Following the recent emergency budget, here in the UK we are all going to pay a higher rate of VAT. (20% from 4 January 2011)

Thankfully, we have been given plenty of notice before the VAT rate changes.

So here is how to change the VAT standard rate in Sage:

Click on ‘Settings’

Then select ‘Configuration’…this will take you to the ‘Configuration editor’

Select the ‘Tax codes’ Tab.

Select ‘Edit’.

Here you can change the rate of Vat for the main ‘T1′ tax code.

It would be worth having a separate ‘T’ code with the old rate of 17.5% so that if during the change in January you have any invoices with the old rate, you can use the alternative code.

ps. If you have any large purchases planned, it may well be very beneficial to make the purchase before 4 January 2011, this will save you a few pounds!!

Do you get the annoying message ‘ Terms have not been agreed’ when you set up a new customer or supplier account on Sage?
If so, click on the new customer, then go to the ‘credit control’ tab.
At the bottom left hand corner, tick the box ‘Terms agreed’ then click on save.
Hurray no more annoying messages!

Dave

Hi Bubble

Thank you for your question regarding entering pre-trading expenses into Sage Instant accounts.

There are a number of ways that you can achieve this and my answer would depend on how many invoices have been paid by your boss.

If you have less than say twenty expenses, and the money is available in the bank account, you could total up all of the invoices and write one cheque to your boss, say this was £5,000.

Then when you enter this cheque into Sage, you would go to the bank module, then click ‘Payment’.  There you can enter each separate invoice, as part of the one total cheque.  So you will have a list of twenty items on your screen, then when you are finished,  click on ‘Save’.

This should then give you one total amount for the cheque when you come to reconcile the bank account.

Although the payments are from before the company started trading, it is perfectly acceptable to include them as the date of the bank payment.  If you were to enter them with their actual date this would result in Sage getting very confused!

If you have lots of expenses, it may be easier to summarise these on an Excel spreadsheet, so that you end up with a total for each type of expense.

If the bank account does not have enough money to repay your boss all at once, then you could select a few invoices, and pay them on one payment, but remember to enter the date on Sage Instant as the actual date of the bank payment.

I hope this is helpful and thank you again for your post.

Dave )

Why should I bother reconciling the bank account?  Well, throughout the weeks you will be entering lots of different types of information into Sage.  Even at our most careful and efficient level, nearly everyone makes a mistake!  So how can we find out if we have made an error?  In accountancy we take the information from the bank statement as ‘almost’ 100% accurate (ok banks do make rare mistakes!).

So the bank statement is a crucial document, as it is EXTERNAL to the business and proves exactly how much money the business has or owes!  Rather than the owner telling their accountant they have ‘enough’, ‘not enough’, ‘a few hundred’ etc…….. in reality, most accountants will usuallywant to confirm that the balance in the clients accounting system agrees to the bank account.

Therefore the bank  ‘Reconcile’ function on Sage is to me one of the MOST important areas to a business.  This function simply matches the information contained in Sage with what ‘actually’ went through  the bank account.  If you fail to reconcile the bank then your financial data will almost certainly be incomplete, contain errors and possible cost you a lot more Tax, Vat or both!

Bank Reconciliation – Sage

To find the reconcile function go to ‘Bank’. Then single click the account you wish to reconcile. Above you will see a ‘Reconcile’ button, click this.

Enter the statement reference.  This should be the bank statement number.

The ‘Ending balance’ should be the closing balance on the statement, say £2,000 on the 19th May.

The ‘Statement date’ is the date of the last balance shown on the bank statement, ie 19th May.  Click ok. Sage works completely on dates, therefore it will now only show you entries dated before or on 19th May.

You should see a list in the top part of the screen of all the items that have not yet been ‘Matched’ to the bank statement.  ‘Matching’ means agreed or found.

As you find each transaction on the bank statement, either double click it, or highlight it and then click the ‘Match transaction’ button on the right.

