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Transcript

0:01
So welcome to the top five series for webinars for Microsoft Dynamics Business Central and NAV. So this is number 12 in a series of monthly webinars where you can sign up for one, all, and we’ll be sending out e-mails to register and I’ll show a list of the webinars at the end. So my name is Karen and I’ll be facilitating the demo today.

I’m an Account Manager here at TVision and my background is 18 years of software account management experience working for ERP companies. Ian will be doing the demo today, and he’s a support consultant here at TVision. He’s been working here for about 2.5 years and has been using NAV since 2000.

0:40
OK, so at TVision, we’ve been working on implementing the making tax digital functionality released by Microsoft for lots of clients. What this work is thrown up was lots of questions about how to setup VAT properly in order for this functionality to work. Making tax digital requires the running of the calculation and post VAT settlement routine, this will not work if you haven’t got your VAT posting, a VAT statement set up correctly.

1:05
Your VAT statement and GL need to be identical.

1:09
And the main reason if they aren’t, is because manual adjustments is being done outside of NAV. This webinar is about the best practice for VAT procedures, and the correct way of handling manual adjustments in NAV before you run the reconciliation.

1:26
OK, so what about in this month? Well, there are best practice if you are going to make any adjustments for this month, if you haven’t put these best practice VAT procedures in place yet.

1:40
So first of all, use the full VAT Journal for making adjustments. So this is the invoices to customers or for suppliers.

1:48
Just post the VAT transaction and NAV understands therefore what to do with them, and that will ignore any manual adjustments in the VAT calculation as well.

1:59
Then you need to run the VAT statement, modify any new VAT accounts and redesign if missing.

2:05
Then run the Calculate Post and VAT. Run the setup statement again.

2:09
Then post and it will zero out any VAT transactions, and then move over to settlement account to pay.

2:19
OK, so now I’m going to hand over to Ian, who will be showing you the demo.

2:24
Hi. Thanks, Karen.

2:28
Now, for today’s demo, I am just using a very standard out of the box NAV 2018 Kronos database, using the standard information that’s in there. So, if you want to try this on your test system, you can have a go yourselves. And what I’m not going to cover today is making tax digital. This is more about all the VAT transactions that happen in order for making tax digital to work. Whether you’re using making text digital features in NAV or not. Everything that I’m going to talk about applies to your VAT reporting. So there’s a lot of tools in NAV to help you with your VAT, but still, a lot of people don’t use those tools.

3:15
So for a typical finance person at the end of the month or the quarter, when it comes time to report VAT they’re downloading Excel spreadsheets, going into the general ledger, finding out what the sales were, what the purchases were, reconciling spreadsheets, putting it altogether, and then coming back, and it shouldn’t be that difficult. If we use all the tools that are in NAV, and we’ve got our setup done properly, then VAT reporting becomes actually something that’s quite easy to do.

So on your system, if you just go and search for VAT up in your search box, you can see they’re all, quite literally, dozens of tools and screens here, to help you sort out your VAT. And some of the main ones that I’m going to be talking about today are these ones around the VAT set up on the business posting groups, product posting groups, and the VAT posting setup. So let’s have a quick look at the VAT business posting groups.

4:09
You can see my system, set up for domestic EU and export, and this is how you define the people that you’re transacting with. So all of your customers and your suppliers, are they from the UK, are they from the EU, or are they from somewhere else in the world. This is a very basic setup. You might have something a little more complicated than this.

So instead of saying EU, you can have a line for France, Germany, Austria, etc., etc. Instead of just saying Export, you can have lines for South Africa, Canada, Argentina, whichever countries, you might be buying and selling from. But whatever categories you choose, you need to cover at least three basic options, you know, domestic, EU, and Export. Let’s have a look at one of our customers.

5:00
So, I’m just going to go to the customer master here.

5:05
And just looking at one of these customers, The Cannon Group, for instance.

5:10
And I can see if I come down to the invoicing tab, Show all my fields. There is a VAT Business Posting Group set up for this customer. It says that their domestic, so we know that they’re from within the UK. If they were from Europe, I’d have EU, if there were from somewhere else in the world, it would say export. And it’s really important that all your customers, and all your vendors, have your VAT business posting groups set up. A very easy way to check if you’re looking at a list of all your customers here, this could be a list of vendors.

5:43
All you’d have to do is put on a filter and, whoopise, not that filter this filter. And scroll down, find the VAT business posting group. Say, Show me anything where this is blank. So I’m just putting into single quote, and I can see there’s nothing here. So that tells me that all my customers do have VAT business posting group. I can do the same exercise for my vendors. If I see anything in this list, someone needs to go and update those customers, or those vendors. So, great stuff.

