The COVID-19 pandemic is having a devastating impact on the corporate world. However, we are not going to focus on the regressive effects it has had on the corporate world, instead, we are going to discuss a solution available that can help to keep businesses afloat during this time: VAT recovery.
VAT has rapidly become the most effective liquidity tool for companies looking to tighten cash flows. Having spoken to many clients, they have told us that they have put cash flow management at the top of their priority action plan following guidelines from several of the global advisory firms. In fact, many organisations large or small who have strong cash positions at the moment are also very focused on protecting their liquidity and looking to utilise all the support offered by the various governments. Managing VAT refunds is one of the fairly simple mechanism that businesses can use to their advantage, provided they invest in the right technology to identify unclaimed input VAT.
We explore how businesses can improve their financial situation, during these hard times using VAT recovery tools and technical knowledge from VAT4U and also share some of the insights published by experts such as EY and McKinsey.
The importance of cash flow management
Businesses should not assume that demand would return anytime soon, as the Mckinsey report ‘Coronavirus business impact: Evolving perspective’ states, companies must face the possibility of a prolonged downturn. The sooner they accept this perspective, the better (Craven, Liu, Wilion, 2020).
Added to that, EY say “Cash flow management must be significantly overhauled – if businesses are to withstand the next few months, “COVID-19 business continuity plan: Five ways to reshape. To help you navigate through these unprecedented times here you’ll find the most relevant EY insights on responding to the current volatility.
Click here to access the full EY report
Securing liquidity and building resilience appears to one of the Top 4 actions that companies should consider in their crisis response plan. The common theme amongst all the experts is that businesses must now review, evaluate and take action to maintain or improve their cash positions.
Countries around the world are also turning to new support legislation to help its flagging economies under the unprecedented Covid-19 threat. Some of the measures already announced are things like tax holidays so that companies don’t have to pay VAT owed at the normal deadline and removing penalties for deferred payment. All these measures have been put in place to ensure that businesses can shore up weaknesses in their cash-flow.
Essentially however, identifying unrecovered VAT, be it domestic or foreign VAT incurred, is one of the quickest options available for improving cash flow, especially as it is an option that preserves human capital.
This is where VAT4U becomes an invaluable instrument for businesses. VAT4U is offering organisations a quick, flash assessment of their VAT position to help them determine the volume if any of unclaimed VAT and how much can be claimed swiftly. A 48-hour assessment from VAT4U is all organisations need to devise a suitable VAT recovery solution to fix their cash flow problems. We can take advantage of this tax holiday window to run these audits to identify any leakage of VAT in plenty of time before VAT payments are due.
VAT recovery as a lever to improve liquidity
Speed is one of the most important aspects of VAT recovery, in particular when decisions and executions must be taken fast. VAT4U’s awarded technology allows businesses to speed up the administration process, so that they can claim their rebates before any deadlines expire.
The key to accelerating administration is cloud computing and automation. This is where VAT4U can be helpful. Businesses can use the automated technology to not only improve the volume of refunds/payments brought into the company but also the speed at which payments are processed.
What has to be highlight is that business have the opportunity to recover missed input VAT over several years adding to the cashflow opportunity. For example, businesses wishing to claim domestic VAT in Germany, UK and Spain have up to four years from the due date of the VAT return on which the original claim was made. Foreign VAT is just one year with the deadline for 2019 invoices being 30th September 2020. With many companies having thousands of invoices to review we take the burden off you through VAT4U automation and AI.
The advantages of digitizing VAT processes
By digitizing and automating the process, businesses are better placed to submit their invoices before the deadline. Studies show that automating the process improves the rate of VAT collection by over 70%. Beyond just improving the speed of collection, and the speed of recovery, businesses can also minimise enquiries from tax authorities. Minimising enquiries reduces delays in having claims processed, and makes the overall process more efficient.
The technology allows organisations to transmit data and digital invoices at the click of a button and hence VAT invoices and reports can be sent to relevant authorities faster. Furthermore, they can utilise the full power of cloud technology to store and process large volumes of information more efficiently, essential features for filing.
With the focus on VAT4U technology, organisations can significantly increase the rate at which they submit amended returns or receive VAT refunds from foreign administrations, which can help them better manage cash flow during these troubled times.
Don’t leave compliance aside
Without undermining the gravity of the current situation, it is also important for organisations to account for compliance requirements from different organisations, including the OECD laws.
Even though OECD provided clear recommendations to governments in order to provide a Tax Response to the crisis that businesses are currently facing, and highlighting flexibility in different matters including VAT as illustrated here:
TAX ADMINISTRATION RESPONSES TO COVID-19: MEASURES TAKEN TO SUPPORT TAXPAYERS
Source: www.oecd.org
It is worth noting that The International Monetary Fund have provided in the past clear guidelines to Tax Authorities making recommendations to strengthen the assessment of VAT Refund claims during economic crisis periods.
Click here to access the full IMF report
Businesses have to take all measures to ensure they are complying with the law, and one of the best measures to ensure compliance is technology. VAT4U technology is here to help! In fact, according to a study by the OECD’s tax administration, the eighth edition revealed that digital technologies increase tax compliance.
By incorporating VAT recovery technology, businesses can ensure they are staying in line with regulation and can help organisations abide by compliance laws. Being more compliant secures faster and better results. To put it another way, businesses will increase their VAT recovery claims approval, refunds will be received faster and the number of queries received from Tax Authorities will be limited.
VAT4U technology is particularly well-suited for ensuring compliance because it uses artificial intelligence to automatically detect errors. The technology, coupled with the internal expertise of experienced personnel, allows organisations to follow the law at every step.
Concluding thoughts
Liquidity is or will be a major risk that most of companies around the globe will face during the coming months. As explained by EY, this is the right moment to define strategies and implement an umbrella of actions action plans to mitigate this risk.
While a series of actions shall be carried-out in the Tax environment of companies, we would like to point here that VAT recovery together with Technology provides a natural lever to answer this need. Discovering unclaimed VAT, reducing the number of unprocessed claims, improving the speed of claims processing and ensuring compliance are all crucial to fixing cash flow problems.
VAT4U can be the solution that answers the questions businesses are asking and can do so within just 48 hours. This can be made possible by a flash assessment. VAT4U will be flexible in its payment terms to ensure you do have an additional burden of consultancy fees before you receive the cash benefit.
