Compliance Automation for SME’s - Cuts both ways
Is Automation of Compliance a Double Edged Sword? Are SME’s better off by investing in people and systems to build a sound compliance framework than adopting prematurely an automated compliance system?
Automation is the need of the hour.
Catch the latest global trends, you will find Industry 4.0 and mention of IOT, Cloud Computing, Cyber Physical systems and Cognitive Computing. Closer home, e-Governance has rapidly made inroads, and has brought greater transparency and accountability in the way, that businesses communicate with the tax authorities.
In midst of the rapidly evolving information eco-system, and the underlying complexities of change, many SME’s find that their compliance management system is unprepared and unequipped, to handle the transformation.
Entire business strategies were rewritten in view of GST implementation last year. The challenge before the industry, was not only limited to the adoption of new valuation, classification, accounting and reporting requirements but went beyond to encompass review of the entire methodology of doing business in some cases.
Information inter-change between various tax and regulatory bodies have brought greater insights on reported transactions by businesses, to the exchequer, who have, at their disposal latest analytical tools. All this now mandates that a sound compliance management framework must be adopted by all organisations.
In this compelling scenario, it is tempting for the SME’s to hastily adopt and implement compliance computation and monitoring tools, without first evaluating, their organisational maturity level, and most importantly competence of the staff and its compatibility with the implementation requirements.
The plethora of offerings on virtually every statute, snazzy compliance schedulers and analytical tools can overwhelm the SME’s to believe that such tools would act as a panacea for all their compliance requirements.
Moot point remains whether compliance automation, without first defining the organisation’s culture along with setting up of compliance policies and procedures, would lead to any significant benefits in terms of compliance and tangible savings.
It is idealistic to think that automation would fill gaps in processes and compliance procedures. Implementation killers like resistance to change, silo mentality, geographically dispersed workforce, ad hoc procedures, database corruption, can, derail a perfectly intentioned automation project.
Haphazard implementation of compliance automation, would actually increase the risk of non-compliance, due to doubtful database integrity and the delusion that all applicable statutes and compliances have been mapped. SME’s would further be constrained by recurring costs of updates, AMC’s, legal research costs and training costs which would be required to revamp the system.
It is advisable for SME’s to adopt compliance automation only after conducting its cultural and operational due diligence. This internal validation must be followed with external validation of their compliance exposure by reaching out to local trade associations, MSME and other Government help-centres and compliance professionals.
To conclude, compliance automation is a double edged sword and must be adopted carefully by SME’s. Tangible benefits would accrue to an SME only when compliance automation complements its compliance policies, cultural attributes and maturity level.