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By Oscar Caicedo, VP of Strategy and Operations, VAT, Sovos

Microservices are a popular form of modular architecture used by software engineers in the creation and scaling of large and complex applications. As economies and businesses across the world continue to embrace digital technology to engage with each other, data and analytics are becoming more important, and software is required to adapt accordingly to this huge scaling process. The use of microservices will become increasingly more prevalent to enable this, creating smaller, manageable pieces of a greater picture in order to avoid complications further down the line – especially when handling business or government-critical data across multiple jurisdictions.

Challenging complexity

Differing from country to country, navigating the nuances of governmental financial legislation can be a headache for many companies, particularly when it is constantly being updated. Real time VAT reporting, for instance, is increasingly common across the globe, with many tax authorities employing continuous transaction controls, such as electronic invoicing, to insert themselves ever closer to transactions.

International businesses, operating across a number of different jurisdictions, face the challenge of keeping up with these rapidly changing rules and regulations. They are under considerable pressure to ensure all the transaction data they store is clean, correctly stored, and ready to be retrieved and submitted – in the correct format – whenever required.

There is a wide range of varying digital tools and solutions available to help businesses and governments manage this challenge, of course, not least the labour-intensive and time-consuming research and analysis tasks. But these tools can actually exacerbate the problem to some extent. With each solution placing differing demands on reporting formats and data, their use creates a varied and complicated patchwork of reporting and archiving systems, not to mention a huge – and vastly complex – volume of data that must be correctly managed.

A need to scale

For its transactional data to comply with the various legislative requirements, and ensure the accuracy of its tax reporting, an organisation’s technology needs to give an accurate picture of its entire finances, and link together each of its different systems to synchronise and communicate vital financial information across its IT infrastructure.

Sophisticated, flexible APIs are an essential part of this, enabling businesses to link disparate aspects of their financial architecture, and collect the necessary data through a compliance partner in this manner for accurate reporting to the authorities. Once a “nice to have” bolt-on, they’re now essential for any organisation operating across multiple jurisdictions, enabling them to navigate the legal minefields of shifting complex government financial regulations without the need to constantly reinvent the wheel.

This is no small task, however. The necessary technology, including these crucial APIs, must be able to integrate with a large number of  different systems, including an organisation’s ERP, billing system, and procure-to-pay platforms. What’s more, as an organisation grows, and government transactional reporting requirements become more granular and complex, the demands on this technology will continue to grow. What’s needed, therefore, is a means of scaling the technology without the need to overhaul it with every iteration, combined with evolving, dynamic compliance rules that work on the API basis from a compliance partner.

Rearranging Lego bricks

The answer lies in microservices, an architecture that’s becoming increasingly popular with software developers and seeing links into the VAT and tax compliance space. By breaking an application down into small, simple modular parts – each of which carries out its own specific task – the microservices approach allows developers to continue scaling that application without the risk of it breaking the moment an element is added or changed.

In simple terms, microservices can be seen as Lego bricks. Every time there’s a change in requirements, those blocks can be rearranged into a compliant product. Instead of continually having to create new technology, modifying an existing process to comply with a specific country’s requirements instead allows businesses to adapt almost instantly. Of course, working with specialists in the space gives businesses the foresight to make these changes accurately and when needed.

The benefits of utilising a network of microservices will soon become clear to any business currently finding itself overwhelmed by the logistical complexity of global financial legislation. Rather than having to overhaul a solution from scratch every time an organisation starts doing business in a new territory, or encounters a changing in the legislation of a country with which it already does business, microservices can be used to ensure it complies with that particular requirement for that individual market.

Navigating the shifting regulatory landscape is challenging enough for businesses, without having to contend with the prospect of their reporting structure breaking under the strain. The use of microservices – especially combined with the speed, flexibility, and scalability of cloud architecture – is, therefore, swiftly becoming the only way for businesses to stay ahead of the pace of technological change and the sheer volume of transactional data shared between businesses and governments today.

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