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Another change in VAT rates - start preparing for the next!

This New Year saw the increase of the UK’s VAT rate to 20%. For consumers it has meant reported price hikes for everything from cars and fuel to electrical goods. But what does it mean for corporates who are handling the processes behind the change?

When it comes to collecting payments, many organisations including gyms, leisure centres, local authorities and charities rely on standing order or Direct Debit as their method of collection. With the 2.5% increase, by law these organisations need to provide their customers with correspondence confirming any changes in the payment amount. The administration burden of this task is huge but it is something that could be beaten in the future using automated payments management software. This type of technology platform can significantly reduce administration, automatically sending out letters to all payers, thus reducing costs and the administration headache.

With Direct Debit, consumers do not have to take any action. They will be informed by mail and the payment amount will be adjusted automatically. But for those paying by standing order, the onus is on the individual to manually change their payment amount with the bank. As well as causing hassle for consumers, it can prove tricky for businesses that are reliant on the customer to make the necessary amendments.

Using Direct Debit in conjunction with automated payments-management software enables companies to overcome thereliance on the customer to take action. Payments information is pulled by the software and the payment amount is changed automatically, rather than staff having to make multiple phone calls to customers to explain the changes required for standing orders. It can save accounts departments around 10 to 15 minutes in administration per customer.

This is the third adjustment to VAT in only two years, so we can certainly expect to see more alterations down the line. Companies should prepare now to beat the next change.



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