From CFO Daily News: When your finance team thinks “sales tax audit,” they probably think “big headache.” But a reverse audit could spur a different result.
As CFOs know, a reverse audit aims to identify and recover tax overpayments that have either been remitted to vendors or filed directly as a self-assessment of use tax, explain the pros at Journal of Accountancy.
There’s no denying that audits can be expensive, stressful and time-consuming for your company. But with a reverse audit, the time spent could recoup money that otherwise would’ve been undetected losses. And it could help expand your team’s sales tax knowledge for the long haul, making assessments easier and saving you money going forward.
3 key benefits
Want more details you can share with your team and any skeptics? Check out three top benefits of reverse audits from the tax experts at Cherry Bekaert:
1. There’s no major disruption. With typical audits, you may picture your finance team bogged down, creating paper trails, searching for documents, answering auditors’ questions. But many companies that’ve done a reverse audit say it didn’t largely disrupt their normal operations.
The auditors can work quickly and independently of your team, limiting their interactions to only critical questions. And typically, they can leave files just as they found them.
2. You feel more ready for future audits. A sales tax reverse audit can reveal a lot about your people’s knowledge of – or lack thereof – sales and use tax compliance.
Throughout the process, auditors can reveal the mistakes that were made, so those same errors aren’t repeated in the future. And they can also teach your staff insider secrets they’ve learned as seasoned tax practitioners – like how to spot audit red flags, better manage exemptions, etc.
3. Your team sees the big picture of savings and compliance. In tandem with the second benefit, many auditors include detailed training for staffers as part of their reverse audit process. (This may be something you want to verify with the third party before bringing them on.)
During training, your team can learn tactical approaches (i.e., how to streamline sales tax management and improve recordkeeping procedures). But equally as important, they’ll see the strategic viewpoint that you, the CFO, value (i.e., how much strong sales and use tax practices can positively affect your company’s bottom line). And going forward, your team’s actions and behaviors should reflect that.