Maintaining the finance of a business is difficult and that leads onto being able to maintain tax of the business as well as the credit control. i will analyse the different aspects of the tax system with regards to business as well as how credit control works within the business and how it benefits the company as well as the worthy creditors.
Credit control is generally a simple procedure that increases as the time between invoicing and payment escalates. Credit control is not debt collection, debt collection is only interested in getting the money. Credit control engages and communicates with customers to make sure they are paying their debts on time. It is aimed at serving a dual purpose of increasing sales revenue by extorting credit to customers who are deemed a good credit risk and by minimising risk of loss from bad debts by restricting or denying credits to customers with bad credit risk. The effectiveness of credit control lies in procedures employed for judging a prospects credit worthiness rather than in procedures used in extracting the owed money.
The tax liability has to be paid off by the organization or person every year to the appropriate government agency, otherwise the liability keeps on building up. Many organizations therefore, prefer to prepare a separate reserve or provision for tax liabilities
This is a system of contributions paid by workers and employers towards the cost of certain state benefits. Initially it was a contribution system of insurance against unemployment but it now also provides retirement pensions. The self employed contribute partly by a fixed payment and partly on a percentage of net profits above a certain point.
The Pay As You Earn, PAYE, system is a method of paying income tax and national insurance contributions. The employer deducts tax and national insurance contributions from the employees wages or occupational pension before paying the employees wages or pension.
Wages includes sick pay, maternity or paternity pay and adoption pay. Employees pay tax over the whole year, each time they are paid, rather than paying tax in one massive sum. The employer is responsible for sending the tax on to the HM Revenue and Customs. Each pay day, employees will get a pay slip setting out their pay, tax and national insurance contributions and any other deductions from the pay. At the end of the tax year, employees receive a form which sets out the total amounts paid to them and deducted from them for the previous tax year.
If one pays tax on their wages or occupational pension under PAYE, the PAYE system can also be used to collect the income tax on any other taxable income they have. For example, if one pays tax under PAYE on an occupational pension, the tax due on their State Retirement Pension is collected through PAYE by deducting tax from the occupational pension. The PAYE system can also be used to collect tax due on other sources of income such as untaxed interest or rent.
This is a form of consumption tax, taken from the perspective of the buyer, it means it is a tax on the purchase price. From the perspective of the seller, it is the tax on the value added to the product, or service from an accounting point of view. The purpose of VAT is to generate tax revenues to the government similar to the corporate income tax.