What should I separate in a cash forecast when VAT payments are due?

Start with the vendor and tax period

Confirm the legal entity, VAT registration number, tax period and accounting basis before adding a VAT line to the forecast. A group of related businesses may use one shared planning spreadsheet, but each vendor’s liability and bank resources need to remain identifiable. Do not offset one company’s expected refund against another company’s payment as if the two obligations automatically cancel.

Use the VAT reconciliation and current SARS account information to establish the starting position. The amount on the next return may differ from the balance already owed. Existing debt, interest, penalties, payments awaiting allocation and corrections require separate investigation. A forecast that includes only the latest period can understate the cash needed to bring the account up to date.

Separate tax recognition from customer collection

SARS VAT 404 explains the invoice and payments bases of accounting. Under the invoice basis, VAT can become payable before the customer settles the invoice. The payments basis has eligibility and other conditions; a business cannot simply choose it inside a cash forecast because debtors are paying slowly. Confirm the approved position and the applicable time of supply rules with the preparer.

This distinction matters when a large invoice is issued near the end of a tax period. The cash plan may correctly place the customer receipt in a later month while the VAT obligation falls earlier. That timing difference should be visible. Do not move the tax payment to the customer receipt date without establishing that the legal basis for doing so actually exists.

Choose one consistent cash presentation

A practical forecast often records customer receipts and supplier payments at their full bank amounts, including VAT where charged. The separate VAT payment or refund then represents the settlement with SARS. The supporting tax calculation explains how the settlement was derived. This arrangement makes the cash lines easier to compare with bank movements.

A more detailed model may separate the tax components, but it must reconcile to the same total cash. Do not mix a gross customer receipt with a second receipt for the VAT already included in it. Similarly, do not subtract the VAT component of a supplier payment twice. Label whether figures include VAT and keep that convention consistent across the forecast and its input schedules.

Illustrative example: a settlement is missing from the plan

A fictional business expects R120,000 of gross customer receipts during a week and R80,000 of gross supplier payments. It starts with R30,000 available cash. A separately prepared and reviewed VAT reconciliation shows R18,000 payable to SARS during that same week. These invented totals are supplied assumptions, not a VAT rate calculation, and the example excludes other transactions.

Without the tax settlement, the forecast shows R70,000 closing cash. Including the R18,000 payment once produces R52,000. If the business treated the first figure as fully available for equipment or owner withdrawals, it would overstate its capacity by R18,000. The tax amount must also appear on the relevant payment date, not merely as a note below the annual budget.

Now suppose R40,000 of the expected customer receipts moves into the following week. The closing cash becomes R12,000 while the stated VAT payment remains due under the assumed facts. The forecast should expose that pressure and prompt action. It should not automatically reduce the VAT line in proportion to the delayed receipt.

Keep these amounts on separate lines

The forecast may group lines for readability, but retain the supporting breakdown. A single tax number covering VAT, PAYE and income tax makes it difficult to verify the amount, payment reference and due date. Separate tax types before deciding whether the business has enough cash for all of them.

Treat refunds and reserves carefully

An expected refund should be supported by the submitted return and the current SARS position. Verification, supporting document requests or other issues may affect when funds arrive. Show an uncertain refund separately from money already in the bank, and test the forecast without it where it is needed to fund essential payments. Do not promise a supplier a date based only on an estimated refund turnaround.

If the business transfers money to a separate tax savings account, treat that as a transfer between its own bank accounts in the combined cash view. It does not create a new expense or additional money. Show the reserved amount when considering discretionary spending, while preserving the actual legal and banking position. An internal reserve is useful discipline, but it does not submit a return or settle the liability.

Confirm the payment date and authorisation process

SARS publishes VAT filing and payment requirements, including differences linked to the filing and payment channel. Check the current rule for the vendor’s actual method and period, including the effect of nonbusiness days. Record the resulting date in the forecast rather than copying a generic monthly reminder. Recheck it when a filing period or payment method changes.

Also allow for the business’s bank authorisation process. A payment request awaiting a second approver is not a completed payment. Identify who prepares, reviews and releases the payment and verify the correct reference. Keep the submission acknowledgement, bank confirmation and subsequent account allocation together. They establish different stages and should not be treated as interchangeable evidence.

Investigate a difference before changing the forecast

If the expected VAT amount changes sharply, ask for the reconciliation rather than overwriting the cell. Possible explanations include a large sale, asset purchase, credit note, disallowed input claim, incorrect tax code or adjustment relating to another period. Each has a different cash and compliance implication. An input amount should not be included merely because an invoice contains a tax line; entitlement and supporting documentation still matter.

Compare the return calculation with the ledger control account and the movement in debtors and creditors where relevant. Explain any unresolved difference and show a cautious planning assumption until it is resolved. A forecast is a decision tool, not a substitute for the tax calculation. Preserve earlier versions so the owner can see why the required funding changed.

Check opening balances and partial payments

A forecast prepared halfway through a tax period needs a clear starting point. Confirm which customer and supplier transactions have already occurred and which tax payments have already left the bank. Include only future cash movements in the remaining forecast, while retaining the full period tax calculation as supporting information. Otherwise an opening tax balance can be included once as old debt and again as part of the next settlement.

If a payment has been made but the SARS account has not yet reflected the expected allocation, show the bank payment as completed and track the allocation issue separately. Do not forecast paying the same amount again merely because one view has not updated. Equally, a payment confirmation should be checked for the correct entity, period and reference. Resolve the account discrepancy with the relevant evidence before assuming the liability is settled.

Make the tax line part of the ordinary cash review

Review the forecast before the liability becomes urgent. Bring the VAT reconciliation into the same discussion as customer collections, supplier payments and planned capital spending. Where cash is insufficient, seek advice promptly about the available options and applicable SARS processes. Do not assume that a pending request changes a deadline or that an informal intention to pay later constitutes an approved arrangement.

Vatco’s cash flow management service can help connect the tax settlement with the wider payment plan. Bring the current VAT records, account position, customer receipts schedule and bank balances. The article on planning for late customer payments helps test the collection assumptions that often create the VAT funding gap.