The economic landscape in Malaysia has changed since the implementation of Goods and Services Tax (GST) and it changes the rules on how a business should be play. We have witnessed lots of new incorporations of private limited companies and sole proprietorships being established before the implementation and a few after it with reasons only known by themselves. Simultaneously, we did witness that some aged old businesses have come to a halt due to aging and incapable of continuing with the burdening administration works affected by GST.
With the current political situation, weakened ringgit, ongoing confusion and continuously updating of GST guides by Royal Malaysia Customs (RMC) towards certain industry, it is certainly going to be a hard nut to crack for the business owners who are currently dealing with cash flow issues, debt collection, accounting software and finance works, and other administration issues pertaining to GST. Attending to GST seminars, or hiring a full time accountant may help certain SMEs but can they cope financially in a long run? We have to be mindful that a number of big corporations are going through retrenchment processes if not, cutting back big budgets meant for advertising and promotions and while some may claim even bonuses have shrink.
Undeniably, cash flow is one of the most crucial elements apart from sales that determine the survival of the business and both of them are correlated; without sales, cash flow will be ruin and without cash, the business will collapse. Ever since the implementation of GST, businesses are facing tight cash flow as most SMEs are practicing sales on credit and with the increasingly high prolonged debt, it spells trouble to the businesses. Literally, SMEs will need to pay output taxes out of nothing from their pocket. Thus the reason for all the budget and bonuses cut.
REGROUP FOR REALIGNMENT
SMEs are advised to go through a process of Business Realignment, or basically change the way a businesses should be done. This is applicable to those businesses where the owner feels that the businesses are under performing due to implications of GST. SMEs must look back to the origins of the processes and how are the sales orders should come in, inventory control, delivery, billing, and payment collection after the GST effect. Every section requires a great degree of coordination. Lack of coordination may cause losing of customers and thus cash flow problems.
Back to the roots
First step in realigning your business is to examine how the business runs before and after GST, identifying the root cause of the problems and what is lost during this hard times. From each division and departments to each procedure and communication processes must be examined thoroughly.
For example, when sales department failed to notify the billing and finance department on the special request’s credit sales terms & conditions, the invoices may failed to serve either on time or on the planned date taking into consideration of the 21 days rules. Thereafter if the credit control department failed to liaise with finance department and do not have sufficient data especially GST registration number of the client, the department will have difficulties to claim back the paid output tax when the debt has exceeded six months (Sec 58 GST Act 2014). Treat your inventory or goods well. For instance, those are the items where you are able to claim back the input taxes provided that it fulfils the GST criteria. The point here is solving the cash flow problems by managing well your inter-department communication.
Realign policies
No one loves strict policy but a good policy governs well the administration. Documented policy with process flows are important as it can be act as a reference whenever a problem or non-conformities arise. For those who have this procedure being documented, the problem will be easily tracked and analyse the cause of the problem and thus rectify the flow itself. If there is not any documented procedure, investigation will not only be tough but also time consuming and the business will be at risk being penalised under GST Act.
Staffs of the company will be more discipline and well guided as GST administration involves lot of crucial steps to recognize all the transactions. Every step which linked with GST are required to be documented so that even when a staff resigned or being deployed to other division, the new employed staff will know how to move on without jeopardizing the efficiency or delaying the work.
Marketing strategy
Have you review your business’s marketing strategy after a year of GST implementation? The market trend is currently changing; globally and nationally. Despite many economists are warning the global economy is going almost flat, growth seems really coming to a halt. This is all about customer’s spending power. Market segmentation need to be refocus and business owners need to observe what is really going on and what attracts customer to your business.
Attractive and affordable pricing of a product must give the customer’s value worthy. Gone were the days where customer spends to fulfil their wants. As customer feels that the GST affect are digging into their pocket, business owners need to be more alert on knowing how to play with pricing strategy, promotional strategy, and gifts strategy.
Are these three strategies familiar to you somehow? These are the one where you can find indirectly from the GST Act itself. A business owner needs to understand the rules of the Act and how to fulfill the criteria in order to perfect a good marketing strategy.
Moving forward
It is time now for all SMEs to look back at their own business and go through a thorough post mortem to understand how far your business has fared throughout GST era. If the business owner does nothing to help the business even if they knew there are issues affecting them, it is their fault if their business collapses.
Cheng & Co has launched GST Healthcare Centre at Melaka, Kuala Terengganu, and Dungun offices to offer a GST health consultation for FREE to all business owners at stipulated time. Our consultants will help answer the problem which the business owners are facing and how to settle it.
Terms and Conditions apply.
