As businesses across the country get ready to apply a one per cent reduction on the goods and services tax (GST) – they are looking to IT to help them get the job done simply and seamlessly.
But just how simple and seamless the transition happens to be will depend on the size of your business.
The cut, which brings down the GST from 7 to 6 per cent kicks in July 1, may mean nothing more than a few keystrokes and mouse clicks to change default settings on accounting software for small businesses, but things could be more complicated for larger firms.
The effects of the cut go beyond the point of sale, according to David Black, policy advisor for the Toronto Board of Trade.
The Board is an organization of some 10,000 small and large scale businesses from single person consultancy firms to giant companies such as General Motors Canada.
“The cut will affect each business differently. It could affect expense reports, automatic payments and other transactions,” said Black.
Smaller firms have less of a headache, according to Intuit Inc. the Palo Alto, Calif.-based makers of the accounting software QuickBooks.
Chris Bain, product manager for Intuit Canada said they have not received a lot of calls from their customers regarding the announced GST reduction.
But he said that is probably because Intuit had e-mailed a “quick fix” to their customers a few weeks before the change.
“We sent our customers messages informing them of the rollback and gave them instructions on how to make adjustment on the software,” said Bain.
“At the most, it’s a two step-three click process a simple matter of changing the rate on the field for GST.”
Bain said QuickBooks 2007 that rolls out this fall will have the new GST rate as default. As with all changes and updates, Bain said, QuickBooks make the procedures easy to enough from non-tech savvy business owners to follow. There is a back-up Web walk through as well.
He said QuickBooks found itself in a similar situation in 2005 when the GST and provincial sales tax (PST) were harmonized. “At that time customers had to create a tax code and reset percentages as well, so it took maybe 50 seconds instead of 20.”
If businesses fail to apply the GST cut, they could be charging clients higher prices or find that they are short-hanging themselves on credits they are entitled to, according to Bain.
He also said businesses could lose additional administration time in trying to correct the errors later.
Kim Mortson, owner and operator of Body Design, a one-on-one personal training company in Mount, Albert, Ont. says she’s ready for the change. “This Saturday (July 1), all I have to do is simply change the GST rate accounting program. It’s very simple,” Mortson, who considers herself non-tech savvy, said.
Mortson, who teaches around 30 to 45 one-on-one health programs, uses QuickBooks for the bookkeeping needs. While she may work with clients over a period of time that might overlap with the GST reduction, her fees are paid upfront so she does not have to adjust the tax rate for those accounts.
“I don’t see the cut affecting small businesses that much. Some people might put off making large purchases until the cuts come into effect to take advantage of the savings,” said Mortson.
Larger businesses, however, may have to program their system to take into account the correct GST rate on invoices dated before July 1.
Black said he expects larger businesses to have more worries compared to small business owners.
The changes do not occur just at the point of sale. The cut will affect expense reports, automatic bill payments, supply purchases as well as online transactions.
“All our members will have some cost associated with their efforts to comply with the new GST. And the more complex a business is, the more back office adjustments are required,” said Black.
“For instance, the City of Toronto itself had had to go through a lot of its billing procedures for the varied services it provides across the city.”