Crunch highlights cash flow

Bill Dodwell, tax partner at Deloitte

Bill Dodwell, tax partner at Deloitte

Economic instability is forcing a growing number of corporations to look at
the way in which cashflow management is applied.

Bill Dodwell, tax partner at
said the consensus among businesses prior to the collapse of global markets was
to relegate cash flow management behind more compliance-related areas.

‘People haven’t previously focused on it nearly as much as what they are
now,’ he said.

VAT systems are of particular significance to companies as this has a direct
impact on cash flow from sales produced and according to Dodwell, resulting VAT
numbers have the potential to be ‘huge’.

‘Companies haven’t bothered to look at whether their system is proper. It’s
about ensuring you’re paying the right amount of tax at the right time,’ he

During a time when credit isn’t as readily available, companies will be
seeking to reclaim VAT as early as possible, further emphasising the need to
re-evaluate. Dodwell said the spike in the volume of client enquiries isn’t
unique to individual sectors and Deloitte are advising both SMEs and larger

Richard Mannion, national tax director at
Smith &
, said the rise in the number of enquiries around this has been
confined to property sector clients, but expects a sharp increase over the
coming 12 months and a spread to other sectors.

Up until recently many businesses in the property sector had been producing
solid growth, he said, but the paying of the next tax bill will be attributed to
less favourable conditions now being experienced.

Mannion said any well run businesses should be aware of its cashflow
management system. ‘It’s critical for people to be doing cashflow very
carefully. It has come as a shock for business plans put in place last year
which hadn’t factored in the downturn in the market,’ he said.

Companies will also need to plan for proposed changes to electronic filing,
including software compatibility in recording of VAT and corporation tax, due to
take effect from 2011.

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