Surviving the VAT Increase
The impact of the 14.28% rise in the rate of VAT will affect everyone in the UK from consumer to sole trader and small business to multinational enterprise. Yes, pilule that is correct, order raising the level of VAT from 17.5% to 20% is an increase of 14.28% and the knock on effect is something we will all have to adjust to if we are to survive the transition.
It is not just the increase in the level of VAT by from 17.5% to 20% itself that is the problem. It is that this increase will put up the cost of raw materials, production, marketing and distribution. All of these increases must then either be absorbed by the supplier reducing profit margins or passed on to the consumer, who for the most part has a limited amount of disposable income, hence changing their purchasing priorities.
Surviving the impact of the VAT increase involves taking proactive measures. Failure to react could result in businesses being trapped in a downward spiral. Simply increasing the cost of your product or service by the amount of VAT increase may not be enough, especially if you yourself are not VAT registered. Increasing the cost might also make you uncompetitive and reduce your overall turnover.
Here are some tips to help you adjust and prosper:
- Review your supplier’s costs, terms and delivery.
- Source new suppliers and negotiate better deals.
- Increase productivity.
- Review your marketing strategy and make it more cost effective.
- Widen your marketplace using the internet to reach consumers.
- Research your competitor’s prices, quality and marketing methods.
- Test market your products and or services to establish the optimum price.
- Do your accounts daily and review the reports they generate.
- Get feedback from customers and react to what they tell you.
- Go over these steps in regular intervals to improve your position.
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