6:20
We know who we’re dealing with. And the next thing we need to know about is the products that we’re selling. So that is the VAT Product posting groups.

6:31
If I look at the VAT product posting groups on my system, you need to have at least these three. This is for your VAT exempt or zero rated items that you sell. Things that attract standard VAT. And things that attract a reduced rate VAT, such as fuel. And we’ve also got these two special ones up here, and these are the ones for recording full VAT transactions. If we need to make any adjustments to our VAT, we’ll come back to those a little bit later.

7:02
But basically, every item that we sell, or every resource that we sell, every general ledger account that we sell against or by against needs to be set up with what is the VAT product posting group.

7:17
And exactly as we did with our customers, just now, when we had to look at them, we can go to our Items or Resources, check for the VAT Product Posting Group, anything that’s blank. And if you find anything on the list, you need to go to that particular item, resource or GL account and insert what’s the correct VAT product posting group.

7:41
We’ve got those two things. And they work together to calculate how much VAT should be posted on a transaction. So once again if we go and search through our VAT tools, we have our VAT posting setup. And if we look in here, this is a matrix of how those fields interact with each other.

8:02
So, nice and simple.

8:04
If I look at my export, so any export customer or export supplier, for the three different types of VAT that we have, my system knows that I need to record 0% VAT because these are export customers or export suppliers, for my domestic customers, I have my three different options here. So no, VAT, VAT 20 or VAT 5%. And for each one, we’re telling the system, what percentage rate of VAT should be charged?

If it’s a sale, which VAT account does it go into if it’s a purchase? Which VAT account should it go into? And as you can see, these are all normal VAT calculations, so its just going to calculate 20%. I’ve still got my two special ones up here, which we’ll talk about just now, from our EU customers, very slightly different here.

9:01
So for no VAT, we calculate 0% of it, but for something that attracts 20%, I still put in the 20 here. And I said, this is reverse charge VAT. For a sale or purchase, these are the VAT accounts that it goes into, then immediately afterwards, that VAT transaction is reversed out into another account, and that’s at the end of the VAT reporting period. We still need to report on these amounts of VAT. That’s why they’re in these accounts, but we don’t actually have to pay this VAT over, so we take it out again with a balancing entry. And we do the same thing for our 5% VAT.

9:45
You might have on your system something where the VAT Business Posting group is blank, and the VAT Product posting group has a value. This is usually used by the finance department to do correcting entries. This shouldn’t be your normal run of the mill transactions. And that’s why I say, for every one of your vendors and your suppliers, you need to give this information. If any of them are blank, the system’s going to come up here, and it’s going to use one of these rows. And for VAT 20 with a blank, it would charge nought per cent, even if it was supposed to be charging 20%.

10:20
So you really need to make sure that your vendors and customers have a VAT business posting group. If you’re worried that some users might accidentally post transactions against these accounts, you can always edit this matrix, and you can blank out these accounts here. Then, if a user tries to post something with a blank, they’re going to receive an error. It will say you need to tell me which VAT account to post this transaction to.

And if they come to you with that kind of error, you can have a quick look and say, oh, you’ve made a mistake. You need to go and choose VAT posting group. That way it forces would ever document they’re posting be the sale or credit note or a purchase invoice, it forces it to calculate the VAT correctly and put that in the correct VAT account. Let’s go and have a look at some of those VAT accounts on our GL.

11:19
If I go and look at my Chart of accounts.

11:25
For this company, I have quite a lot of VAT accounts up here. You don’t need to have as many as this.

11:34
Basically, the minimum you would want would be a sales VAT account and a purchase VAT account.

11:40
But you can, if you want, split them out further into your 20%, your 5%, what’s domestic, what’s EU, etc.

11:50
And a good reason for doing this is, come the end of the month when you’re doing your reconciliations.

11:55
If you do have any differences, you can very quickly see which one of these numbers does it look like the mistakes coming from. You can drill in and potentially find problems a lot quicker. You can imagine if all the VAT was just posted to one account, the problems in one of those thousands of transactions somewhere.

12:16
One thing you will notice about my VAT accounts, all of my VAT accounts, direct posting, I have turned it off for these accounts. When NAV is handling VAT, it posts VAT transactions. So every one of the transactions in these accounts, when it comes from a source document, it’s flagged as being a VAT transaction.

12:42
When it reports that at the end of the period, it will only report those system created transactions. So if you make any manual adjustments to any of these numbers through a general journal, your VAT report, your VAT statement, your VAT settlement, your making tax digital. They’re not going to report those manual adjustments. It’s only going to report the system created transactions. So you should never post anything directly to any of your VAT accounts. If you really need to make an adjustment, and you want to come and put this tick back on, so that you can make your adjustment, don’t do it. It’s a mistake. Just stop. Think about what you’re trying to do.

