The government's
2.5% cut in VAT could put a strain on the business systems of
firms, says analyst Butler
Group.
"Changing the VAT rate from 17.5% to 15% has widespread
implications inside the organisation, across the supply chain, and
for the customers," said Butler analyst Angela Eager.
"The decision will challenge business management systems,
particularly financial management and enterprise resource planning
(ERP) applications."
As the change comes into force from next Monday (1 December),
firms have little time to change systems.
It is not just a matter of repricing goods on the shelves and
changing point of sale systems, said Eager, it also means making,
checking and testing changes throughout the entire inventory, the
up and downstream supplier network, and in back-office systems and
related processes such as financial and ERP systems.
Many firms have also already bought goods and supplies to be
sold on at a 17.5% VAT rate. Some retailers are expected to
struggle and may not be able to think about applying the reduction
until next season's goods arrive, said Eager.
Firms usually have a greater notice period about tax changes,
and the VAT drop is also being introduced in the run-up to the busy
Christmas shopping period, a time when businesses need to
concentrate on handling volume transactions rather than altering
their core systems.
UK financial systems supplier Coda
says concerns centre on four key issues. The change will override
the traditional pre-Christmas systems lock-down, which is put in
place to minimise risk during a key trading period there will be
time and cost issues associated with changing price tags
communicating price changes and setting a round number price point
will be difficult as will handling customer refunds.
Eager said, "For the past few years one of the key strategic IT
objectives has been to design and implement systems and processes
that enable business agility. This short-notice VAT rate change
will be a good test of how effective these changes have been, and
will highlight areas that need further attention."