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Increase in VAT bills hit small businesses

According to recent analysis completed by ‘Funding Options’, the increasing focus by the government on generating income through VAT, is creating cashflow difficulties for many businesses.

VAT receipts currently generate more than a fifth of all of HM Revenue & Customs (HMRCs) tax income.

VAT is usually paid by a business after the customer has been invoiced.  When these invoices go unpaid, businesses still have to pay their VAT bill, with many resorting to borrowing to meet their liability or risk going out of business.

Corporation Tax, on the other hand, is only charged once a business actually collects the money for their services.

Recent research into the construction sector, showed that companies are now waiting an average of over two months – 69 days – to receive payment from their customers.  This is a staggering increase of 8% in the last year.

Where businesses pay their VAT bill late or fail to pay at all, they are met with sanctions that ‘Funding Options’ deem as crippling.  These can include director disqualifications, asset seizures, and winding-up orders.

With customers not paying their bills before or when they fall due, smaller business are on a slippery slope.  Funding Options states that a growing number of businesses are requesting borrowing specifically to meet cashflow difficulties, that have arose due to VAT bills falling due.  But what else can businesses to do to help their cash flow…

There is nothing more frustrating than outstanding debt, but it is a known fact that once a third party gets involved the debtor generally pays faster and ultimately this benefits cashflow and provides peace of mind for a business.

Our debt recovery team are known for their no-nonsense approach; their knowledge and their experience.  Whether it is sending a letter of claim, or issuing court proceedings, we have a successful track record or recovering outstanding debt efficiently and effectively.

Give us a call on 01228 713070 to learn more.

Posted: February 9th, 2018