Top VAT How small businesses can manage the increased tax rate

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Top VAT How small businesses can manage the increased tax rate

Posted On : Feb-01-2011 | seen (426) times | Article Word Count : 374 |

With VAT increasing by 2.5 per cent to 20 per cent in January, businesses need to work out ways to absorb and manage this cost.

With VAT increasing by 2.5 per cent to 20 per cent in January, businesses need to work out ways to absorb and manage this cost. The key factors to consider are how to maintain profit despite the 2.5 per cent deduction and how to manage book keeping process now that the new VAT rate has kicked in.

In terms of profits, there are two main strategies – businesses can either ramp up sales and marketing and swallow the cost of VAT, or raise prices and pass some of the pain of VAT on to the customer. Many businesses would feel more comfortable focusing their energies on sales and marketing since they do not want to drive their price-sensitive customers into the hands of competitors. However this is a costly strategy which most small businesses can’t afford. Moreover, since there has been a lot of noise about the budget and the upcoming VAT rise, most consumers are aware that costs are going to increase and will expect some degree of price change anyway.

It is likely that small businesses need to combine both approaches. According to a survey by Screwfix, 82 per cent of small businesses will raise their prices in order to cope with the increase in VAT. However, businesses also need to prioritise marketing activities to offset a potential fall in trade and the usual post-Christmas decline in consumer spending.

As well as developing a comprehensive sales strategy, it is also essential that business get their financial houses in order ahead of the VAT increase. In fact businesses that ensured a strong understanding of cash flow in the final months of the year are now much better prepared to manage the change. One way they have done this is by automating the bookkeeping process. This takes the pain out of filing VAT and greatly reduces the likelihood of a costly mistake in calculation.

In fact January is the time of the year when businesses should be focusing on maximising profits rather than managing the nitty-gritty details of VAT change. By putting in the effort in advance, businesses can focus their attention on getting back that 2.5 per cent (and then some!) in profit.

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<h1>Top VAT How small businesses can manage the increased tax rate</h1> Author: <a href='http://www.articleseen.com/profile_Smallbiz MattersUK.aspx'>Smallbiz MattersUK</a> With VAT increasing by 2.5 per cent to 20 per cent in January, businesses need to work out ways to absorb and manage this cost. The key factors to consider are how to maintain profit despite the 2.5 per cent deduction and how to manage book keeping process now that the new VAT rate has kicked in.

In terms of profits, there are two main strategies – businesses can either ramp up sales and marketing and swallow the cost of VAT, or raise prices and pass some of the pain of VAT on to the customer. Many businesses would feel more comfortable focusing their energies on sales and marketing since they do not want to drive their price-sensitive customers into the hands of competitors. However this is a costly strategy which most small businesses can’t afford. Moreover, since there has been a lot of noise about the budget and the upcoming VAT rise, most consumers are aware that costs are going to increase and will expect some degree of price change anyway.

It is likely that small businesses need to combine both approaches. According to a survey by Screwfix, 82 per cent of small businesses will raise their prices in order to cope with the increase in VAT. However, businesses also need to prioritise marketing activities to offset a potential fall in trade and the usual post-Christmas decline in consumer spending.

As well as developing a comprehensive sales strategy, it is also essential that business get their financial houses in order ahead of the VAT increase. In fact businesses that ensured a strong understanding of cash flow in the final months of the year are now much better prepared to manage the change. One way they have done this is by automating the bookkeeping process. This takes the pain out of filing VAT and greatly reduces the likelihood of a costly mistake in calculation.

In fact January is the time of the year when businesses should be focusing on maximising profits rather than managing the nitty-gritty details of VAT change. By putting in the effort in advance, businesses can focus their attention on getting back that 2.5 per cent (and then some!) in profit. About the Author: This post is written by the small business team at Intuit UK. QuickBooks is part of the family of <a rel="nofollow" href="http://quickbooks.intuit.co.uk/small-business-accounting/index.jsp">financial software</a> and services from Intuit. QuickBooks UK is the <a rel="nofollow" href="http://quickbooks.intuit.co.uk">accounting software</a> for all you small business needs. Article Source: <a href='http://www.articleseen.com/Article_Top-VAT-How-small-businesses-can-manage-the-increased-tax-rate_50923.aspx'> http://www.articleseen.com/Article_Top VAT How small businesses can manage the increased tax rate_50923.aspx</a>

Article Source : http://www.articleseen.com/Article_Top VAT How small businesses can manage the increased tax rate_50923.aspx

Author Resource :
This post is written by the small business team at Intuit UK. QuickBooks is part of the family of financial software and services from Intuit. QuickBooks UK is the accounting software for all you small business needs.

Keywords : small business accounting software, quickbooks, accounting software, intuit quickbooks,

Category : Finance : Finance

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