With different regimes and rates applicable, monthly or annual deadlines, value-added tax represents a burdensome administrative and financial task for small businesses. Yet you know that mistakes or oversights can be very costly, and have a negative impact on the economic health of your business. There are a number of pitfalls to avoid, and tools you shouldn't overlook, to ensure proper VAT and cash flow management. Find out how our online pro accounts can help you.
How can VAT have a negative impact on your cash flow as a building craftsman?
The main pitfall to avoid: including VAT in your cash flow
Value-added tax is an indirect tax on consumption. Companies subject to it act as VAT collectors. The amount is deducted from your bank account. You must then file a VAT return, either monthly or annually, in order to transfer the money to the French Treasury.
The major risk is linked to the time lag between the date of collection of the sums collected and their payment to the authorities. The trap is to include VAT in your cash flow or working capital requirement (WCR). Poor management of financial flows can lead you to spend the sums collected and no longer have sufficient liquidity when the tax due date arrives. Despite deductible VAT on your investments, you could find yourself in a loss-making situation.
The impact of different VAT regimes
Apart from the basic VAT exemption scheme, there are two other VAT schemes, each of which has a different impact on your tax returns and cash flow management.
- Simplified VAT system
It involves a simplified reporting obligation. The procedure is carried out once a year, with the payment of two instalments, in July and December respectively, followed by the balance 3 to 4 months after the close of the financial year.
The simplified tax regime does, however, expose you to a number of cash management pitfalls. Aside from a possible lack of provisions, advance payments do not reflect your actual situation as a building and civil engineering professional, as they are assessed on the basis of the N-1 declaration. In the event of an increase in sales, the time lag between collection and payment will result in a substantial difference that needs to be regularized.
It is therefore advisable to calculate your instalments on an actual basis, and not just on the basis of your previous declaration.
- Standard actual VAT regime
It applies when the ceilings of the simplified system are exceeded, or when your company declares more than €15,000 in VAT per year. The normal actual system requires a monthly declaration according to a deadline defined by the tax authorities.
This means less time lag for your cash flow. However, you need to keep a close eye on your receipts, particularly in terms of VAT liability. There are two different collection systems.
VAT on debits makes your company liable for payment as soon as the invoice is issued, which can be problematic in view of the payment deadlines applicable in the building and civil engineering sector.
VAT on incoming payments is only charged when the sums are actually paid by your customer, whether by cheque, bank transfer or cash.
How does the online pro account help building professionals manage their VAT?
Understanding how VAT works, and what is at stake in managing this tax correctly, is essential to avoid errors and late payments. Then, equipping yourself with the right office automation tools will enable you to manage your cash flow efficiently. An online business account offers you a wide range of banking services and functions to support your accounting.
Tax dashboard included
Your online account is equipped with a tax dashboard. You no longer run the risk of missing an important deadline. These reminders enable you to declare and pay your VAT on time, taking into account the latest tax news. By complying with current regulations, you avoid the additional costs associated with late payment penalties.
Centralize your invoices and expense reports with integrated tools
When you open your online pro account, you benefit from an integrated invoicing tool. Thanks to this intuitive module, you can manage your customer relations from the moment you issue a quotation to the moment you receive payment, all in one place. Your invoices are also compliant with regulations, with the integration of different VAT rates for different jobs.
The interface also includes an expense claim management module for easy retrieval of receipts required to declare deductible VAT. The archiving of digital copies with probative value means you can stop wasting time sorting tickets.
Automatic VAT calculation and display options
The VSE online business account offer is modular. Options can be added to your basic package. You can benefit from a VAT display on your account statements and an additional function for automatic calculation of amounts due in this respect, which simplifies management of your declaration to the tax authorities.
The ability to create a piggy bank sub-account for VAT
The Anytime sub-account works like a piggy bank attached to your online business account. It allows you to set aside collected VAT so that you have sufficient budgetary reserves when it's time to pay the advance or the balance of the tax.
This financial envelope has a dedicated RIB for direct debits by the tax authorities.