SAP Document and Reporting Compliance (SAP DRC) is a solution used to support existing and upcoming legal mandates in global e-invoicing and statutory tax reports for businesses worldwide.
Prior to the advent of SAP DRC, there were two separate solutions for statutory reporting and e-invoicing. The first, advanced compliance reporting (ACR), was used for generating and submitting legal compliance reports to government tax authorities in the required formats. The second, SAP Document Compliance, was used to generate, display, and download electronic documents (eDocuments). This was used for both outgoing and incoming eDocuments.
SAP has combined these two into a single solution and named it DRC. The new solution enables you to transfer business documents such as invoices, credit memos, debit memos, and delivery notes electronically and in a required exchange format to external systems such as legal government authorities or business partners. Common statutory reports supported by DRC are VAT return, EC sales list, withholding tax, and SAF-T reports.
Evolving Trend of Digitalization, Tax Regulations and Mandatory Compliance
In the past, the requirements of e-invoicing and eDocuments submission were optional in many countries. Businesses were slow in adopting such requirements as these were seen as just bringing efficiency to existing processes and stepping towards digitalizing business processing operations.
Now, with the majority of countries already having or planning to introduce mandatory e-invoicing, the regulations and legal mandates for businesses are evolving continuously with many challenges. These include mandates for access to real time transactional data by tax authorities, demand for complete transparency, and mandatory compliance needs. Additionally, adopting local/country-specific mandatory processes, complying with ever-evolving new regulations, and meeting the needs of deadlines and compliance status present an opportunity for businesses.
SAP DRC for Global Compliance
SAP DRC gives businesses the ability to track the lifecycle of business transactions, from the creation of eDocuments to exchange with business partners and tax authorities, to preparing and submitting statutory reports globally. It provides enhanced agility and control of legal compliance and changes from e-invoicing to statutory reporting.
As a single solution, SAP DRC helps you control costs, maximize transparency, and reduce risk on non-compliance in terms of regulations. It provides users with a way to reconciliate and validate transactional data with tax authorities’ systems in real time, and it automates end-to-end compliance processes. All of this means you can be completely compliant with current and future legal mandates.
Features of SAP DRC
There are many features of SAP DRC. Let’s focus on some of the most important.
Firstly, you must know that SAP DRC comes in both basic and advanced versions. The features and capabilities differ in both versions. The basic version allows you to generate and submit periodic reports to tax authorities, view reporting activities, and schedule reporting runs.
Functionality such as embedded analytics, report extensibility, workflows, etc. are part of the advanced version. The majority of the features listed below are part of the advanced version.
SAP DRC provides end-to-end process automation, including the creation, transmission, processing, and submission of business transactions to business partners and/or tax authorities. This includes a complete audit trail and traceability of document flow.
It allows you to receive notification messages related to document status from tax authorities, as well as incoming eDocuments from your suppliers or customers.
Integration is possible with your own incoming automation solution to further process supplier invoices and pay invoices.
For C-level users focused on global compliance monitoring, SAP DRC provides an overview of the company’s global compliance status. The DRC Dashboard allows authorized users to see any items that need attention.
Furthermore, business documents can be accessed directly from dashboards in SAP DRC. Users are able to preview documents in readable form and use the preview option to view the relevant data before submitting statutory reports. The data in these reports can be analyzed, allowing you to validate data across many dimensions. Drill downs are available for easier auditing, and users have the ability to initiate corrections directly in eDocuments.
In order to identify, review, correct, and resolve inconsistencies between systems, a consistency check is available to compare business transactions in the system of record to those in the tax authorities’ systems. Currently, this feature is available to customers in Spain and India, where new compliance rules require businesses to complete such checks.
SAP DRC allows you to monitor statutory reporting deadlines worldwide. It provides complete insight into timelines and the submission status of reports, and helps you with preparing and submitting reports and fulfilling compliance requirements.
Statutory reports can feature manual adjustments. Typically used for VAT reports, GST/HST, and withholding tax filing, these adjustments allow you to make changes to the tax reporting date using posting inclusion and exclusion. Users can access a full audit log, including traceability and change history in order to be compliant with relevant regulations.
SAP DRC integrates the SAP standard flexible workflow to ensure statutory reports are validated with the organization before submission to tax authorities.
Users can integrate business partner correspondence (email or print) with output management so they can send withholding tax certificates to relevant business partners.
SAP DRC’s extensibility framework allows you to create your own reports to comply with local reporting obligations. Standard reports are available, of course, but these can be customized.
One of the most recent additions to the features list is mass action in DRC statutory reports. This allows you to generate report runs in a single execution for a group of reports.
Roadmap and Product Vision
SAP DRC offers out-of-the-box support for legal mandates from many countries and regions (such as Spain and India, as mentioned above). The number of countries varies based on the version, but as an example, SAP S/4HANA 2023 supports 59 countries and over 500+ reports and compliance tasks. More countries and report types are in the process of being added to the next versions of SAP S/4HANA.
To further extend the capabilities of SAP DRC, partner solutions exist for some non-standard invoicing countries and regions such as Argentina, Ecuador, Panama, Uruguay, and Vietnam. These partner solutions can leverage SAP localization settings; communication happens between SAP S/4HANA or SAP ERP and local tax authorities using SAP Integration Suite.
Generative AI in DRC
SAP has a roadmap in place for adding generative AI functionality to SAP DRC. It is currently being implemented, with version-specific deliverables. Below are a couple of generative AI functions to know.
In SAP S/4HANA Cloud Public Edition, SAP has already added conversational search support through Joule. With this copilot, you can express questions in natural language and have Joule answer based on the available documentation in the SAP Help Portal for use in SAP S/4HANA Cloud Public Edition. This provides time savings to users, who can avoid browsing through long search results and going through several topics in search of the most accurate information.
An upcoming generative AI feature is error simplification. This is currently scheduled for delivery in SAP S/4HANA Cloud Public Edition. With this feature, the error resolution timeline for failed documents can be shortened using Joule and SAP DRC. This will be achieved by infusing document context into error logs. Since Joule is provisioned with error insights, it can find the root cause and prescribe efficient remediation steps. This means end users will be able to complete error investigation faster, as well as get direct error explanations from the failed business documents.
Conclusion
SAP has many offerings for financial compliance, including SAP DRC. This solution includes a single point of integration with authorities for automated filing of statutory reports and eDocuments. By automating compliance processes, providing real-time insights, and integrating advanced features like AI-powered error resolution, SAP DRC helps organizations maintain transparency, reduce risks, and streamline reporting. As regulations continue to evolve, SAP’s commitment to expanding DRC’s capabilities ensures businesses have the tools they need to remain compliant and efficient in a rapidly changing digital landscape.
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