The VAT increment from 5% to 7.5% is an avenue for Small and Medium Businesses to audit their procedures and identify areas to reduce expenses and streamline operations.
Do you know Nigeria’s VAT rate is among the lowest in the world?
In making plans to accommodate the increment, your organization should kill two birds with one stone, by using the opportunity to also review all other areas of your business and develop strategies to optimize them, by doing more with less.
BELOW ARE SOME TIPS YOU CAN USE TO UNMASK YOUR VAT INCREMENT BENEFITS
Inventory: You should change the costs of every one of your items (except if they are zero-evaluated) so as to reflect the new VAT increment. You can also use this opportunity to do a stock audit to know what is selling and what isn’t.
Automation: On the off chance you’re still using spreadsheets and other manual frameworks to keep VAT records, this is an ideal time to change to a business management software. An automated system wipes out a considerable amount of the bottlenecks associated with tax compliance and ensures all your invoices, credit and debit notes complies with the VAT law.
Cut expenses: At first, the new VAT rate may cause cash flow problems as you balance VAT charged to customers with VAT charged by your suppliers. Reduce your expenses to still maintain a positive cash flow.
Re-train your team: Change in regulations is an avenue to upskill your team to get familiarized with the adjustment, some of your personnel might not be familiarized with some clauses in the new VAT Act. Your accountant can likewise give refresher training on all tax laws to guarantee your business stays consistent.
While VAT ought not be viewed as an expense to the business, smaller organizations may need to spend money to be compliant, e.g. by printing new price labels and investing in team training.
However, if you also view the VAT change as an opportunity to review your processes, you could identify problem areas and growth opportunities, which will leave your business in a much stronger position than before.