If you have to stop half way through, you may be interupted, or you realise that you have made a mistake, then you can click ‘Save’.  This will save all the work you have done, you can then come back to it at a later time.

Do not press reconcile until the ‘Difference’ figure equals zero.  This is VERY VERY important.   The purpose of the ‘Difference’ button is to highlight that the balance Sage ‘thinks’ is in the bank account, and the actual ‘Ending balance’ on the bank statement MUST be the same.

If, after ‘matching’ each of the transactions on the top half of the screen you still have a difference, then double check the bank statement and see if you have any entries on the statement that you have not already entered.  You should leave the ‘Reconcile’ screen, by pressing ‘Save’…go and enter the transaction, then come back to the ‘Reconcile’ module.

When returning to continue reconciling the bank account, you will again click ‘Reconcile’, however this time Sage will tell you that you have a previous ‘Saved’ reconciliation.  You can select to use or discard this.  Choose ‘Use’.  You will now see the transaction you have just entered.  Ensure it is selected, then hopefully the balance in the ‘Difference’ box should now be zero.

The ‘Adjustment’ button allows you to enter very simple items, eg. a bank charge, rather than you having to Save and then leave the reconcile module.

Bit by Bit is easier

A very helpful tip when reconciling the bank account on Sage is to reconcile the bank statement in say two or three steps.  Say your statement covers 10th to 19th May, rather than try and reconcile the whole page in one go, draw a line say half way down the page, at say 15th May,then reconcile using this date and ‘Ending balance’. This way you have less transactions to handle.

Is the date correct?

Finally.  If you cannot find a transaction on your Sage ‘Reconcile’ screen, but you are SURE you have entered the transaction but it isn’t showing up, then it may be that you have entered the transaction with a later date, ie 21st May.  This will mean that the transaction should not be re-entered, but rather you simply need to edit the date back to the 19th.  I always check this, otherwise it’s VERY easy to end up with duplicate bank entries!

Do you have any questions about Sage that you would like me to Blog about?

If so please leave a comment with your query and if it is something I can help with I’ll happily give it a go.  I obviously cannot give ‘too specific’ advice, however I will try my best to help.

Dave

Many Sage users find preparing the VAT return each quarter a worry.  So that my clients can prepare their VAT return confidently and without making any mistakes, I prepared a straight forward checklist.  My checklist is a single page on Excel and can be printed and used each quarter to ensure things go smoothly!

Vat return for the period _______ to ________

Step

1)      Ensure that all the bank accounts have reconciled up to the last day of the Vat period

2)      Now take a backup , the file name should include the transaction number, date and the words ‘Pre Vat return’

3)      To find the VAT function go to “Company” then “Financials” then Click the ‘VAT’ Button

4)      Enter the dates of your Vat return period, then click the ‘Calculate’ Button

5)      The number of transactions found for the VAT return will be shown

eg:  “1029 transactions found for this return

12 of these transactions are un-reconciled and before the specified period.

Do you want to include the un-reconciled transactions?   YES       NO”

If the second number is small click YES

If the second number is large : Contact Sloane Walker! or your accountant.

6)  Print the VAT return and summary

7)  Review the return for reasonableness, does it compare to the last quarter and is it in line with the VAT return for the equivalent 12 months ago?

8)  If the VAT return looks reasonable, print off the detailed VAT report and carry out a more thorough review of the entries on the return.

If the entires are correct go to step 9

9)  Now print off the Purchase and Sales daybooks for the quarter, along with the Bank receipts and payments daybooks.  This is recommended by HMRC although some businesses choose not to do this.

10)  Once the VAT return has been checked and approved for submission to HMRC -  Re-run the VAT return -  See steps 3 & 4

Then Click ‘Reconcile’           Sage will ask you ‘Flag transactions for VAT?’    Click YES

You can now enter the Sage VAT return figures onto the Green VAT return and submit this to HMRC once it has been signed (and a cheque sent if applicable).

