Monday, October 13, 2008

Cash flow for September

Our income for September was £18,868, and expenditure £15,680, so there was a net surplus of £3,998 for the month. However, this was skewed by receipt of the £9,289 payment for reclaimed input VAT relating to the annual payment to the University Vet School for clinical services during 2007 which we made in April. 

Another poor month for the shops — overall profits are almost halved compared with 2007.

When combined with the figures for the number of animals handled by us in the same month, you'll see how the cash flow figures demonstrate that the amount of money available per animal is quite low. We would have no more than £50 available for each animal even if we had no overheads (shop rents etc.) at all.

A brief explanation of how VAT works in relation to charity activities is probably in order. We have to pay output VAT to the Inland Revenue on services (such as our animal clinic) for which we make a charge and which are not VAT exempt. We can reclaim the VAT which is included in charges we pay to our suppliers (such as the University Vet School) to enable us to provide those services. 

A normal business would charge its customers more than it pays its suppliers (or go bust) so, because VAT is calculated as a percentage of VATable charges, its reclaimed VAT would always be less than the VAT owed (so it would have to make a net payment to Inland Revenue every quarter).

We subsidise our clinic services, so we charge clinic users less than it costs us to run the clinic, and this means that the VAT we owe is less than the VAT which is included in the charge made by our suppliers. This means the Inland Revenue owe us money at the end of a quarter (effectively we have overpaid them) and we get a refund four times a year.

At present this is very welcome.

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