Forecast cashflow to counterbalance VAT rise SMEs advised
ABSOLUTE Invoice Finance is urging small businesses in Yorkshire to carefully forecast their cash flow to counterbalance costs incurred as a result of the VAT increase on January 1.
The lender, which operates six regional centres across the UK including in Yorkshire, said that small firms may find themselves forced to absorb the increased cost of VAT on invoices payable rather than passing on unpopular price increases to customers in the current challenging economic climate.
As a result many are likely to wrestle with restricted cash flow in the early months of 2010 as they attempt to compete on price with larger firms.
Ian Wilkins, managing director at Absolute Invoice Finance, said: “With smaller businesses in Yorkshire likely to struggle to pass on VAT-related price increases to customers at the start of 2010, it will be crucial that they take the time to forecast carefully for the remainder of the year once they appreciate how the VAT increase has impacted their cash flow.
“This will help to ensure as stable a cash flow as possible for the remainder of 2010.”
Mr Wilkins said that the main challenge for SMEs would be to identify a way of maintaining a healthy cashflow during the period in between paying increased VAT on purcahses and receiving payment from customers on invoices.
He continued: “It is at such times of restricted cash flow that alternative finance, in the form of factoring, invoice discounting or asset finance, can provide a lifeline.
“The ability to release a substantial percentage of the value of an outstanding sales ledger can act as a vital injection of working capital, which can then be used to meet overheads, including VAT.”