11)  The last step to complete is to enter the VAT transfer journal:

Go to ‘Modules’ then ‘Wizards’ then ‘VAT Transfer wizard’    Click ‘YES’

Enter the last day of the VAT period and ensure that the sales tax amount and the purchase tax amount agree to the figures on the completed VAT return.

Click ‘Finish’

You have now completed the VAT return.

When a Limited company pays dividends to its shareholders, it is best to post (allocate) these entries to a separate nominal code on Sage.  Code 3102 ‘Dividends Paid’ is the best place for these dividends.

As these payments are NOT an allowable business expense but rather a share of the after tax profits, they should NOT be shown as a expense on the Profit and Loss account.

Ensure that when the dividend is entered into Sage, the VAT code must be ‘T9′ as dividends are outside the scope of VAT and should not be shown on the VAT return.

Any money introduced by a director, or paid out to a director must also be given the VAT code ‘T9′ so as to exclude it from the VAT return.

Click on the ‘Company’ button, then you should arrive on the ‘Nominal Ledger’ module.

At the bottom of the screen there is a button called ‘Print List’. If you click this button you will print off a list of ALL of the nominal codes.  Alternatively, click reports at the top of the page, the ‘Miscellaneous’ reports, then select ‘Nominal List’.  The advantage of this method is that you can select a range of nominal codes, rather than printing ALL the codes in Sage.

The Profit and Loss account on Sage will be excluding VAT.  One reason for this is because when the accounts figures are submitted to HMRC they are normally reported excluding VAT.

VAT is collected by a VAT registered business, any VAT suffered by the business is deducted and the balance paid over to HMRC.  Therefore the VAT payment each quarter is not actually an expense of the business.

Also the tax payment to HMRC for Income Tax is NOT a business expense and is also excluded from the Profit and Loss account.  For a Limited Company the Corporation Tax charge will be shown as a business expense, and therefore you may wish to include this on the Profit and Loss account.

Payments to HMRC for PAYE will be shown on the Profit and Loss account either in with Wages costs, or in a separate heading.

Remember also that any payments to HMRC that are for VAT or Tax should be given the ‘T9′ VAT code, this will then ensure that they are NOT included on the VAT return.

Ok, so you have discovered that you have made an error on Sage.  Imagine you made a bank transfer from your current account to your deposit account, except that instead of entering £100 into Sage you have managed to enter £1,000, what can you do?

Well if you have tried to change the error by using ‘File Maintenance’ then you may be frustrated to find that Sage will not let you change the amount from £1,000 back to £100, why not?

Well the reason for this is that certain transactions on Sage are made via a ‘Journal entry’ rather than the usual ‘bank payment’ or ‘customer invoice’ etc. If you look in the ‘type’ column next to the incorrect entry you should find the code ‘JC’ or ‘JD’.  These codes refer to a ‘Journal credit’ or a ‘Journal debit’.

If the error you are trying to correct has a ‘JD’ or ‘JC’ code then Sage does not let you alter this transaction using ‘File maintenance’.

So how can we correct this mistake on Sage?  Simple, first write down the exact details of the original transaction, date, amount, nominal account numbers etc.  Then you need to enter a ‘Journal’ for the exact opposite amounts on the same date and to the same accounts.  This will reverse out the original entry and get you back to a position as if the incorrect journal had never happened.

Using our original example you would do as follows:

Original error:

1 June 2009 Debit (JD) deposit account £1,000

1 June 2009 Credit (JC) current account £1,000

To reverse the above enter:

1 June 2009 Debit (JD) current account £1,000

1 June 2009 Credit (JC) deposit account £1,000.

As the entry is a bank transfer then you can enter this via the ‘Transfer’ button in the ‘Bank’ module.

You can now enter the correct transfer of £100 on the correct date of 1 June 2009.

If you need to enter a standard journal to correct an error then go to ‘Company’, then nominal ledger then select the ‘Journals’ button.