ITESOFT & VAT IT: Customer Success Stories: Pharmaceutical.
Part 4 of our latest 5 part series, with our newest partners at VAT IT.
Join Nick Dunnett, Managing Director of ITESOFT UK and Jamie Breslaw, Global Finance Operations Manager of VAT IT as they take a look at some customer success stories, specifically within the pharmaceutical industries.
Part 4 of a new 5 part ITESOFT Insider View series.
Watch the video, listen to the podcast or read the transcript below.
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Customer Success Stories: The Pharmaceutical Industry.
Nick Dunnett: Welcome to the latest ITESOFT Insider View. In this episode we are once again joined by Jamie from VAT IT.
Welcome back, and welcome back to all of you.
Last time we were looking at legislation, especially the potential impacts of Brexit.
We are going to move away from that for this one and look back again at some explicit customer success stories.
We are going to focus, as an industry sector today, for an easy way of hanging this together, on customer success in the pharmaceutical sector.
This covers everything from big Pharma, manufacturing, distribution, and a huge amount of R&D as well.
How this all plays out. The impacts of this can be high, especially from a tax perspective.
Jamie, give us a couple of key points on this to get us going.
VAT IT Customer Success Story.
Jamie Breslaw: We deal very heavily withing the pharma industry. We have a customer success story in the pharmaceutical industry: $3M of VAT refunded from 2013.
Essentially that is largely, as you said, the R&D, the clinical trials.
We had a company that had issues with understanding the international tax landscape. Their foreign exposure, and they conducted clinical trials.
There was an opportunity for us to first, as we always do, review their set up. Are they set up compliantly?
There were instances where they were deemed to be having taxable supplies in certain jurisdictions. This was a US based company.
The first thing we had to do was make sure they were structured compliantly.
Saving £6M With Compliance.
We helped them with their VAT registrations, and therefore about half of that $3M was reclaimed within the refunds of the local tax mechanism where we set up the registration.
The other half was through clinical trials.
What you are doing is buying various drugs, shipping goods over to where you are conducting the trials. So, you have that point that we have looked at on the movement of goods.
Essentially there was a massive opportunity to reclaim foreign VAT on those Accounts Payable expenses.
Sometimes what we can also do for clients is, say your largest companies that may have a set up abroad. It can happen, it depends on the size of the set up and the finance team etc.
Helping With Rejected Claims.
There are times when it has been done in house, but there can still be issues where the local tax office queries or rejects the claims.
Now, they are obliged to provide explanations for any rejection, but if you don’t have experts in the indirect tax field knowing the legality around it and being able to compose that response.
What we can do is pick up on anything that has been queried or rejected and help them with that re-submission to ensure they are maximising on their refunds.
There are really good opportunities for us, and I know you guys have pharmaceutical clients as well, so there are really nice synergies between us there.
ITESOFT Pharmaceutical Customer Success Story.
Nick: Definitely, and what we find, one of the big benefits that customers in the pharmaceutical industries can gain is that there is an awful lot of product level information that must be held.
You know, a drug is going to end up going to a human, or in the veterinary world to a cat, dog, or cow (which will then be eaten by a human).
Tracking those medications there is a huge amount of compliance requirements around what you are tracking, how you are doing it.
There are, obviously, important matching rules and regulations around the tracking, traditional 3-way matching and so on and so forth.
We have done a huge amount of work with customers in this area. And I can give you one specific customer success story in the pharmaceutical industry.
46 People Processing 1 Million Invoices.
They were looking for a solution, they had a lot of challenges.
They had 46 people processing around about a million invoices annually. A big operation, lots happening from an AP perspective.
We worked with them to support them in capturing invoices in what we call an omnichannel way, so multiple inputs. Whether its direct EDI from some of their bigger suppliers.
Jamie: EDI is?
Nick: Electronic Data Interface, so pure electronic exchange.
Through to some emails coming in from some of their smaller suppliers and, of course, through to paper still arriving through the post. Handling that for them.
And then the automation of the matching process, really working with the client to help them maximise this process, to get most of their invoices through to ready to pay as quickly as possible.
This allowed them to open discussions with their suppliers to manage pricing from that perspective.
If you are paying well, your suppliers are much happier to negotiate pricing with you.
Jamie: And if you are paying well why not then recover the VAT to improve you cash flow off the back of that.
Nick: Absolutely, you can start that process so much more quickly.
From 46 to 6 People.
