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MISC
By 19 March 2018 | Categories: Misc

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March business news sponsored by:

By Viresh Harduth, vice president: New Customer Acquisition (Start up and Small Business) at Sage Africa & Middle East

The VAT increase, which comes into effect in just 13 days, is an opportunity for Small & Medium Businesses to review their processes and identify opportunities to cut costs and streamline operations.

For more than 25 years, the VAT rate has remained unchanged at 14%. Unlike with income tax, many businesses have never had to adjust their systems or train their teams on new VAT rates. Until now.

In preparing for the adjustment, your small business should grab the opportunity to review all other areas of your business and figure out where you can do more with less.

Here are a few ways to do that:

· Take stock. You will need to adjust the prices of all your products – unless they are zero-rated – to reflect the new VAT rate. This has to be done by 31 May. While you’re at it, you might as well do a stock audit and work out what is selling and what isn’t, the latter of which you could put on sale to try and move the stock and give your business a cash flow boost.

· Automate wherever possible. If you’re still using spreadsheets and other manual systems to keep VAT records, now is the perfect time to switch to a cloud-based accounting solution, like Sage One. Automated systems eliminate many of the headaches and admin associated with tax compliance and ensure that all your invoices, credit and debit notes comply with the ‘time of supply’ clause in the VAT Act. Cloud-based software also optimises your record-keeping, maximising the expenses you can claim back from SARS.

· Cut costs. Initially, the new VAT rate may force small businesses into cash flow problems as they balance VAT charged to their customers with the VAT they will need to pay their suppliers. Shop smarter and aim to process all stock purchases on or before 31 March so that you only pay 14% VAT. You can then sell the stock at 15% VAT and put the balance back into your business.

· Upskill your team. There’s no better reason or opportunity to train your team than a change in regulations. VAT has not increased in 25 years so it’s likely that your team is not familiar with the VAT Act. Set up some time with your accountant, who can clearly explain the ‘time of supply’ clause to your team. They’ll need to know how to correctly process sales and refunds that occur before and after 1 April. Your accountant can also provide refresher training on all tax laws to ensure your business remains compliant.

While VAT should not be seen as a cost to the business, smaller businesses might have to spend money to become compliant, e.g. by printing new price labels, shutting down shop for a day to prepare, and investing in team training.

However, if you also view the VAT change as an opportunity to review your processes, you could identify problem areas and growth opportunities, which will leave your business in a much stronger position than before.

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