Small businesses must ensure VAT compliance

Kobus Engelbrecht

The value-added tax (VAT) increase to 15% will eat away at consumers’ disposable income and invariably have a negative knockon effect for small businesses. It’s important that all businesses adjust their accounting systems to ensure they’re compliant with the new VAT rate. Taking into account the VAT increase’s effect on consumers and their ability to purchase from a small business is one thing. But it’s vital to consider its effect on a business’ ability to pay its own debts and pay for essential products and services, which will also incur price increases.

With a business having to adjust its budgets to allow for price increases in operational expenditure (including fuel levies), and the possible decrease in spend by its customers – it’ll be crucial for entrepreneurs to pay even closer attention to their monthly cash flow statements.

There are a few steps they can take to counter the negative impact of the VAT increase.

These include offering early account settlement discounts to debtors; remaining vigilant about regularly reviewing cash flow statements; keep cash flow statements as realistic as possible and make adjustments for periods of downturns.

Engelbrecht is spokesperson for the 2018 Entrepreneur of the Year competition