With all of the difficulties facing the modern business (both large and small, it seems), the icing on the cake of a poor financial year is getting mail informing you of an impending audit courtesy of Uncle Sam. Corporate compliance is something that businesses of all stripes and sizes absolutely must deal with on a regular basis unless they want to incur the wrath of what is usually a vengeful tax department.
So while you might be lamenting the prospect of having to add yet more tasks to your already full agenda, the good news is that by selecting the right tools for the job, you can dramatically reduce the amount of time it takes to perform these jobs, while also limiting the sorts of errors that the tax man tends to pounce on.
Although corporate compliance might mean different things in different industries, this post will focus on a few of the broader options available to small and medium-sized businesses (SMEs) that hire people, make money, and provide goods and services that keep the country running smoothly.
Key Challenges In Corporate Compliance For Small Businesses
Even the most fastidious of companies that hire the brightest minds they can attract will inevitably fall victim to the one thing that makes us human… the ability to make mistakes. These mistakes can be minor and require only the slightest touch to correct, or they can bring down a small business from the full force of the law and various government departments.
In fact, many of these company errors can result in federal charges that can result in various charges depending on severity. This Houston criminal defense lawyer makes a note that although white collar crime might not get the same sort of attention as violent crime and the like, they can often lead to prison time at worst, and hefty fines and court-ordered restitution at best.
This is why, outside of choosing a compliance solution, you really ought to be looking at hiring legal counsel who can advise you on the wide gamut of pitfalls that can hurt your company. Some of the primary challenges faced can include (but are certainly not limited to):
Resource Constraints And Limited Expertise
Many small businesses around the country have a web of tricky regulations that they absolutely must abide by if they want to stay in business and afloat (not to mention away from the social repercussions that can spiral out of hand far quicker than ever before, thanks to social media).
But it’s not always possible for a small enterprise to invest in creating and hiring people for a dedicated department. For instance, a small bakery misclassifying workers as independent contractors faces IRS penalties averaging $10,000 due to untracked tax forms, worsened by limited accounting expertise.
Navigating A Complex Regulatory Landscape
From specific IRS forms related to hiring contractors to EEOC anti-discrimination rules, businesses have a lot to contend with. If you happen to have international customers, the pressure only becomes even more complex.
High Risk Of Errors With Manual Processes
Manual solutions like the ever-present spreadsheet or paper records often used by smaller operations can and usually do lead to all manner of errors, and ignorance of the law has never or will never constitute a defense.
Keeping Up With Regulatory Changes
Even if you somehow manage to get your head around the current regulations and legislations, because of the nature of this kind of thing, they are ever-evolving. This means that you must dedicate even more time to keeping up with the whims of whatever governments are in power or whatever new laws have been passed.
Benefits Of Automating Compliance Processes
It’s fair to say that even in a world that has seen a rapid rise in AI solutions (something we might never have imagined just five years ago), you will still need some level of human interaction. But what AI and other SaaS solutions such as Diligent have afforded small businesses is a way to slash the time, effort, and resources that they would otherwise have to dedicate to the process.
Efficiency and accuracy: Perhaps foremost in the push for automated solutions is the reality that they are simply far better at parsing and creating records that are free from error.
Cost savings: For most SMEs, the bottleneck regarding compliance is usually the inability to devote vast resources to teams of legal and compliance specialists.
Scalability: For growing small businesses, automation scales without hiring more staff, helping them grow without worry that they might fall afoul of the law.
Integration with legal safeguards: Automation generates defensible records, which are invaluable if legal issues arise, such as in a dispute where evidence from automated logs could support a defense strategy. This can massively help if you have an upcoming audit or lawsuit that needs dealing with.
To dig a little deeper, you can see from the following table the sorts of advantages that automation can bring over existing, manual efforts:
| Benefit | Manual Process Impact | Automated Impact |
| Time spent on audits | 40+ hours per month | 10 hours or less in some instances |
| Error rates | Up to 20% for smaller operations relying on outdated processes | Less than 5% error rate (still often arising from human input error) |
| Penalty avoidance | Reactive fixes cost $5K+ | Proactive automated alerts can caution against any potential errors or issues that can be fixed rapidly |
Overcoming Implementation Hurdles
It’s not all rose-tinted glasses and buttercups, though, and without the correct approach to choosing an automated solution, you can still come a cropper, causing different, unplanned problems.
Cost
Although many of the better solutions include free tiers, the cost can ramp up rapidly if you’re not careful. The best thing to do is to discuss your needs with a provider and see what options they offer that are most viable with your circumstances.
Complexity
Introducing any new tech can be a lesson in futility, and without the correct setup, you could be left with a costly McGuffin. Fortunately, most SaaS providers understand this and tend to offer some sort of onboarding and setup process to ease you into the system.
Automating your compliance needs could end up being the best thing you ever do for your business. As long as you’re aware of the pros and cons, and are willing to learn, you can end up with a solution that enables you to conduct business without worrying if you will fall foul of the law.