13:28
And then when you’ve thought about it and you really, really want to put that tick on to make your adjustment, stop again. You’re still making a mistake. You must never post directly to these accounts. Rather than give us a call them the helpdesk, or speak to your consultant. And we will help you through the correct procedure. And that’s why we set up those full VAT 20, and full VAT 5% posting combinations. And that is so that you can post full VAT transactions through a journal or through a source document to correct any errors VAT you might have.

14:07
If you need to post any of those, give us a shout. Will send you a how to, on exactly how to post those full VAT journals, or a full VAT sales document, or a full VAT purchase document. That will adjust these numbers in a way that NAV understands it’s a VAT transaction so it will still report it for you at the end of a period.

14:27
When it comes time to do your VAT reporting, at the end of the month or at the end of the quarter, one of the first things you should do is, you should reconcile your VAT to make sure that everything looks hunky dory. So the first place I would come to, I would come to my general ledger, I would look at these VAT accounts and look at the total.

14:47
I’d make a note of these numbers. If anything looks really weird, you know, maybe investigate a little bit further. But these are the numbers that I’m looking for on my VAT statement. So let’s go and have a look at a VAT statement.

15:05
I’m going to go and look at the design of VAT statement here. You can see I’ve got two different VAT Statements. I’m interested in the VAT GB statement.

15:14
And here we can see we’ve got a VAT statement setup for this company, and this one is quite nicely done. So rows 1 to 9 correlate to the nine boxes on the VAT return for HMRC. So the first one is my sales. The third one is the total VAT due. The fifth one is how much I need to pay after taking off my purchase VAT etc. And you can see how this works. Each row has a number.

15:44
I’m not going to start talking about these top ones. Down here is where it’s actually calculating the VAT amounts. So to calculate my 20% sales VAT, basically my system is going to come in, find everything that’s a sale, where it had the VAT business posting group, the VAT product posting group of 20%. It will add them together and put that total into line 20. It will do the same thing for my 5% VAT and put that total into line 30 and then up at the top here, we can see this first row.

16:18
My total VAT on sales is the sum of rule 20 and 30. Same thing happens for my EU VAT, I get the totals. And, and then we start coming onto the purchase VAT, where same thing again. But this time, instead of sale, it’s talking about purchases for all my different groups. Now, because my system had domestic, EU and export, I need to make sure I’ve covered all of them in here. And because I had VAT 20, full 20, VAT 5, full 5 etc., I need to make sure I’ve got all of these covered in here. If I’d chosen to have France, Germany, Austria, South Africa, Argentina etc., I would need to make sure I’ve got a row for each sale and purchase for all of those different groups.

17:07
This is set up nicely, the numbers feeding up to the top and this is how it calculates what your VAT liability is. So if we can have a quick preview of this report, and I’ll just make that a little bit bigger, so that we can see it. We can see, I can put in my date filter, if it’s a particular quarter, or month that I’m looking at. And then you can see the numbers that the system is going to want to report to HMRC. And you’ll notice here in box five the total amount to VAT to be paid or refunded. It’s telling me £140,870.68 pence.

17:47
So my first check in reconciling my VAT, is to compare this number to the number in my GL.

17:57
So, this line is the total of all my VAT accounts, and I can see it corresponds to this number. So I’m very confident that all the numbers in these accounts, the grand total is the same number that I’m going to be reporting to HMRC. So this now saves me having to download all the spreadsheets, calculate these numbers manually and then trying to compare them.

18:24
I’ve got it from two places on my system, this is the correct number.

18:29
If there’s a difference between these two numbers, this one’s higher or lower, for instance, then that’s telling us that there’s a mistake somewhere in one of these accounts.

18:41
If there is a mistake, 99% of the time, that mistake comes from somebody turning on direct posting, manually posting something into one of these accounts. It affects the balance in my GL, but that VAT statement is looking at VAT transactions. So it’s going to ignore those manual entries, and that’s where the difference will come from. If you do get that situation, what you’re going to have to do, you’re going to have to reverse out whatever it was you posted in here manually, and then repost it as a full VAT journal. So if you do encounter that problem, by all means, give us a call and we’ll help you with how to post that VAT correctly. So the system can pick it up. Once you’ve looked at your general ledger, and you’ve got the correct number you’re looking for down here, it corresponds to your VAT statement.

19:36
Then you can move on to your next step.

19:41
And your next step, it’s quite simply, you need to then zero out these accounts.

19:46
And move the sum total into your VAT payable account, which are my system, is account: 5780. So, let’s have a look at VAT calculating and posting VAT.

20:03
So, we have this routine on the system, where we give it some options. We set up the dates of the periods that we are interested in.

