Are you ready to submit your VAT returns digitally?
In April the government will begin rolling out the new Making Tax Digital scheme. The impact of this on SMEs will be significant, anyone who is already VAT registered will have to keep and preserve their VAT records digitally and send their VAT returns to HMRC using compatible software. The days of putting bits of paper in a shoe box and then transferring the data onto a paper form and popping it in the post to HMRC will become a thing of the past.
I appreciate that many people are way more advanced now than the shoe box days and I am certainly not an expert in VAT and its intricacies, but what the Making Tax Digital scheme will highlight is the importance of managing the cash in your business and keeping up to date and accurate financials. This is something Foundation East strongly recommends and in fact also includes as a condition on all its loans. Even so, my biggest battle as portfolio manager here is to ensure that all our clients maintain the cash flow that they provided at the application stage and that they realise that doing so is an invaluable tool for the management of their business.
We understand how easy it is to let things slip, of course. Entrepreneurs are ‘entrepreneurs’ because they are passionate about their business and what they want to achieve, because they have a vision and are driven to achieve this vision. It is common for an entrepreneur to be so busy working within the business making it happen, that the monitoring of what they are actually achieving can get forgotten about or not be a priority. With the deadline for making tax digital looming, forgetting is no longer an option.
Foundation East’s clients are lucky. One way in which our service differs from mainstream finance providers, is that we support our entrepreneurs in ensuring that relevant monitoring systems are in place. Even so, I’m still far too often surprised when clients don’t send me their financials because they ‘haven’t had time’ or ‘don’t see the importance’. I’m surprised almost as often when they then can’t understand why they have a cash flow problem!
Having said this, I have had many really successful experiences helping clients experiencing cash flow crises. Typically, once we have created a new cash flow with actuals and forecasted figures, including a plan of how to get out of the crisis, they turn their business around and send me their financials every month without fail.
This practice will stand our entrepreneurs in good stead for HMRC’s digital deadline. For those who are not supported by Foundation East, fear not. Various expert bodies have put together guides. Small Business magazine’s article, ‘Making Tax Digital: what do I need to do before it’s introduced?’ offers wise advice. Sage has also put together ‘Making Tax Digital: A guide for businesses’ to help you understand what you need to do to prepare for the April deadline (other business accounting software is available).
There are other options, of course. Hiring a good book-keeper or talking to your accountant about the packages they offer would be a good start. It may be that you don’t yet have the cashflow to outsource, yet do not feel confident enough to do your own figures. If this is so, don’t worry, there are lots of short courses available that are free or have a nominal fee that could help. Check out local accountancy practices, including LarkingGowen and Whiting & Partners. Foundation East member Lovewell Blake’s courses were so popular they were fully booked. You can though watch a video and read their top 10 tips on the matter here. Local Chambers of Commerce and Menta offer courses too.
To conclude: If you’re not ready to make your VAT return digital by April, then there will be negative consequences. So, have a think and choose a route. As our customers often hear me reflect ‘failing to prepare is preparing to fail.’ Failure is the extreme of course but whether it’s getting ready for the new digital tax scheme or simply keeping a handle on your businesses financials, these are wise words …