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Tax and VAT bills: how can finance help?

tax-blog-tips.pngIn the first of the series, we discussed how investment into a clear marketing plan could boost your business exposure. In the next instalment, we discuss the different types of tax payments that could affect your business, with the best ways to help compliment your cash flow.

You might not look forward to it, but you know it’s coming: tax bills are a good example of a considerable expense you can predict every year.

Making your VAT payments

There can be good reasons for businesses to fall behind on VAT bills – customers are increasingly paying later for goods and services (average payment time is around 72 days). Now that VAT stands at 20%, it represents a bigger proportion of revenue for everyone, but despite late payments, you’re still expected to pay the quarter’s VAT on your invoices promptly. If you’re finding it hard to make these payments on time, you’re not alone: UK businesses owe almost £2.6 billion to HMRC in overdue VAT payments. Finance can help spread this cost.

Paying January, July and Corporation Tax

Companies of all types are increasingly choosing to finance their tax payments, especially if they’re working in seasonal industries. A little flipside finance will allow you to spread this cost over 6, 10 or 12 months while avoiding late payment charges from the HMRC.

Our tax tips for smaller businesses: If you put your mind to it, you can take care of tax more effectively – but we know that small businesses normally have more than enough to think about from day to day. We’ve brought together some good basic advice about tackling tax management for small to medium enterprises (SMEs), to give you a head start.

For example, do you know if there are any industry-specific tax allowances that apply to your business? Or if any members of your family work for your company, it’s good to know you can take advantage of their personal tax allowance as well as your own.

Money for business expenses

Covering essential annual costs

Some industries come with specific annual outlays. For lawyers and accountants, this will include Professional Indemnity Insurance – a sizeable expenditure. Many design-based industries depend on expensive specialist software, which is updated regularly (requiring you to buy the new one). And if your business is in manufacturing, leasing equipment can come with a large yearly cost. Applying some flipside finance could let you smooth out your cash flow with regular payments, instead of bracing for big recurring bills.


Take charge of your cash flow

  1. Invoice quickly: if you invoice promptly when work is completed or your products ship, you’ll get payment as soon as possible. Also, consider emailing invoices rather than posting: these will reach your customers immediately, with an automatic record.

  2. Make your payment terms explicit: if it’s not clear when invoices are due, your customers may well feel more relaxed about paying up. And managing your cash flow is only possible if you know when money’s due to come in.

  3. Consider direct debit/regular payments: periodic payment packages can work for both you and your customers. If you agree a fixed–payment amount for each month, this can be paid (in advance) by direct debit. It’s more convenient for your customers and gives you greater stability.

  4. Create a budget: maintaining a budget plan can help you control your business and give you more certainty for at least a year ahead. This will help warn you of possible cash shortfalls long before they occur.

  5. Use tech to manage cash flow: accounting software can help if you have limited time for admin. Cloud-based accounting can be an even bigger time saver, allowing you to see your accounts on the move, from a range of devices, and keep better track of what’s going on.

This is an excerpt from our ‘11 ways to make money work for your business’ guide. Download the guide to learn more about where to invest in your business to maximise your potential.


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