This organisation, as I said, they had 46 people when they started looking at this project.
Today they are running with less than 6. So huge benefits for them there and enormous returns. Immediately this leads to the bottom line.
Whilst in this instance this is bottom line through reduction in staff. It is, as you say, driving organisations to have that time and that ability to say, well these are ready to pay early so what can we do?
As well as having less people we have time to think about things like VAT reclaim.
Jamie: I think the beauty, when we spoke in one of the early sessions about the reductions in people and finding space in that business for their skills.
The hardest thing to do is to find good resources. Sometimes that is sitting there already in your organisation.
What a way to empower your people when you can open more opportunities for them and can ask them what else they would like to be doing.
Compliance Is So Important.
Nick: I think a second area that is important is this compliance part. We have touched on this.
You have clinical trials happening, you have drugs that must be managed properly.
There are so many rules and regulations just on the compliance side. Before we can even move into a VAT or invoicing levels.
The amount of complexity on the compliance side is mirrored on the VAT side.
These are happening cross borders, cross regions, cross jurisdictions that create the complexity.
And the pharma industry, it is well known, if you find the right drug, the profits are enormous.
But the cost of finding the drug, you are investing in so many trials, and so many drugs. Most do not make it.
Customer Success: Cash Flow.
Jamie: And then there are time impacts, because of having to do things like waiting a year for the next set of trials.
So, there is also that time versus cash flow piece as well.
Nick: Exactly, so anything that these businesses can do to generate cash flow is of huge benefit.
So, what else have you seen from your clients that brings that benefit?
Jamie: Well, just to confirm, we can assist across all industries. On the AP side, the power & energy space is a very big one for us.
That, in terms of what we discussed around the automotive industry. Of course, there are quirks and differences.
But just in terms of the flow of goods, and where the services are being provided. What does that mean for compliance around the international landscape, that’s a very big area for us.
Meetings, Events Etc.
We will also look, on the AP side, a big area is your meetings, events, conferences, training etc. companies that are setting that up internally abroad.
There is often an opportunity for reclaims there.
Even if they are using an agent to help them book trips, sometimes VAT can be lost within that transaction flow.
We work with our clients to make sure that between all the parties, which could be our client, the supplier, or the agent, that this is structured properly, contracted properly.
Ensuring the right people can reclaim the benefits. It is important because it makes it more commercially viable.
Nick: Of course, and that is particularly important in the pharma industry, where there is a lot of education that must happen as well.
To bring the medical professionals up to speed with what the drugs are, how they work, what the benefits are etc.
These are often done with huge conferences bringing people together across borders etc.
It is creating exactly that sort of opportunity for VAT to be reclaimed.
Jamie: The thing with these sorts of events, companies often plan for this up front.
So, engaging with us early on allows us to ensure that the parties involved are structured correctly to enable that.
Whereas sometimes it is very difficult when clients come to us too late to understand the implications to resolve it. So always take that advice up front.
Best Practices & Change Management.
Nick: I think that is critical with the whole process really.
All organisations, one of the things we see, when we go in to help them put in automation and digitalisation of process is that this is an opportunity to review what you are doing and look for best practice.
Companies often try and stick with their existing processes because “that’s how we have always done it”.
And you are right, looking at that early is critical to having the best possible success.
The same from a fraud prevention view, which we are going to talk about more on next weeks Insider View.
Being able to stop that before its happened is infinitely better than getting it wrong and then trying to claim the money back.
Jamie: And if you are dealing with change management, and we do not have to hide away from this, it is one of the hardest things to achieve in a business, to get a change in behaviour.
Get It Right At The Start.
If you are setting that up at the start, and taking the right advice, that behaviour is far easier to infiltrate into the organisation.
Essentially you are developing a process for people to follow that you know, first time round, is compliant.
That builds efficiencies into the process, it allows you to train them effectively within the organisation.
It makes that change management process, which a lot of people are naturally scared of, far easier. And that is a big thing with something like automating your AP function.
Do not be afraid in this digital world to go for it! Working with a trusted partner.
Nick: Absolutely! Thank you for that and thank you all again for joining us on this Insider View from ITESOFT.
Hopefully, you will be able to join us next week when we are discussing the impacts of fraud.
Fraud prevention, and the ways companies can prevent that.
We look forward to you joining us then.
Want to know more about VAT IT? Get in touch with Jamie directly on LinkedIn!
Or check out the VAT IT Website.