It has been almost a year since the GCC countries adopted the value added tax, which has been immensely helpful in generating revenue. However, the businesses operating in the region had a stressful time integrating all the necessary changes to become VAT compliant. This set off a wave of decisions that depended on technology to ease the challenges emanated with VAT.
In this technology-driven process, cloud-based ERPs are playing a pivotal role. ERP softwares are expected to help companies to make the transition to VAT in a free of risk and flawless manner. Get detailed report of global enterprise application market on the Inkwood Research website.
Beginning from January 2018, the slumping of global oil markets led to the establishment of the Value Added Tax. This way, the oil-based economies of the Middle-East won’t be fully dependent on the hydrocarbon market which is as volatile as it comes. It has also been estimated that the 5% rate of the VAT will contribute about 1.4% or $25 billion to the annual GDP of the GCC nations on the whole. The GCC region had a unified VAT agreement, whereby country-specific guidelines were laid down and were signed by six governments.
The difficulty of adjusting the accounts and finances of any given business will remain an issue. However, advanced IT solutions will be the main drivers for the transformation involved in this process. Also, various IT solutions will help businesses to adopt VAT in their accounting system. For example, a competent ERP system will help companies to keep track of the various aspects of the VAT transactions by providing correct analytics data, updates as well as integrate latest changes made in the VAT policies in the system. Learn more region-specific details in our Asia-Pacific ERP report.
For companies that are already using an particular ERP software, the system will work towards adaption of the latest VAT as well as accounting, billing, invoices and reporting functions. On the other hand, companies that use two or three ERP solutions for various purposes such as CRM and finance, the effort required to integrate data into the given system will be significant. If the organization is using a legacy ERP system instead of a cloud based ERP system, it will prolong the integration of the VAT functionalities in the system.
Legacy systems are those that are mostly run on the local servers instead of the cloud. These systems are expensive and tedious to maintain. No wonder, many organizations have migrated their ERP system over the cloud. Cloud-based ERP systems are managing the VAT functionalities very smoothly and flexibly by reducing operational costs. This is because the cloud service provider maintains the infrastructure and continuously updates the software without demanding any additional costs. Also, cloud-based ERP can be accessed on all types of devices including phones and tablets.
Cloud-Based ERP systems are easy to deploy and implement as compared to ERP systems on the premises. Large corporations can install and run on the ground ERP systems since they can afford the large server room and running costs, which cannot fit the budget of smaller and medium-sized enterprises. Therefore, cloud-based ERP systems are preferred.
According to a business survey, 66% of the respondents opined that they would switch to ERP based on cloud if it helps them optimize their ERP costs.
No wonder, Inkwood Research advises, choosing a cloud-based ERP is much more profitable and cost-efficient than a locally run ERP system.
As a result, wide acceptance of the cloud-based ERP systems, many ERP software vendors have entered the market. Companies such as NetSuite ERP, Syspro, Scoro and Sage Intacct not only develop ERP software but also deliver and maintain them for their clients. With a growing focus on the cloud for various services, cloud-based ERP is anticipated to fully replace locally run ERP.