VAT cash flow. Don't spend what isn't yours.
VAT collected from customers is not ordinary business income. Plan for your VAT liability before the payment deadline.
VAT is an indirect tax on consumption. A VAT vendor generally charges output tax on taxable supplies and may deduct qualifying input tax. The amount payable to SARS is generally the difference between the two.
The trouble starts when the VAT sitting in your bank account is treated as money you can spend. When the return is due, the cash isn't there.
VAT cash flow control
- Separate VAT cash: Set aside the VAT portion of what you collect, so it is available when due
- Track output VAT: Reconcile the VAT charged on taxable sales with your accounting records
- Capture input VAT: Keep valid supporting documents for every input tax deduction you claim
- Plan for the due date: VAT returns and payment are due by the 25th of the month after your tax period ends — or by the last business day of that month if you file and pay on eFiling
- Protect working capital: Forecast VAT payments alongside wages, suppliers and your other obligations
VAT can create a cash-flow squeeze when the liability is treated as spendable cash.
VSI Accountants
The cost of poor VAT cash flow
A cash shortfall when payment is due. Penalties and interest — SARS charges both on late VAT payments. Cash tied up unexpectedly, leaving less room for stock, payroll or growth. And inaccurate or late VAT returns create avoidable compliance problems.
What you should do now
- Reconcile your sales to your VAT records
- Review your input VAT and its supporting documents
- Forecast your next VAT payment
- Keep VAT cash separate where practical
- Submit and pay on time
Bottom line
Don't let VAT catch you off guard. Plan the liability, and protect your cash flow.
Sources: SARS, VAT overview · Obligations of a VAT vendor · VAT 404 Guide for Vendors · For informational purposes only