How To Combat VAT Reverse Charge Cash Crunch

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    How To Combat VAT Reverse Charge Cash Crunch

    New VAT rules are due to come into force for construction businesses on the 1st of March 2021 to combat VAT fraud in the industry. 

    The new VAT reverse charge means customers receiving construction services will now have to account for and pay the VAT due to HMRC. Historically, construction businesses have been liable for accounting for VAT themselves.

    This means that up until March, construction businesses have been able to receive and retain VAT payments before paying their quarterly VAT bill to HMRC.

    Understandably, construction businesses are concerned about the cash flow crunch that will follow these rule changes. This is also a key concern for accountants and bookkeepers working with clients in the construction industry, according to accountancytoday.

    If you have clients in the construction industry, we're here to help you support them through this cash flow crunch. Here's how Chaser can help your clients:

    Get invoices paid sooner

    The construction industry has a notoriously poor payment culture, it's cited as the worst industry for late payments, with an average 28% of all invoices paid outside the agreed payment terms (CCE).

    Construction businesses can rest assured that they will get paid for their work with Chaser. They have been using Chaser's software to automate and improve their accounts receivable processes for over 6 years now. On average, Chaser users are getting invoices paid 16 or more days sooner!

    Reduce days sales outstanding

    Now being unable to hold VAT payments until the end of each quarter, in many cases, construction businesses will need to operate with a reduced cash flow. With an average wait-time for receiving payments of over 15 weeks for businesses in this sector (Constructing Excellence), more reliable and faster invoice payments can provide a much-needed cash flow boost to help your clients in construction adapt to this crunch.

    Your clients can benefit from an average 25% reduction in days sales outstanding (DSO) with Chaser. To put this into perspective; if your construction clients are used to waiting 15 weeks for payment, this can equate to them getting paid over 26 days faster! A welcome aid to their cash flow in the face of the upcoming crunch.

    Save time chasing

    Did you know construction businesses spend, on average, 130 hours each year chasing late payments? (Constructing Excellence). Particularly for small and medium sized businesses with lower head-counts (which make up the majority of the construction industry), time is such a valuable resource.

    What could your clients do with an extra 15 hours per week? With Chaser, they can expect this level of time-saving or more. Let them focus their time on other important aspects of their job, knowing that late payments are being taken care of.


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