Cash Flow Management More Critical Than Ever Now

The VAT increase from 14% to 15% on April 1 is the most significant impact of the 2018 budget. It is our first VAT increase in 25 years and it is going to affect customers’ disposable income.

Remember that your current accounting systems need to be adjusted so that your business complies with the change of VAT from 14% to 15%. There are thousands of businesses who have ever only known VAT at 14% and who are not sure where to start or how to implement the necessary changes without affecting their operations and cash flow.

The increase from 14% VAT to 15% is going to present some tricky scenarios, in the short term and long term, and involves things like pricing adjustments, readjusting quotes and invoices and getting SARS ready.

It may sound daunting but there are automated solutions that can help you to put everything in place. Whichever method you employ to become compliant do not lose sight of stringent cash flow management in the process.

Why Managing your Cash Flow in a Tough Economic Climate is More Important than Ever:

• The products and services you use are also going to increase as VAT increases from 14% to 15%. Good cash flow management, with the help of quality accounting software, will help you to ensure you can pay all your own debts and continue to procure the products and services which your customers have come to expect from your business.
• Your operational expenses budget will have to be adjusted. Think about increases in fuel, for example, and the possible decrease in consumer spend. If you do not have an accurate view of your company’s monthly cash flow statements, you will not have a realistic view of what is coming in and what is going out. This is not a position you want to find yourself in. All too often, unfortunately, small business owners only regret not investing in good accounting software after the front doors have been shut.

Tips to Help You Counter the 14% VAT Increase:

• Be diligent about checking your cash flow statements as procrastination could be the difference between success and failure.
• Be creative about debt collection. Your debtors are also going to be feeling the pinch. Why not offer them an early settlement discount, for example?
• Be realistic with forecasts and projections. It is not wise to count your chickens before they hatch in business (any chicken farmer will tell you this), especially in a strained economy.
• Be responsible by making the necessary adjustments to your cash flow statements for economic slumps. In this way, and with the help of the right accounting software, there will be no nasty surprises.
• Ensure your business is VAT compliant. There is a handy VAT pocket guide on the SARS website.

Economists believe the VAT increase is a necessary evil on this path to long-term, sustainable growth. Yes, it is going to make business tougher and consumers thriftier, but if business owners keep a close eye on their accounts, they can weather the storm.

To find out how to manage your accounts quickly and easily, contact QuickBooks today on 010 203 4300 or info@easybiztech.co.za