Every entrepreneur has to deal with it: paying sales tax. In doing so, you pay the VAT that you as a company have charged the customer. However, it unfortunately happens more than once that the invoice sent has not yet been paid by the customer, while the deadline for remitting VAT is approaching. What then? In such a case, you have to pre-finance the VAT to the tax authorities.
What is pre-financing VAT?
Sales tax should be remitted to the tax authorities every quarter. This involves all the VAT you have charged to customers, including the invoices that have not yet been paid at this time. At such a time, there is nothing else a business can do but pre-finance the VAT. If this happens once in a while, it probably won’t hurt too much, but if you run into problems paying VAT more often, it can lead to unpleasant situations. In fact, when you pay VAT late, the tax authorities apply a penalty of 3% of the total outstanding amount. To avoid this penalty, you will have to pre-finance the VAT – if possible. But what is the best way to do this? Here are some tips for pre-financing VAT.
Tips for pre-financing VAT
Optimise your invoicing procedure
Do you need to pre-finance your VAT because you often have to wait a long time for your invoices to be paid? Start by checking what you can do yourself to get the invoice paid faster. Is the invoice clear enough? How is the communication with the customer, actually? Also make sure you provide as much ease of payment for the customer as possible. Send a payment link with an online invoice, for example. By optimising the invoicing procedure to perfection on your side in this way, you can be sure that you cannot blame yourself in this.
Improve debtor management
If customers often take a long time to pay the invoices you send, it would be smart to take a good look at your company’s debtor management. Accounts receivable management refers to the activities you carry out to get customers to pay their invoices on time. Think about calling customers or sending reminders and demands. Is this process currently running smoothly or are there certain aspects that can be improved? Do you want to outsource your debtor management? You can do this easily with Factris factoring. More on this later.
Current account credit
As an entrepreneur, do you need a short-term financial injection to transfer VAT on time? In that case, a current account credit is a possible solution. The current account credit is a form of alternative financing that allows you – up to a certain amount – to be in the bank’s red. Within a limit agreed with the bank, it allows you to flexibly withdraw and deposit money. A good solution when the payment of the invoices you send takes a long time, although the current account credit also has its drawbacks. For instance, there is a maximum amount of credit you receive and you pay a relatively high interest rate on the credit.
Shorten the payment period on your own invoices
Generally, a standard payment period of 30 days applies to a sent invoice. If, as a business owner, you often receive payment of invoices late or perhaps too late, you can choose to shorten the payment period to, say, 14 days. This way, you increase your chances of receiving payment of the invoice faster, making paying sales tax a lot easier.
The solution for pre-financing VAT: factoring
Are you done pre-financing VAT and do you want to be sure you receive the money from sent invoices on time? In that case, factoring is the solution you are looking for. Factris factoring is an alternative financing method that revolves around selling invoices. After Factris has bought the invoice, we make sure that you have the total value of the invoice in question in your account within 24 hours. This way, you are no longer dependent on the customer’s payments and you always have enough financial resources to transfer the VAT on time. An additional advantage of our factoring: not only the invoice, but also the debtor management is taken over by Factris. We will therefore ensure that the invoice is collected from the customer. Ideal, right?