Implementing a new ERP System – Why is it such a challenge?
Introducing a new integrated Enterprise Resource Planning (ERP) system – whether it’s SAP, NetSuite-Oracle, QAD, Deacom, Microsoft Dynamics, or a custom-developed solution – often represents a significant challenge for businesses. This is mainly due to the complexity and scope of the transition, which typically impacts nearly every critical aspect of a company’s operations, such as manufacturing, finance, human resources, accounting, inventory management, logistics, controlling, procurement and sales, and possibly even project management.
Despite the challenges, implementing a new ERP system is often unavoidable for companies aiming to grow, or to align with the requirements of a multinational corporate group. In order to increase efficiency, reduce costs, streamline processes, and operate in a more transparent and coordinated manner, a company needs a reliable and well-functioning ERP system.
Regardless of the purpose of implementation, introducing a new ERP system always brings significant change to a company’s operations. It requires dedicated professional support, close collaboration, precise planning, and special attention to detail throughout the entire process.
In this blog post, we focus primarily on the accounting and taxation aspects that, based in our experts’ personal experience, tend to present the greatest challenges and pitfalls during the implementation of an ERP system – particularly in the absence of proper professional support.
Tax and accounting advisory for ERP system implementation
Tax challenges during ERP implementation
VAT treatment: the most critical point
From a taxation perspective, one of the most complex tasks is designing and integrating processes related to VAT into the system, especially when transitioning to the parent company’s foreign ERP system and incorporating local Hungarian regulations.
The development of various VAT codes, exemption and deductibility rules, and the correct determination of dates necessary for VAT compliance all impact invoice recording, VAT ledger maintenance. and the preparation of VAT returns. For example, if the system does not allow the recording of the completion date indicated on the invoice, it can result in significant tax deficiencies and penalty risks for the Company during a tax audit.
Verification of partner information and VAT numbers
It is especially important that business partner data is always up-to-date and accurate. The system must be capable of verifying the validity of tax numbers and the accuracy of master data. If the selected ERP system does not support these functionalities, it is essential to ensure the verification and proper integration of partner data through reliable technological solutions. In many cases, especially then working with a non-localized ERP system, it is necessary to apply modern technological tools to efficiently verify, update, and maintain master data.
NAV online invoice reporting and RTIR integration
In addition to VAT, one of the greatest challenges is the proper implementation of invoicing in compliance with Hungarian regulations and the integration of the NAV online invoice reporting obligation (RTIR connection) within the ERP system. This requires special attention, as in recent years, invoicing, online invoice reporting, and the consistency between the online reports and the VAT returns have become key focus areas for the Hungarian Tax Authority during audits. Particularly important is the new data reconciliation procedure introduced this year, under which the Tax Authority compares the data reported in the domestic summary section of the VAT return with the data recorded in the online invoicing system. As the Tax Authority continues to develop its audit methodologies and now systematically cross-checks the online invoice data against information submitted in companies’ VAT returns, businesses must place strong emphasis on digital data analysis and transparency. During the implementation of the new ERP system, it is crucial to pay special attention to these requirements to ensure proper system setup and future compliance.
Accounting compliance and the design of the general ledger structure
Recording of depreciation for corporate income tax compliance
From a corporate income tax perspective, we often observed that ERP systems are not adequately equipped to manage proper depreciation tracking. When integrating a foreign ERP system, depreciation tracking according to Hungarian corporate income tax rules – being a Hungarian specificity – is typically not implemented. As a result, companies are often forced to manually maintain these records afterwards, which increase costs due to the additional workload and raises the risk of errors.
Inventory management – the method matters
In cases where inventory management was previously handled either through a dedicated software solution or a Hungarian ERP system, the introduction of a foreign ERP system makes it highly advisable to involve experts to ensure the proper structure is established from both an accounting and a tax compliance perspective.
International and Hungarian general ledger compliance
In case of international accounting standards, it is particularly important to reconcile the Hungarian general ledger numbers. We have often observed that improper design of the chart of accounts and account structure, as well as inadequate recordkeeping, has caused significant difficulties and penalty risks for companies during year-end closings and tax audits.
Invoicing system and regulatory compliance
It is critically important to support the integration of the invoicing system into the ERP system, taking into account Hungarian invoicing regulations (mandatory data content, requirements for standard and corrective invoices). This includes ensuring the correct reflection of performance dates, taxable amounts, VAT values, and the accurate indication of foreign currency/HUF amounts, which are often questioned by the Tax Authority. In many cases, IT departments fail to ensure compliance with invoice archiving regulations, which can result in the risk of penalties due to non-compliance with document retention obligations.
Communication challenges during the implementation of a new ERP system
Based on our experiences, although companies have employees who are familiar with internal processes, and possess the necessary professional information, it is evident that the process in hindered by communication issues between company employees and IT professionals, especially when dealing with foreign experts. These problems often stem from a lack of legal knowledge. In our experience, an independent expert with expertise in both tax and IT is needed to support the smooth implementation of the ERP system. To ensure efficiency and avoid future tax risks, we strongly recommend involving an external tax expert team to assist the IT team responsible for development and integration.
Tax and accounting advisory for ERP system implementation
How can an external tax advisory team help during the implementation of the ERP system?
The team at RSM Hungary has extensive experience in supporting the implementation of ERP systems. During the project, we provide assistance in the following areas:
- Ensuring compliance with Hungarian tax and accounting regulations
- Participation in system design and testing phases
- Communication with IT experts
- recommendations for process optimization
- Establishing a solid foundation from a tax audit perspective
Don’t let complex tax regulations or communication misunderstandings hinder the success of your ERP project. If you are planning to implement a new ERP system and want to ensure smooth operations from both an accounting and tax perspective, contact us – we will assist you through the entire process.
