ta How To Make Golden Tax Compliance Fast, Accurate, and Easy | DocLib Doclib Accounts Payable Automation is Making Chinese Golden Tax Compliance Easy for QAD Manufacturers

How To Make Golden Tax Compliance Fast, Accurate, and Easy

Accounts Payable
December 18th, 2018

DocLib Accounts Payable Automation Is Making Chinese Golden Tax Compliance Easy for QAD Manufacturers

The Chinese economy is one of the world’s largest economies. In fact, China is poised to become the clear economic leader in the world with significant investment in new technology, more university graduates than any other country, and massive investments in infrastructure.

Needless to say, this promising future for China has made it a popular place to do business. Chinese companies have supplied the world with products and services and, increasingly, outside companies are looking to do more businesses within China.

Of course, doing business in China means that businesses must familiarize themselves with the local laws, customs, and taxation structures. When it comes to tax, China has one of the most advanced tax collection and verification systems in the world. This system is often referred to as the Chinese Golden Tax system.

Without the right knowledge and tools, manufacturers risk running afoul of the Golden Tax system and creating difficult challenges for their business. In this article, we will look closer at the Golden Tax system, how it works, and how DocLib is helping manufacturers navigate the system, reduce man hours required for invoicing, and streamline the tax process.

What Exactly Is a Golden Tax?

Golden Tax is the name given to China’s central value added tax (VAT) system. The name is a nod to China’s imperial tax system, but the processes are incredibly modern and very thorough.

The main goal of the Golden Tax system is to ensure that vendors are providing accurate tax information and the government is getting their share of the transaction. Secondary goals of the system are to eliminate tax fraud or counterfeit invoices. All businesses must register with the tax authority and, through the Golden Tax system, invoices will be verified and given identifier codes.

The system currently used is technically called Golden Tax 3. Previous iterations of the Golden Tax system were not as broad or as advanced and the system has been in regular development since the 1990’s. However, more businesses looking to operate in China are becoming aware of the tax system and the requirements as China’s economy continues to grow.

What Are the Challenges of the Golden Tax System?

Managing a tax system like this for the world’s most populated country and one of the largest economies is, needless to say, an intense process for business, customers, and tax authorities alike. The system is not without its challenges and many businesses are still searching for the most effective way to manage their invoice submissions.

The biggest challenge often comes from time constraints and the delays that can result from incorrect invoice submissions. The delays could cause business disruption and incorrectly applying taxes could lead to audits which, of course, no business wants to experience. Fixing incorrect invoice submissions could take a lot of time and require man hours that a business simply does not have.

Manufacturers working with multiple products that could fall under different tax structures also have challenges to address in order to ensure that all invoices are 100% accurate. This means verifying correct tax codes and monitoring tax changes closely so that outdated rates are not applied and, subsequently, rejected by the tax authorities.

How Taxes Are Currently Addressed by Manufacturers

As mentioned, different businesses have implemented their own strategies to ensure they are compliant with China’s Golden Tax. In most cases, however, these solutions are time consuming and unsustainable.

Essentially, employees in accounts payable end up having to create sample invoices, do manual calculations, and verify all of the tax identification numbers before sending for approval through the Golden Tax system. It could take a few days for the results to be returned and, if there are errors, employees may have to make corrections and resubmit. Now imagine doing this for every transaction.

There are some providers that will analyze sample invoices prior to submission but, regardless, the creation of the invoices must be done which is a time consuming task. Of course, the major downside to all of this is instances of human error and the large volume of time required to prepare and submit all of these invoices. Major deals could be stalled or put on hold because the process has not been followed correctly. A delayed payment to a supplier can cause material delivery delays, credit holds, or at worst a production shutdown that could cause missed deliveries to a manufacturer’s end customers. Obviously, short of being audited, this would be the biggest concern for businesses that aren’t making money unless invoices are being approved and paid.

How Accounts Payable Automation Can Make It Easier for QAD Manufacturers

As you can see, some of the existing solutions are cumbersome and unreliable. For some large businesses that are processing a high volume of orders, this kind of manpower could demand a large budget and staff. This is not a sustainable way to process invoices. That is where DocLib steps in to streamline the operation with accounts payable automation.

With DocLib, users can greatly reduce the amount of manual input required to generate sample invoices. Most importantly, errors or issues can be identified before submitting for government approval. Essentially, a large portion of the accounts payable workflow has been automated to save time and catch errors prior to submission. Data gathering and validation is done right away to alert accounts payable of issues or discrepancies.

