Most businesses have cost reduction as a vital cornerstone of their business strategy. Businesses that are fully taxable for VAT purposes, i.e. those that generally fully recover VAT on costs, often overlook VAT during cost reduction exercises. However even fully taxable businesses can generate significant P&L and working capital savings if this area is reviewed in detail.
Cost reduction exercises focused on improving working capital essentially centre on accelerating the time at which VAT is recovered on costs and decelerating the time at which VAT is paid on revenues. There are a number of ways in which this can be achieved depending on the nature of the transactions undertaken by the business.
P&L savings can be generated in a variety of ways, e.g. by identifying areas where the business is accounting for too much or recovering too little VAT, and filing retrospective refund claims and implementing procedures in future to minimise the cost.
We have a significant amount of experience in generating substantial savings for clients by conducting cost reduction reviews.