VAT reporting


/ 25 november 2019 / 4apps

VAT reporting: stuck in the Middle Ages?

For many complex processes like VAT reporting leading up to a declaration, financial experts still cling on tightly to Excel. This is despite the fact that other solutions are available that reduce or eliminate the need for our best-loved spreadsheet program. Why is it that many financial processes are automated using ERP systems or even RPA (Robotic Process Automation) while the preparation of VAT declarations remains stuck in the metaphoric Dark Ages?

Machine or hand wash

Financial departments seem to be relying on (ERP) systems to produce outstanding customer balances or GL trial balances. When it comes to preparing VAT declarations, however, specialists do not have the same confidence and rely on manual processing instead. Why this discrepancy? We can’t think of any financial department using ERP that is putting together their GL trial balances from detailed extracts with GL journal lines in Excel. Remarkably enough, in the evolution of ERP, the process of producing VAT declarations seems to be lagging behind. In practice we experience that VAT declarations are created in Excel based on detailed AP and AR transaction lines and summarized per Tax Code. In other words: although washing machines are available, for some reason VAT specialists have a strong belief that doing their wash by hand provides better results.

Guilty pleasure

Many VAT declarations still depend on Excel. Why? Is (your) administrative staff afraid to reveal how many hours they spend on producing the figures required? Could it be the ‘fear’ of losing part of their daily tasks and having to put their teeth into other challenges? Do they simply enjoy messing around with figures (a guilty pleasure if you will)? Or do people feel more creative using Excel as it gives them the feeling that they actually ‘build’ a solution themselves?

Cold feet

Looking for an answer, we decided to compare this issue with other aspects of the financial closure cycle (with a balance sheet and P&L as a result) and came to the following observations:

  • Time schedules for financial closure are much more aggressive than deadlines for VAT declarations.
  • Financial closure is a more collaborative effort than preparing VAT declarations.
  • For VAT specialists, ERP applications are “black boxes” when it comes to VAT determination and reporting.

In short, having more time available and not being dependent on others could be reasons why the preparation of VAT declarations remains limited to the use of Excel. Furthermore, in purpose-built VAT reporting applications the desired outcome is presented first (high level), followed by a top-down approach using drilldowns. Not knowing where figures are coming from certainly doesn’t help in embracing this top-down approach as it requires confidence that these applications are reporting the right figures (even in cases when the source data proves to be wrong). Without such trust, VAT specialists keep using a bottom-up approach as that gives the idea of being in control. That’s usually where Excel comes into the picture.

A little push

Squeezing time schedules to prepare VAT declarations could force VAT specialists to use an application of some kind. Another approach is for VAT specialists to invest in ERP knowledge just as their financial colleagues once did. Maybe tax teams should ask their financial colleagues for advice, support and their experience on how they moved forward digitally. Or maybe integrating into the financial department (if not already done) could enable VAT specialists to make a giant step forward from the Dark Ages into the digital era that we are now entering.

stuck in the middle

If you’re interested to learn more or if you want to share you opinion, don’t hesitate to contact us by phone on +31 20 6673800 or by sending an email to We appreciate your feedback.