How we recovered PLN 127,400 in VAT for a manufacturing company
In February 2023, a large window factory near Krakow began to lose financial liquidity due to errors in accounting for promotions. We screened their documentation and found money that had been frozen at the Tax Office for months.
Where was marketing money leaking?
Many companies treat marketing invoices as a necessary evil and simply pay them without a deeper substantive analysis of the item descriptions. In the case of our client from the joinery industry, the promotional budget in 2023 was exactly PLN 842,300. For 14 months, no one noticed that invoices from external agencies were issued in a way that prevented full VAT deduction in a given cost group. This was not a problem of lack of money in the account, but a lack of order in documentation, which with 142 employees and a huge scale of operations becomes a barrier. Numbers don't lie – every month the company lost an average of PLN 9,100 just because of one incorrect word in the service description on the invoice. We recover capital where others see only empty operating costs.
The problem had been growing since September 2022, when the company signed a contract with a new image subcontractor. Instead of precise reports, the accounting department received general notes that would be immediately questioned in the event of a tax audit. The management lived in the belief that since marketing was working, finances were safe. Only our entry into the company and the audit of the first 20 invoices showed that 23% of PR spending was burdened with tax risk. Hard tax data clearly indicated that without a change in approach, the company would lose another PLN 110,000 by the end of 2024 forever. In marketing, every zloty must have its justification in regulations, otherwise it becomes a gift for the tax collector.
Numbers don't lie – every month the company lost an average of PLN 9,100 just because of one wrong word on the invoice.
Analysis of 114 invoices from a 14-month period
Our work at Orzeł Consulting Group began with a detailed audit of 114 accounting documents collected from March 2023 to May 2024. We used our experience from 482 projects that we have conducted since the company's founding in September 2016. We found a recurring, dangerous pattern: the PR agency issued invoices for "communication services", which for the Polish tax office is a term that is too general and suspicious. Without specifically assigning the cost to a specific revenue, the VAT deduction hung by a thread. We spent 38 hours just verifying contracts to match every zloty spent to the sales campaign for energy-efficient windows.
The analysis showed that the error resulted from a lack of communication between the marketing department and the accounting department. The marketing director accepted invoices based on visual effects, without looking at their legal content. In turn, accounting recorded what it received, assuming that since the invoice was paid, it must be correct. Marketing is mathematics, and in this case, the equation did not add up. Thanks to our experience in the manufacturing industry, we knew that we had to go back to each order individually. This work required us to check campaign logs and compare them with the dates the documents were issued, which allowed us to build a hard line of defense against tax authorities.
Error in classification of PR and image services
The main problem was that image services were incorrectly recorded as general administrative costs, rather than as costs directly related to sales. According to the analysis prepared by Marek Wiśniewski, changing this one classification allowed for the unlocking of a refund of PLN 127,400. We recover capital by focusing on details that others overlook. In this case, it was crucial to demonstrate a close link between publications in the construction media and a 12.7% increase in orders in the third quarter of 2023. Without this proof, the tax collector could consider these expenses as representation, which is not subject to VAT deduction.
During the audit, we also discovered that the company was paying for services that were never fully performed because there was no system for verifying the materials delivered. Out of 114 invoices, as many as 17 contained errors in tax rates, which generated additional criminal-tax risk for the management. The average response time to our inquiries to the agency was 2 hours and 14 minutes, which allowed us to quickly close the process of collecting missing statements. Hard tax data shows that 87% of errors in marketing settlements result from improper naming of services, and not from an actual lack of right to deduction. Our role was to straighten out these definitions in accordance with current case law.
Changing the cost classification allowed for the unlocking of a refund of PLN 127,400.
New invoice description system in 14 days
Implementing the corrections and the new system took us exactly 14 working days. We created a rigid invoice description scheme for the client, which agencies must now strictly follow if they want to receive payment on time. Every new invoice must contain a campaign number, project ID, and a reference to a specific sales target recorded in the annual budget. This simple, even trivial solution completely stopped the cash leak from the company. Marketing is mathematics and every variable must be in its place. Now the accounting department is able to verify the correctness of the entire monthly package of marketing documents in terms of tax in just 47 minutes.
We also trained 4 people from the purchasing and marketing departments so that they could independently identify agency errors even before sending the document to accounting. Since October 2017, Orzeł Consulting Group has focused on educating clients, because only then is optimization sustainable. Our scheme was integrated with the company's ERP system, which eliminated human errors in data entry by 94%. The client gained not only money, but above all peace of mind during potential audits. The process that previously took days is now enclosed in standardized procedures that work automatically with every new promotional order.
Hard data after changes and real profits
The effects of our work are visible in the financial report for July 2024. In addition to a one-time recovery of PLN 127,400 from overdue VAT, the company permanently reduced its tax burden by PLN 9,100 per month. On an annual scale, this gives an amount of PLN 109,200 of additional net profit, which was previously simply wasted by bureaucracy. Tomasz Jabłoński, financial director of the factory, confirmed in August 2024 that these recovered funds have already been moved to modernize the packaging line in plant No. 2. Our audit showed that tax optimization in marketing is the fastest way to find cash within the organization without having to fire people.
We recover capital by applying a pragmatic approach to regulations that are often misinterpreted to the detriment of entrepreneurs. In 2024, we have already handled 97 similar installations of tax procedures in 4 regions of Poland, and the average refund for the client was PLN 42,300. This case was, however, a record one due to the scale of negligence of the previous accounting office. Numbers don't lie – the investment in a marketing tax audit paid off for this company within just 19 days of the completion of our work. Hard tax data is the only foundation on which you can build the safe development of a manufacturing company in current market conditions.
