Regulatory risk and heightened regulatory scrutiny continued to rank as the top concerns for businesses in 2015, with 67 percent of respondents to a recent survey by the consulting firm Proviti(opens in new tab) saying it would have a significant impact on their businesses. Firms surveyed by Thomson Reuters(opens in new tab) reported spending more than 10 hours a week on compliance-related tasks, with 74 percent of the total indicating they expected this time spent to increase.
It’s a very fair judgment. While companies caught a pass on implementing new revenue recognition(opens in new tab) standards this year, they must prepare for FASB accounting requirements(opens in new tab) that see them implementing them by 2019 at the latest. Regulations from the Affordable Care Act, employee and labor-related regulations, VAT tax and changes in the tax code will continue to affect businesses in 2016 and beyond.
The situation begs the question: Will the quest to comply with shifting government regulations by countries globally prove to be a big driver for adoption of cloud ERP software(opens in new tab) in 2015 and beyond?
Traditional, on-premise ERP customers of course apply patches that update their systems in compliance with tax and regulatory updates. And there is no shortage of additional risk and compliance software customers can integrate with their systems to keep strong reporting standards.
But according to a new whitepaper, “Eight Ways Legacy ERP Harms Businesses,” the pace of these updates can’t match the pace of change, leaving traditional ERP customers to turn to spreadsheets to manage data and ensure compliance. The requisite security risk introduced by such a situation is clear; it undermines the very compliance they are aiming to ensure.
Will the ease of updates via the cloud prove irresistible to traditional customers – even those in the enterprise set?
With upgrades rolled out regularly “while you sleep,” the system is constantly updated with the latest regulations and requirements, resulting in less risk, fewer people needed to manage these processes and more time spent on strategic rather than operational tasks.
“(Cloud-based ERP) applies the same philosophy to corporate ERP that’sbehind web-based applications like TurboTax Online—you’re always up to date to adhere to the latest accounting rules, tax regulations and compliance standards,” the report states.
That was the case for Commvault, an enterprise backup software vendor that implemented NetSuite to get ahead of the new FASB (Financial Accounting Standards Board) regulations,(opens in new tab) and enable a single transaction to hit multiple books at the same time. Without additional automation for the process, even adding a few minutes to each transaction would require a lot of extra work for a company that books tens of thousands of transactions a month.
The ease of updates is also attractive to companies grappling with how to handle changes in the VAT tax that require companies to change the basis for charging VAT from the place of supply to all of the EU countries in which its e-service is consumed. The super flexible tax compliance engine built within the suite, through which NetSuite can release updates specific to the VAT tax, allows companies to handle these changing regulations with ease.
Companies using cloud software ranked improved business agility as the most important factor driving their decision to implement it, according to a 2014 Forrester Report “Forrsights Software Survey, Q4, 2013.” It’s tough for a business to move quickly and easily if it’s mired in regulatory compliance concerns, or worse, lawsuits, penalties or fines.
For more on the ways your old ERP system is holding you back, download the white paper 8 Ways Legacy ERP Harms Your Business(opens in new tab).