For the first time in 25 years, South Africans were hit with a value-added tax (VAT) rate increase – from 14% to 15% – further increasing the cost of living for consumers and leaving them with less disposable income to support local small businesses.
According to Rich Preece, Global Leader of the QuickBooks Accountant Business, it is more important than ever for small businesses to monitor their budgets and cash flow closely as consumer spending may dip because of the VAT increase that took effect 1 April.
“Whether a small business outsources their accounting and bookkeeping needs to an accounting professional or has an internal employee manage their company’s finances, small business leaders need to understand the potential effects of the VAT increase on the business beyond consumer demand. This includes, for example, reviewing budgets for supplier orders.
“It is also crucial that all accounting software is updated in line with the new VAT rate. If this is overlooked, small business owners will be liable for the difference – digging into profit margins,” explains Preece.
QuickBooks, the world’s leading cloud accounting solution provider with 700,000 accountant partners and over seven million users across the world, increased the standard tax rate to 15% for all transactions on its online platform starting 1 April.
Preece adds, “We understand the dynamic small business environment and know that this may be a scary time for small business owners. With this in mind, QuickBooks prioritises providing solutions and systems that help accountants and business owners succed. We want to support our customers and be the partner they can call on to ensure they stay ahead of the game when it comes to their taxes – even in uncertain times.”
Preece’s top VAT tips for small businesses are:
– Invest in professional accounting services and regularly updated accounting software;
– Revise financial documents and templates that make reference to VAT, including invoices and price lists; and
– Stay up-to-date with your business finances, insisting on regular reports if you outsource accounting services.
“While the VAT rate increase may be disruptive for small businesses across the country, there are accounting solutions on the market, such as QuickBooks, to ease the transition. This is, after all, the first VAT rate hike in the nation’s democratic history. It is to be expected that it is unfamiliar terrain for small business entrepreneurs and that many may need some guidance at this time.
“It is also important to remember that the aim of the increase is ultimately to reduce the country’s budget deficit and avoid future credit rating downgrades. In the long-term, this slight adjustment can go a long way in creating a conducive environment for small business and – on a bigger scale – economic growth,” Preece concludes.
For more information about QuickBooks, or for a free QuickBooks trial, please visit: https://quickbooks.intuit.com/za/.