Make VAT Reclaim a Key Part of Your Cash Strategy: 4 Best Practices

In a difficult economic climate, companies turn to managing the one thing they can control – their cost base. While companies tighten their belts, there is actually sizeable cost reduction to be made in the area of VAT recovery.

Now is not the time to be leaving money on the table.

Recoverable VAT amounts are significant, often adding up to the millions. They can be recovered quickly, helping companies reduce their cost base, improve profits and increase cash reserves

This white paper looks at some of the most effective ways companies can reclaim VAT. 

Nobody wants to be paying more in VAT than they have to. However, many companies aren’t reclaiming nearly as much as they are entitled to.

Here are some actions you can start taking today, and some that may take months to implement, but will have a pay-off in the long run.

• Explore any un-tapped opportunities of VAT reclaim. Start to understand what you are reclaiming, and if there are any areas you might be missing. Domestic VAT has been historically underclaimed, and a number of EU countries allow for recovery from past years. Evaluate recovery opportunities, and if you haven’t authorized an assessment of domestic reclaim, act now.

• Use a third party to manage the VAT reclaim for you. Indirect tax teams are generally small and under-resourced. Keeping up with constantly-changing legislation and ensuring compliance may be the most a tax team can handle at the moment. If they don’t have extra capacity to take on time-consuming reclaims processes, third parties are equipped to come in and handle them for you. Some providers do not require any fees up front and take their fee from reclaimed VAT, so it could be a quick business case to put forward.
• Important questions to ask your partners:
• What is their pricing model? Do you pay up front? Or is the fee taken as a proportion of successful claims?
• Will they work with your existing T&E framework and help in any efforts to go electronic?
• Will they blend technology with people expertise? A combination of Robotic Process. Automation (RPA) and experienced processing staff will ensure nothing is missed and errors are highlighted.
• Educate your team on why VAT matters and what to look for on invoice. Getting your company into a healthy cash position is about developing a culture that supports this. You need to involve more than AP, AR and Tax. Start some programs that explain to all employees who touch, issue or process receipts and invoices, as well as anyone who might submit an expense, about why your cash position matters, and the huge impact that VAT can have. The more problems you can stop from happening ‘upstream’ in AP, Procurement or expenses, the easier your claims process will be down the line.
• Move from a paper-based T&E recovery process to an electronic one. Paper in any finance process will slow you down. It is much more difficult to get an accurate view of the data on your key documents if they are in binders, desks and post rooms. While there will be some up-front costs to investing in a digital solution, it will make it easier for you to enforce compliance with your existing T&E rules and will make your VAT reclaim process easier. An increase in VAT reclaim that comes from automating could easily offset your investment – and lead to a quicker return on investment.