lends a lot of value, even if you're not going to have every single type of tax touchpoint that you would want and companies are still trying to, and partners are still to work on getting out more functionality.  It's still going to help you, even if you automate even just a little bit, you're doing better off the bat.  Would you agree with that, or what are your thoughts? 
    MR. KNAF:  Yeah, I would agree with that.  I mean, you mentioned Ariba and Coupa, and those are certainly two platforms that we see a lot of in the market these days.
    But to your point there, they're not very mature yet just because of where they are in their lifecycles.  And the good thing about those products is they've got workflow so that you can control some of the decision-making and who approves what to make sure that you get an accurate calculation.  But the downside of those platforms is that they are still somewhat immature in how their integrations are built because you've got to think about the integration to a tax engine like Vertex, you've got to think about the integration to the ERP.  Because where is the AP happening?  Is it in Ariba?  Is it in Coupa?  Is it in the ERP?  And those are all challenges from an integration perspective and those also, then, go back to that can we be 100 per cent compliant?  Because the data between those two systems may not be exactly the same.
    MS. SCHAWBENBAUER:  Right, and that's a big deal.  That's a big deal.  I think you're right, you have a good point there.  As far as these best of breed procurement providers, they're becoming almost ERPs for procurement professionals, which is great.  Tax is kind of a side thought.  It's just kind of a, yep, yeah, we kind of need to do that.  And I think now everyone is learning. 
    And as we even have a broader audience of not just tax, not just IT, but also procurement professionals, there's a learning experience there that could have some pretty good or pretty challenging ramifications, depending on where they go with it.  And I think overall, just having an understanding.  Like you can look at, and I'm sure you were involved in some of these implementations, Ariba, the version one of the Ariba integration and their tax API, didn't have accrual functionality.  And people were kind of up in arms about that.  They eventually got that added in and we did as well.
    But we're seeing some challenges there along the way and I think the key is some automation is better than nothing and get ready to grow and evolve.  And what I'm excited for the future is that we can, with our partners like PwC and relationships with Ariba and Coupa and whoever else, we can all come together and see how far we can take this.  And I think we're really just at the beginning of that journey.  Now, I could be crazy, but I think there's a lot of room there, even with the functionality that if you have all the functionality from a procurement's perspective or if you can do per requisition, if you can do tax on the POs, if you can do it at the reconciliation, and then that final tax call, I think there's still even more that we can -- we haven't even kind of touched upon yet.  And some of those things make this area, I think, more exciting than even just standard sales tax.  It's more complicated for sure.  
    Do you have any thoughts on that?
    MR. KNAF:  Yeah, it's definitely more complicated.  And what we're seeing also is that folks are now looking past sales and use.  They're looking at VAT, which is a whole other animal to deal with when you talk about integrating a tax solution, and how do you make that work in India or Asia Pacific, what have you.  But I think, fundamentally, what this really, at the end of the day, comes down to is that if the tax department wants to be able to drive their tax policy, they have to be engaged with the IT organisation and they have to be engaged with some of the business owners so that the people are aware of these issues and some of the requirements for tax.  Because unfortunately, indirect tax is sort of the forgotten tax because it's in everything.  It touches pretty much everything that your organisation does.  
    MS. SCHAWBENBAUER:  It does, and I think that's a really good clear message too that we want to get out, is it does touch -- tax touches everything in the procurement process.  And I think a lot of folks are very familiar with sales tax and or even on the VAT side, they live that.  But on the procurement side, they don't see it and they don't realise how complicated it could potentially be because, as you had mentioned, like even if you talk about VAT for a second, there's a lot of accounting that goes into these, and a lot of things you got to take into consideration when you talk about this as opposed to the sales tax where it's just a percentage based tax.  
    So I mean, I think that's a clear message for folks.  And let me just expand on that too.  What is your take on the climate of VAT and global procurement, and calculation, and everything else?  To me, it seems like things are getting a heck of a lot more complicated.  Whereas before it was the SAP mentality of you can use native and any of the tax functionality, it's not that big of a deal.  And it seems like that's not really an option anymore.  
    MR. KNAF:  No, I think that the tax on the VAT side has become so complicated from the perspective of the government wants to know in real-time what you are charging a customer or what you're paying a vendor, so these things, in some countries, need to be pinged off of government websites as you are conducting business.  So that certainly complicates it.  
    And the reporting requirements are getting much more involved.  And if you look at just the compliance solutions, even SAP put out a solution to address the compliance specifically, which is an add-on to their S/4 platform.  And that just shows you that their customers are also demanding better solutions than bot reports that would spit data out that you would have to massage in a spreadsheet.  
    MS. SCHAWBENBAUER:  Right, right.  Yeah, I think everything is getting more complicated as it seems that that's just the atmosphere now. 
    Well, this is great.  That'll do it for today's show.  I'd really like to thank Axel.  Thank you so much for taking the time.
    MR. KNAF:  Well, thank you for having me.
    MS. SCHAWBENBAUER:  And thanks to our listeners.  Make sure you tune in for our next episode when we will be discussing controls and documentation, internal audits involvement, and SAX compliance.  

Episode 1: Why is Indirect Tax in Procure-to-Pay So Critical?

Episode 2: The Differences in Tax in the Procure to Pay Process: U.S. vs. Global

Episode 3: Indirect Tax in Procurement – Landscape, Opportunities, and Challenges

Episode 4: Indirect Tax in the Procurement Landscape: Opportunities and Challenges with Global VAT

Episode 5: Industry Perspective: Integrating a Tax Engine for a Global Motor Manufacturer

Episode 6: Aligning Tax and Procurement to Streamline Business Processes

Episode 7: Key Considerations When Deploying a Tax Solution for Procurement

Episode 8: Invoicing Explained: Understanding Indirect Tax During the Procurement Process

Episode 10: Tax Reporting: Why Internal Audit and The Sarbanes-Oxley Act (SOX) are Essential

Episode 11: Technology Trends in P2P and Tax Automation

Episode 12: Understanding International Accounting: Global Indirect Tax and Procurement

Episode 13: Integrating Vertex with SAP Ariba: An Overview

Episode 14: Consumer Use Tax Audits: Pain Points and Solutions