Leverage technology and data to improve financial management in the IT industry

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But, as “digital” became the new buzzword for survival and every industry wanted to jump on the automation train with an acceleration of remote working, the demand for IT and IT services grew. reached a new inflection point. In fact, IT has become the backbone of business in the post-Covid-19 era.

This has widened the opportunities for new entrepreneurship, innovation and new business propositions. In this landscape, the IT industry must rework its financial management strategies. The challenges can range from a lag in tax compliance operations, as employees working remotely lack access to timely information, to tax implications resulting from supply chain reconfigurations across geographies.

The third installment in a series of virtual roundtables, Navigating Compliance with Technology, titled “Transforming Financial Management in the IT Industry,” examines how advanced technologies and the power of big data can be harnessed to reduce taxes and improve compliance. profitability of those operating in the IT field. The series is powered by Clear.

The GST regime has already brought about a significant change for the IT industry when it comes to regulatory compliance. For an industry that has placed India on the global technology map, moving towards transparent financial compliance can be tedious due to the upgrading of accounting systems and ERP systems to align with GST standards.

The evolution of IT systems that require coordination between tax and technology experts and the redesign of business software can be quite a challenge, especially since the majority of IT companies lack experience in financial management.

For Sify, which is one of the leading ISB players in the country and which has gone from a B2C company to a B2B company, the finance function has also undergone a complete transformation to support this evolution.

“The financial model of B2C is totally different from that of B2B. All of our transactions are done through a digital payment model. The transformation that has taken place in the financial model over the past 15 years is to capture real-time data for people to make appropriate decisions, ”said Ganesh Sankararaman, CFO of Sify Digital Services Ltd.

For the IT industry, which has been at the helm of innovation and transformation for the past year and a half, technology has had a major role to play in running their own business.

“If you look at the mantra of many companies today, the pandemic has told us more important that you adapt or die. The rapid convergence of business and technology often determines competitiveness. We are experiencing transformative growth on a global scale and creating adaptable, data-driven processes and constant communication. We have now moved from reducing costs to making strategic investments to improve the customer experience, increase revenue and expand customer base, ”said Hemlata Nevetia, CFO of Allstate Solutions Private Limited.

The GST regime has already brought about a significant change for the IT industry when it comes to regulatory compliance. As the demand for IT services increased after the pandemic, technology majors deployed various solutions for more efficient financial management.

“IT spending across all industries has increased dramatically. For our internal IT journey as well, digitization has seen a boom over the past 18 months as we move towards a more digital organization. While IT companies provide many services to external IT, internal IT can sometimes be a little late in catching up. The pandemic has highlighted the importance of internal IT to us, ”said Vaidyanathan Mahadevan, CFO, Polaris Consulting and Services Ltd.

Stressing the need for compliant technology, which started from 2017 and then from the pandemic, Strategy Director Swaroop Repaka, Clear indicated some major reasons. “The first is the interdependence of compliance and supply chain functions and the second is the real-time compliance required for government which can only occur with technology with the vast pool of data available,” said he declared.

The tax rate for IT services and goods increased after the implementation of the GST. While a single GST tax replaced the VAT, services tax, and excise duties levied on the purchase of IT services, there have also been major changes in the IT e-commerce space. .

One of the biggest challenges encountered was the freezing of working capital and the cumbersome reimbursement process with the huge amount of paperwork involved. Another area that required technical intervention was the reconciliation of the ITC on a GST basis.

“This is a non-trivial issue because it involves working not only with corporate systems, but also with vendors and government. We need to bring them all together and integrate it deeply into the ERP of companies. It’s a layer above the ERP where a lot of smart reconciliations happen in real time and suppliers can log in in real time and know which invoices need to be put on hold. It puts this painful ITC journey on autopilot, ”said Repaka.

The government is moving very quickly on the compliance front, and traditional businesses, SMEs in particular, need to be at the cutting edge of technology when it comes to ensuring compliance. This will have an impact on sourcing decisions and working capital cycles for large companies and SMEs, of which GST is a part.

“The big companies were lucky because they were already automated in the processes. But, what I am seeing is that SMEs have yet to catch up with large companies and this is also hurting sourcing decisions and supply chain decisions. The government wants their control over responsibilities to be a sort of transit to large companies where at least B2B transactions need to be validated, ”said Sandip Dadkar, Chief Financial Officer, Cybage Software Private Limited.

So, is the golden age of finance here, especially when technology plays the role of catalyst? “If you look 10 to 20 years from now, the pace of technological change will be much faster than it has been in the last decade. We are not yet finished, but only at an inflection point, ”concluded Repaka.

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