1. Common items that can drain a business’s budget
2. Late captured VAT can drain your finances
3. VATSolve can save you Hundreds of Millions of Rands
Even as a seasoned financial expert, we often use outdated business practices that provide little or no ROI, so it is important for companies to identify money-wasters and seek to spend smarter in the year ahead.
Common items that can drain a business’s budget:
- Slow response to customer requests: Companies need to respond quickly to customer requests. Companies that are too slow to respond will lose customers.
- Unreliable service providers: If a supplier falls behind on delivery deadlines, fails to meet quality standards, or simply disappears altogether, you could end up with dire consequences.
- Office space: Most knowledge-driven business models do not require traditional office spaces to thrive. The Covid-19 shutdown is proving just how viable digital connectivity outside the office can be for collaboration and serving clients.
- Marketing without a strategy: There are still a number of businesses that just throw money into marketing without a clear strategy to ensure they are targeting the right audience to help grow the value of their business.
- Late-captured VAT: Large corporates close their ERP systems soon after month-end, so they cannot claim Inputs invoiced because documents are often captured one period late, after the cut-off date.
Late captured VAT can drain your finances
When VAT was introduced, companies could at least claim Inputs invoiced to them by suppliers even if they had not yet paid this over. However, because large corporates close their ERP systems soon after month-end they often lose a substantial portion of this benefit, because documents are often captured one period late. Reasons for this include late receipt of the invoice from suppliers, invoices waiting to be signed off before being captured into the ERP, or decentralised or offshore processing of creditors, to name a few.
It is our assumption that on average 50% of creditors invoices are captured over one month late. What companies are unaware of is that it is perfectly legal to claim these Inputs in the current periods VAT submission provided we have the documents in our possession at the time of submitting the VAT return.
VATSolve can save you Hundreds of Millions of Rands
After month-end prepare a provisional VAT return and balance to the GL. Start testing for compliance as you only submit your VAT on the last business day of the following month. This will give you an initial forecast of your VAT payment at the end of the month.
Closer to submission date and as close to submission date as possible, extract the subsequent periods transactions into the system. This can be done weekly, daily, or close to the submission date as possible depending how important the projected VAT payment is to your company’s cash flow forecasting. The estimated VAT payable should decrease as you include the late captured documents.
At month-end you do a final review, submit the VAT return, and close the system after submission. The system will automatically reconcile the VAT payment to the GL liability and ensure the adjusted Inputs are not claimed in the subsequent period. Should SARS require verification schedules of any of the items in the VAT 201, these are available from the system at the click of a button.
We have found that depending on the size of the organisation and nature of the operations this cash flow benefit can amount to Hundreds of Millions of Rands. There is a misconception that this is a once off benefit, but you continue to save Interest on this benefit in perpetuity.
Running a VAT efficient business is crucial to your success. When you find legitimate ways of reducing you VAT bill, it can increase your margins. This in turn improves cashflow and strengthens your business’s overall financial position.
Be VAT Smart
VATSolve is a software
system which offers large companies a complete, in-house, automated, and
user-friendly VAT automation and management solution, while significantly improving your company’s
cash flow. Through enhanced visibility, it ensures compliance and effective
risk management, while increasing efficiency, reliability, and productivity of
the finance team.