Why Your Data Gap Could Represent A Significant Financial Risk

Forbes

30-07-2025

Kevin Akeroyd is the CEO of Sovos, the always-on compliance company.
Let me paint a scenario, and then you, as a business leader, decide how you would respond: Your largest creditor in a given market comes to you with an invoice and says, 'Based on our data, you owe us this amount.' However, your internal systems don't have the capacity or the interoperability to pull together the data across disparate networks and applications to verify if their invoice numbers are correct. What do you do?
If you're anything like me, I'm sure a few choice words come immediately to mind, followed by the sentiment, "There's no way in the world I'm paying this until we can verify that the information and amounts are correct."
However, let me add another layer of complexity to this situation. The creditor in question is the tax authority for the country or region in which you're operating. So, delaying or not paying aren't options if you wish to avoid big fines and continue to operate.
Farfetched? Not even close. This is a very real scenario that's playing out in countries worldwide as we speak, and businesses are scrambling to adjust to this new reality.
New Rules, New Environment
Let's examine the fundamental question of what's changed and why this is happening now. Governments across the world have embraced technology and the digitization of the tax collection process, which has paved the way for more sophisticated e-invoicing rules and mandates. Many have shifted from a declarative system of data collection, where businesses report after the fact, to a transaction-based system where they collect data in real time.
In total, more than 80 countries currently have some form of e-invoicing requirements for tax compliance and digital invoicing. And these aren't small countries we're talking about; these countries represent the biggest economies in the world.
For some, this may seem like an overnight change, but this has been the eventuality ever since Chile pioneered voluntary e-invoicing in 2001 in South America. In 2014, Italy led the European mandate wave.
If you think about e-invoicing mandates in technological terms, it closely resembles the Law of Accelerating Returns. Here, the core principle states that evolutionary processes (including technological development) progress exponentially because each stage builds upon and incorporates the lessons and capabilities of previous stages.
The acceleration of e-invoicing, stemming from lessons learned globally, has been unprecedented in the past few years. Based on my conversations with regulatory experts around the globe, I feel confident in saying that real-time e-invoicing mandates will be the global standard within a decade.
How Does This Impact My Business, And What Do I Do?
For businesses operating in countries with e-invoicing mandates, you've already crossed over the line of demarcation. Meaning, you're in a position where the government probably knows more about your business transactions than you do. This is the result of them not only collecting real-time data from you but from all of your suppliers, partners and customers too.
Given this reality, it's important to appreciate that you're no longer in the role of declaring your position to the government. They'll tell you what you owe, and it's your responsibility to either pay or have the necessary documentation to defend yourself against it.
For many businesses, this is an uneasy position to be in. As these mandates continue to come online, here are five tips that come from my personal observations and many conversations with global experts on both the technology and regulatory sides of the equation.
1. Proactively address this issue. Don't wait for a mandate to become effective to address, implement and test your solutions well in advance.
2. Avoid point solutions that don't communicate with one another; this makes data reconciliation nearly impossible.
3. Standardize your technology to create efficiencies of scale and help avoid the risk of interoperability issues and corrupt data.
4. Ensure that you have a level of systems that can mirror government reporting. This is the only effective way to defend yourself against overcharges and fines.
5. Elevate your compliance program within your organization. This is a core business risk that requires executive sponsorship.
Final Thoughts
Tax compliance and the ability to avoid costly audits, fines and in some cases, forfeiture of operating licenses is now all about your transaction and finance data. The government has access to more insights, is collecting them in real time and is telling you what you owe and when you owe it. The best way to protect your business is to ensure that you can mirror this insights-based strategy being deployed by governments and tax authorities worldwide. Only then can you defend against any discrepancies and be ever-ready for audits. Companies that can't do this and are left with gaps in their compliance data invite financial risk into their organization.
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