Managing your VAT/GST payments
Running out of cash is one of the quickest ways to go out of business. Poor planning will no doubt have played a starring role in your business downfall.
Working out what money is going to come into your business, minus what is going out sounds straightforward enough – but what about tax planning?
Automated tax forecasting
Forecasting the VAT movements (in the UK that is, GST in Australia), which have real cashflow implications, can be daunting and therefore off-putting. Even for trained finance experts, this will be one of the most time-consuming tasks.
A smart business owner will rightly say the costs need to outweigh the benefits but the costs (your time) needn’t be high – Futrli does this for you, handling all of the calculations enabling completely automated VAT forecasting.
Every piece of income or expense that you add to your scenario will automatically generate a VAT asset or liability. This keeps the VAT out of your P&L ensuring profit is accurately forecasted but includes it in the cash flow statement, ensuring you are accounting for all future cash movements.
Any forecasted P&L movements that have no VAT, for example, insurance expense, or anything else that doesn’t follow the default behaviour can be simply and individually changed. Non-deductible VAT items can be set to not affect the tax liability, with the related VAT being forecasted to go through the P&L as a cost of doing business.
As you add forecasts to your scenario, creating an accurate picture of what the future may look like, Futrli is building up a net VAT position in the background. But how to account for the payment or recovery of this build-up of VAT? Answer – leave it to Futrli.
Before creating the scenario, you would have already selected the VAT settings.
Based on these, Futrli knows exactly what to do and when to do it. The VAT is settled in the forecast on the date it becomes due, taking into account the VAT on all forecasted transactions.
See the full picture
VAT payments can be a material cash outflow for a small business and they tend to be paid out in lump sums. Not being financially ready for them can be devastating. Along with the heavy penalties that can be applied for late payment, not being prepared for a large VAT payment can leave you unable to take on that new big order or, much worse, leave you insolvent.
Planning your future cash flow is a necessity, but it doesn’t have to be difficult.