Ultimately, what this means is that manufacturers can submit more invoices, quicker than before, and get VAT confirmation or changes faster. Fewer suppliers are ultimately left waiting and, ideally, invoices are paid in a more timely fashion.

Most importantly, DocLib sees fewer than 1% of invoices returned with errors. This means that the entire invoice generation process has become more time efficient and it delivers exceptional accuracy thanks to accounts payable automation. For manufacturers, this could also mean avoiding painstaking audits due to incorrect tax calculations and submissions. The benefits can be seen from accounts payable staff right up to middle management and executive-level staff. Plus, the advantages from a budget standpoint haven’t even been considered yet.

Implications and Impact of 1000’s of Man Hours Saved

Ultimately, the goal of accounts payable automation is to reduce the time it takes to produce accurate and compliant invoices. Regardless of the tax system in place, this could be a huge boost for accounts payable departments that are already strapped for time and operating on fixed budgets. However, with China’s Golden Tax VAT requirements, this type of automation could amount to thousands of hours saved in the span of only a month.

Imagine that the entire process of generating a sample invoice for submission to the tax authorities requires one hour of time if done manually. This means an accounts payable officer is verifying tax codes, ensuring no changes have been made to the rate, and verifying all details of the invoice down to the final total. It is a time consuming process for each and every invoice that must be created. Now, imagine that a business processes thousands or even tens of thousands of invoices each month.

The man hours required to prepare those invoices is massive. Of course, the above scenario hasn’t even considered returned invoices from the tax authority that need to be adjusted and resubmitted. For many manufacturers, there is simply not enough man hours in a month to complete this work manually. Either more staff needs to be hired at a huge expense to the business or the business needs to look for accounts payable automation opportunities. This is the problem that DocLib has been designed to solve.

By integrating right into QAD, DocLib automates the most mundane, time consuming manual tasks to greatly reduce the amount of time required for each invoice creation. Errors are caught quickly and, ultimately, more invoices can be submitted in a much shorter time frame. The cost savings add up quickly after DocLib has been implemented and, in many cases, implementing DocLib can pay for itself through savings in under a month.

One customer that implemented DocLib has experienced the power of accounts payable automation already. With anywhere from ten-thousand to twenty-thousand invoices being processed per month, this manufacturer absolutely needed a better way to manage their invoices and ensure Golden Tax system compliance. DocLib was exactly the solution they needed.

Most importantly, DocLib could be configured to fit the specific needs of the business so that their accounts payable department was able to easily adapt and integrate the automation features without significant downtime or training required. For all intents and purposes, it was business as usual for this client; however their invoices were processed more quickly and with fewer errors.

How China’s Golden Tax System May Influence Other Countries

Right now, the Golden Tax system is something that is unique to China. However, there is the expectation that a system like China’s will become the norm for many countries around the world. Businesses that operate within China have no choice but to adopt the system today. Businesses outside of China may not be able to wait much longer before a localized version of the Golden Tax system comes to their shores.

Ultimately, tax systems around the world are largely outdated and cumbersome for both governments and businesses. Remitting taxes quarterly or annually can lead to errors, missed submissions, confusion, and frustration. There is also the question of tax fraud. Can consumers be confident that the business is charging the correct amount of tax for their services and how can this trust be verified? The Golden Tax system is the modern example of how governments will likely begin to move in order to improve their own taxation systems.

DocLib is already a leader in accounts payable automation for manufacturers in China. As this type of taxation system grows and expands around the world, more manufacturers will be looking for solutions to streamline their accounts payable operations and meet the demands of new taxation systems. Manufacturers that have already implemented this system will be able to see the benefits immediately and adapt more quickly as changes come.

Learn More About DocLib, China’s Golden Tax System, And Accounts Payable Automation

Accounts payable automation is something that all businesses will be considering in the future regardless of whether they do business in China or are subject to a tax system like the Golden Tax system. Calculating VAT correctly and creating fast, accurate invoices is a service advantage that many businesses would love to be able to offer. Instead of hiring additional staff, DocLib allows existing accounts payable staff to become more efficient.

If you would like to learn more about DocLib, how you can integrate accounts payable automation with QAD, or preparing invoices for the Chinese tax authorities then a DocLib advisor would be happy to speak with you and answer all of your questions.

Contact us today to learn more and see how accounts payable automation could greatly improve the operational efficiency of your accounts payable department.

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