Top VAT opportunities for small businesses

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The VAT increase, which comes into effect in just 13 days, is an opportunity for Small and 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.

Tax tips:

  • 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. 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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About Author

Thabo Mphahlele is the BizNis Africa Head of Sales and Marketing. Mphahlele was previously MultiChoice Production Support Analyst responsible for developing and monitoring applications. In addition, Mphahlele develops and automates batch scripts and is responsible for the daily infrastructure maintenance at MultiChoice. As a Production Support Analyst, he is responsible for incident analysis solving , developing and constructing business reports for SQL and Oracle and implement change controls for the business. Additional responsibility includes monitoring system performance via SOA, Kibaba (Elasticsearch), H.P BSM, HP Sitescope. Mphahlele is responsible for creating infrastructure performance reports through HP Ops Analytics, monitoring payments via Splunk and in-house built-in tool and disaster recovery simulation and testing. At Nashua Mobile, he was responsible for application development and enhancing the web sites At South West Gauteng College, he was the IT Technician and Network Administrator. During his tenure at Double Digit Media, he was he focused on application and web site development for new and existing clients Mphahlele contributes as a Content Manager for BizNis Africa.

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