I have come across a problem which has totally stumped me and I hope someone here can help.
I have to post payments for our energy bills, but the way in which the provider sends the bills confuses the matter - they take a monthly direct debit payment and then send a VAT invoice every six months. Up until now I have been posting the monthly payments with no VAT amount and then when the VAT invoice arrives I post that months payment amount with the total VAT figure.
I have received our latest VAT invoice today with a letter stating that we have overpaid and so our direct debit payments have been reduced. This now means that the payment made each month will be less than the VAT amount chargeable over the 6-month period. So when I receive the VAT invoice and come to post the payment in month 6, the total amount of VAT will be more than the actual payment amount in that month!
I hope this makes some sense and that someone can give me some pointers as to how to post this in Sage.
I've always run this type of thing through the Suppliers module and entering each DD payment as a payment on account then reconciling when the bill is received and posting the bill in its entirety with all the VAT. That means that any adjustments are made exactly as the supplier has made them and so easier to track whether the account is in debit or credit.
I agree with Clare that you should really use the supplier ledger.
If you continued with your current method, in month 6, you could post a 'VAT payment' that's greater than the actual monthly payment and then post a dummy bank receipt of the excess amount. That would make the bank reconcile, recognise the VAT and get the appropriate net cost in the expense account. However, that's quite messy and it's going to be difficult to follow if you ever need to look back at things.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
I also use the supplier account and post dd payments as payments on account. If you are on cash accounting for VAT Sage will ask you what tax code to use as you should account for the VAT on the payments at the time. Then I post the entire bill when it arrives and allocate the payments against it which should leave you with whatever is currently owing. Then you can continue to post the lower dd payments as before.
Thank you for your suggestions and this makes a lot of sense.
However, I have a further problem/question regarding setting this up when there is already a balance outstanding. I understand how to post the direct debit payments from now on, but there is an outstanding credit balance already. These are direct debit payments which have been made in the past months and which I have already posted and reconciled, so my question is how to set up the account with the credit balance. I understand that I could not just post a payment on account for this amount, because this would take it from the bank account again.
I am using VAT Cash Accounting if that helps.
I hope this makes sense and that someone has a solution....
-- Edited by chrb8 on Friday 6th of January 2012 03:17:26 PM
Do you mean there is an outstanding credit balance on the energy bill as per the energy company or there is a credit balance on your supplier account in Sage? I'm assuming that your supplier account is not at the moment the same as the energy company say it is?
To tie this up I would be inclined to post either a dummy invoice or dummy credit note (T9 tax code) whichever is required to bring your supplier account into line with what the energy company balance is. Then you can start again.
Thank you Stardoe - you are correct when you say I am trying to match the two accounts up. Basically, because I am only going to start using the supplier account and payment on account method from now on, the balance as shown on my actual bill from the company does not tally with the new account.
We are in credit with the company, so I guess this is effectively the same as saying they have issued us with a credit note - therefore the 'dummy credit note' method you suggested would work.
I am having trouble implementing the above method because I am using Cash Accounting and posting the credit with a T9 code produces a mismatch. Any suggestions?
Alternatively,
If I was to use the other method suggested as a workaround (because I need to clear this up before the VAT quarter is due for submission end of Jan) -
"If you continued with your current method, in month 6, you could post a 'VAT payment' that's greater than the actual monthly payment and then post a dummy bank receipt of the excess amount. That would make the bank reconcile, recognise the VAT and get the appropriate net cost in the expense account. "
- would I make the dummy bank receipt be a T9 code so that it doesn't show on the VAT return?? And would it be posted to the same nominal code as the original payment?
-- Edited by chrb8 on Friday 20th of January 2012 01:59:08 PM
It's not a problem matching the T9 credit against the outstanding amount. After posting the credit with T9 and before you try to match it, go into error corrections and change the tax code to T1 (or whatever the tax code is), save it, then you can go back in to the supplier ledger and match it off. Then go back into error corrections and change it back to T9.
It's always difficult to know how to deal with these types of bills.