20:16
We have to give it a document number and which is the account where I want to post the sum total of this to, my settlement account or my VAT payable account: 5780. I’ll leave these three unticked. I say Preview, and I can run this as many times as I want. But basically I’m going to look at these numbers.

20:40
Do their tally up with what was shown on my VAT statement? And does this number tally up with the total on my VAT statement and the total on my general ledger accounts? Once I’m happy with these numbers and if everything is recorded correctly, I should be happy. This is the same as my VAT statement. It’s the same as my general ledger. I’m now 100% confident that I’m going to be reporting and recording the correct numbers for HMRC.

21:08
At this point if you’re using the making tax digital functionality, you would go and do your MTD Reporting Routines. That’s going to use the numbers from that VAT statement and report your tax to HMRC using what’s in these accounts.

21:25
Once I’ve finished my making tax digital procedures, I would come back to my calculate and settlement, calculated and post.

21:36
And this time, if I want more details, I can show VAT entries, which will print the same report again, but it will show me every transaction that made up those totals. And it might be a nice idea to print off that report, put it in a file, in six months time or 12 month time, when your company auditor comes along and says, can you give me the backup documentation? Why you posted this amount. You can take out that file and give it to them and say, that’s all the transactions that make up my VAT statement. He’s got something to work on. He’s very happy. Your life’s nice and easy. If you do print it out, fantastic. As I say, you can do this as many times as you want.

22:19
When you’re 100% happy that you’re finished, you just need to tick the post button.

22:24
As soon as I click this post button, and I click either Print or Preview, it’s going to zero out these accounts. And, it’s going to put that balance into my VAT Payable account.

22:36
So, I’ve been speaking for about 15 minutes now, and I’ve gone through the entire VAT reporting and calculating my VAT settlement that your company should need to do at the end of the month. That’s how easy it should be. It should be something that’s taking you 15, 20 minutes, not something that’s taking you 4 or 5 hours. So, let’s do this posting and see what happens. It just asks me to confirm that I really want to do this.

23:03
I’m going to say yes.

23:06
It’s creating a journal. I can print this off if I want to.

23:11
And I will notice it has zeroed out all of those transactions in my VAT accounts, and it’s moved the total to my VAT settlement account, VAT payable. Now it’s back to my manual procedures. How I pay this money over to HMRC. If I have them set up as a vendor and I want to create a invoice against this GL account, I can do so. Or if I want to do a journal between my bank account, and this GL account, I can do it that way as well. Basically when I pay HMRC their money. This account then becomes zero.

23:45
That is really everything in there that you need to make your VAT reporting really simple. It’s important to have your VAT business posting groups set up for all your customers and suppliers, for every item or resource, or general ledger account that you trade, buying or selling to have the VAT product posting group set up. And to go and check your VAT posting setup, so that matrix for every possible combination of customer vendor, item resource, it calculates the correct amount to VAT and post it to the correct GL account.

24:26
If you’ve got that in place and you’re not allowing any manual entries into your VAT accounts, you’ll just clicking a few buttons to do your VAT reporting. You do your VAT statement, check that it balances up to your GL. Do your calculate and post that settlement. Again, double check that it balances up to your GL. Print out your backup documentation if it’s something you need for your audit.

24:50
And then you can post that calculate VAT settlement, it will zero out the accounts, and they’re nice and empty ready for the start of the next period.

25:03
As I say if you struggle at all with any of this, please give us a call If you need to do any transactions to correct a number in one of your VAT accounts you need to be doing a full VAT journal or a full VAT source document. And if you’re not sure how to do that, we will send you through a how to. And that’s it for me.

25:29
Great. Thanks, Ian. So I’d like to leave you with the five key takeaways about VAT, best practice procedures, which we hope will assist you.

25:42
So first of all, making tax digital is not just the functionality. The changes might seem small, but there is a lot that is involved in actually setting up your procedures.

25:57
So the functionality is all about really just putting the calculations into the nine boxes required, HMRC the link to the government gateway and the button.

26:09
But as I said before, it’s about setting it up VAT correctly in NAV. If that has been done, than the making tax digital functionality will work. And having the correct setup does have other benefits. There’s less manual adjustments, which saves you time. There’s everything is within NAV, so there’s no need to export to excel, which means less errors and less manual tasks. The system does its own auditing. And it’s much easier to include any upcoming a new making text digital functionality, as and when it is required by HMRC.

26:43
So we hope you found this webinar interesting and informative. This is the 12th in the series of webinars and we will be sending out an e-mail soon to register for the next one, and also put a reminder about the webinars in our newsletter as well. If you do have any questions, please feel free to e-mail them to us at marketing@tvisiontech.co.uk. Thank you very much.