How can your ERP help with Compliance?
Firstly, we identify the key issues that face small, medium, and larger enterprise businesses and then explain how you can use your ERP to best effect to mitigate risk, streamline processes, and maintain regulatory compliance effectively.
What are the key compliance issues facing Small Business.
Tax and Accounts.
Although every industry faces their own compliance challenges, most small businesses will face tax laws that will be the first compliance hurdles they face. Sales and payroll regulations, especially as they are prone to change almost annually, will be a challenge.
The government introduction to “Make Tax Digital” has helped to resolve this for businesses that are VAT registered at least, as digital accounting systems will handle the elementary payroll and tax issues. This also helps to ensure employees are fairly treated and correctly paid and taxed.
All registered businesses need to file taxes and accounts, but small businesses may not have dedicated staff doing the accounts, but digital solutions are in abundance and relatively easy to use, with integrations into bank feeds and HMRC relatively painless. An ERP system will maintain details audit trails which can demonstrate compliance, showing a clear record of who did what.
Data Privacy Compliance
The next most influential compliance issue is data privacy and security as all businesses (irrelevant of size) need to comply with laws and regulations around the collection, storage and protection of customer and employee data. These include GDPR (General Data Protection Regulation), and you need to be prepared to show an individual the information you hold on them and delete it if required.
The ERP system holds data from all departments and can ensure there is consistency in the way in which it is handled, stored, edited, etc. This can then be used to report compliance with data regulations.
Legal Compliance
Small businesses will also sign contracts and it is never too soon to recruit the services of an expert to review any legal contracts to ensure there are no loopholes or areas that will result in a legal dispute as they are incongruous.
Seeking professional advice and system support is highly recommended at the earliest stage of a small business to avoid risks and ensure compliance; also giving the owner visibility of all financial aspects of the business.
The ERP can provide centralized document management features for the storage and retrieval of legal documents. Processes can be implemented within the ERP, (perhaps including a signing solution like Docusign), to maintain contract integrity.
Additional Compliance challenges for medium-sized businesses.
Taxation and Accounts Compliance
As businesses grow there are additional complexities and regulatory requirements with expanded tax obligations such as dealing with multiple jurisdictions for sales tax, payroll and income tax as well as navigating the tax implications of international operations. Shareholders are also likely to require more financial updates and international operations will require a more robust set of internal governance and controls with more formal policies and procedures being put in place as well as an internal audit.
This is where the ERP system can shine as it maintains regulatory reports and there can be controls and checks that trigger notifications should there be any breaches of compliance rules, such as payments not going through the proper authorisation cycle.
Data Privacy Compliance
With growth comes an increased exposure to risks and perhaps a need for heightened regulatory oversight on data privacy, anti-money laundering (AML) and anti-corruption as well as consumer protection if the business operates a B2C structure (Business to Consumer).
Most ERP solutions offer robust security features, with role-based access controls, encryption and workflows or processes that follow compliance rules. Strong security measures can be maintained through the ERP.
Employee Compliance Requirements
There will be a gradual increase in the level of responsibility for employee benefits to ensure they adhere to regulations for retirement plans, healthcare regulations, and ensuring there is a diversity and inclusion policy.
As a business grows, there will be an increased diligence required across all aspects, such as contractual, risk management, insurance requirements, environmental and other regulations.
As businesses progress from small to medium-sized the challenges of compliance increase exponentially with a broader range of regulatory complexities and your ERP selection will help navigate these changes.
New compliance challenges for Enterprises.
An enterprise will face hugely more complex financial regulations, such as SOX (Sarbanes-Oxley), Dodd-Frank Act, and many others – all of which require substantial resources to ensure compliance.
Compliance and governance expertise is now required. Industry associations, stock exchange rules, International Financial Reporting Standards (IFRS) and the Securities and Exchange Commission (SEC) all have regulations that need to be followed and they will need a robust structure of policies to be managed.
Risk management standards are overseen by ISO 31000 COSO Enterprise Risk Management Framework and the Basel Committee’s principles for effective risk data aggregation and risk reporting. Data privacy is still handled by GDPR and the Californian version of CCPA and the Payment Card industry data security standard (PCI DSS) – all of which dictate robust data protection measure and proactive cybersecurity strategies.
Tax compliances are controlled by CFC anti-tax avoidance and Anti-money laundering are supplemented at this stage by the Counter-Terrorist Financing Compliance (CTF) both of which are stringent regulations at preventing financial crimes. The Bank Security Act (BSA) and Financial Action Task Force (FATF) provide further direction around robust financial compliance.
This gives you just a glimpse of the wide range of compliance challenges facing enterprise businesses – all of which are required to uphold an organisations reputation, integrity, and financial stability. The ERP system is a foundational tool that, when correctly utilised, will dictate processes that comply with many aspects of regulatory and statutory requirements.