Edeka is one of the largest food companies in Germany with more than 11,000 supermarkets in its retail food chain. In 2018, the Edeka Group, which includes EDEKA Südwest, had total annual sales of EUR 53.6 billion.
For large corporations, the implementation of a tax compliance system is particularly important for ongoing compliance and audits. Some of the challenges include:
- Tracking thousands of items with different tax rules, depending on country of origin and item types
- Knowing what tax rates to apply and reporting correctly
- Creating an auditable process
“It is a challenge to establish a tax compliance culture in a company and to actively manage and monitor compliance and implementation of tax obligations across all areas of the company,” explains Florian Faißt, head of taxes at Edeka Südwest.
In addition to enhancing compliance to taxation rules, Edeka Südwest needed to comply with Germany’s GoBD directive, which governs the management and storage of electronic data. These directives and a number of internal issues gave the company reasons to review its previous compliance culture and internal control systems.
The company’s financial administrators decided to use Alessa to help them improve their compliance to tax regulations, conform to the GoBD directive, enforce internal controls and prevent fraud.
“When searching for a solution for mass data analysis and implementation of automatic controls, we focused on the amount of data to be processed, the process automation capabilities and what would be acceptable for the financial administration department. It was also crucial for us that the solution be implemented by Audicon and Alessa met all these requirements,” says Faißt.
In partnership with Audicon, Edeka Südwest implemented a company-wide compliance and risk management system using Alessa. They developed and implemented testing procedures in the solution to ensure that the correct sales tax was applied for every invoice. These are checked each day with the push of a button.
Edeka Südwest also decided to implement additional standard controls including:
- Automatic online confirmation of the validity of VAT IDs (sales tax identification numbers) of foreign customers. The query is carried out daily online and is documented in the system with a timestamp
- Search for insurance bills where the input tax has been deducted. The goal is to reduce the unauthorized deduction of input taxes
- Use of potentially incorrect tax codes (comparison of tax codes with business partner country)
- Identify mismatches in payment terms of suppliers. The aim is to standardize payment terms.
- Flag invoices for which no cash discount has been deducted
- Identify invoices that were paid twice
- Comply with the Money Laundering Act (EU Directive 2018/843) by identifying customers who pay invoices with more than EUR 10,000 in cash
- Identify cases where several invoices from the same payee are posted again using an anonymous accounts payable account
- Comply with segregation of duties policies by identifying users who are both allowed to change vendor master data and to post invoices. The goal is a clean and documented controlled segregation of duties and to avoid instances of fraud.
Depending on relevance and need, these automatic tests are scheduled to run daily, weekly, quarterly or annually.
Alessa made it possible to process large amounts of data automatically with high speed and low system load. The ability to automatically check every invoice has not only increased the company’s compliance with internal controls, but it has also reduced the chances of errors and fraud.
“In the past, these tests were largely manual and random, but now they are completely automatic with Alessa,” says Faißt. “The time they saved is now used to carry out other analysis.”
With Alessa, responsibilities can be clearly organized and the integrated workflow and escalation management ensures that the appropriate responses are set in motion for any issue that needs further investigation.
Finally, Alessa’s ability to adapt to the company’s own processes and across all departments allows Edeka Südwest to keep an eye on risk points. Without this tool, compliance officers would not be able to conclusively demonstrate to management and regulators that compliance is a top priority for the company.
“This is an advantage over competing solutions because standardized solutions do not have the flexibility to address the complexities of our processes and therefore do not deliver satisfactory results,” said Faißt.
Audicon as a strong partner
“The decisive factor for our cooperation with Audicon was that we got to know Audicon GmbH as a powerful partner with a lot of project experience. It was also important for us that Audicon worked with financial authorities and auditors and the resulting knowledge and experience, which can also be transferred and applied well to Edeka Südwest,” said Faißt.