Daily Archives: August 13, 2010

What Happens When You Use Walmart Consultants

Today on Dilbert, Scott Adams uses Dogbert to effectively illustrate what happens when you use a Walmart consultant.

What you have to remember with consultants is that you get what you pay for. If you pay a cut rate, you get a job with corners cut, as illustrated today in Overboard …

… and you get the pleasure of the consultant blaming you for their incompetence!

When hiring a consultant, it’s important to remember that it’s all about the value they can deliver, directly or indirectly. For example, a consultant with the skills and to help you devise a new business strategy that ends up increasing your sales by 30% is worth his weight in platinum. You should gladly fork over a few thousand a day for that kind of expertise as it will end up netting your company millions in the long run. A consultant who can help you select the right optimization or data analysis system for your business that can help it save an average of 10% on corporate buys is worth her weight in tantalum. And a technical resource who can adhere to a schedule and get the job done right the first time is worth his weight in gold — and it still amazes me that in 2010 the vast majority of companies haven’t figured this out! Everyday I hear another example of a company that went with the lowest bid and either got a system that didn’t work (and had to be scrapped) or, after exceeding the schedule and budget by 50% to 150% got a system that only did most of what it was supposed to do and required timely, and costly, manual workarounds. So, instead of paying 30% more for skilled resources who could do the job right the first time within the quoted timeframe and budget, the company spent 50% to 150% more for unskilled resources who delivered a shoddy product with a higher operational cost.

So stop hiring Walmart consultants, especially when, all things considered, Expert Advice is Cheap!

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A Hitchhiker’s Guide to e-Procurement: Tax Reclamation, Part II

Mostly Harmless, Part XVI

Previous Post

In the last post, the process of tax reclamation was defined and some of the complexity around tax reclamation was discussed. This post will address some of the challenges associated with tax reclamation, some best practices, and the benefits that could be expected from an appropriate e-Procurement solution with good tax reclamation support.

Common Challenges

  • Tax Rate Verification

    Is the rate being charged by the supplier the right one? This is tricker than it seems. In HTS, almost identical classifications can have greatly differing rates (which has led to lawsuits by retailers on the basis of gender discrimination, since they believe that gloves for a man should be taxed at the same rate as gloves for a woman). Some countries update tax rates on an irregular basis. (HST [Harmonized Sales Tax, a blending of the GST and PST in some provinces] increased in three provinces in Canada on July 1.) And sometimes a supplier is using an old database or makes a human error.

  • Reclaimable Tax Identification

    Can the organization recover the tax? Is it out-of-state? GST or equivalent? A VAT to which it is exempt?

  • Tax Credit Identification

    Is the expenses an eligible Research & Development expense that can be credited against taxes payable (such as the SRED in Canada)?

Best Practices

  • Automatic Tax Rate Verification

    It’s amazing how many AP clerks will accept the tax calculation as valid, without even a cursory glance, once they have verified the items have been delivered and the rate appears to be in an acceptable range.

  • Automatic Exemption Flagging

    To simplify recovery efforts, any taxes that the organization knows it is eligible to recover should be automatically flagged by the (rules-based) system. In addition, the system should also flag any tax payments that the organization might be able to recover and that should be manually reviewed.

  • Automatic Flagging of Suspect Taxes for Manual Review

    Any taxes that are not in the system should be flagged. Any calculations that are not consistent with internal calculations should be flagged. And the invoice / taxes SHOULD NOT be paid until manually reviewed.

Potential Benefits

  • Prevention of Overpayments

    Automatic verification of taxes (to insure they are valid) and rates (to insure they are current) can prevent significant overpayments.

  • (Over)Payment Recovery

    A good tax tracking system can simplify overpayment recovery when such payments are made (which will sometimes be unavoidable, especially if a 3PL or broker handles imports and screws up a filing), and can simplify recovery of taxes the organization is eligible to recover on a quarterly or annual basis.

  • Future Credits and Savings

    The ability to flag payments that might be (partially) eligible for tax credits can greatly simplify the process of claiming tax credits in an acceptable manner. This can reduce corporate taxes and lead to considerable organizational savings over the long term.

Once the taxes are reclaimed, the actionable part of the procurement cycle is complete and it’s time to analyze performance, which is the subject of the next post.

Next Post: Analysis, Part I

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