Accounting for Vat on a Cash Receipt Basis is a useful and positive Cash Flow mechanism for SMEs. Budget 2013 has increased the turnover threshold from €1 million to €1.25 million. The benefit for any company whose turnover is below the threshold is that they can opt to pay Vat on customer receipts as they come in as opposed to when they are invoiced. With many clients taking longer to pay, the alternative Invoice Basis puts a heavy strain on SMEs cash flow as Vat is payable in the Vat Period when the Invoice is first raised.
Both Sage 50 and Exchequer can handle both the Invoice Basis and the Cash Receipts Basis for accounting for Vat. If you wish to change from an Invoice Basis to the Cash Flow basis as your turnover is now under the threshold, then it must be planned as follows:
- Ensure your accountant recommends the change of basis
- Apply to Revenue in writing for approval to change basis
- Plan the change for the end of a specific Vat Period
- Do not enter any transactions past the change date until the changeover has been completed
- Liaise with Synergy Network Ltd. to assist you with managing the changeover;
- Note separate workaround for Sage 50 users also using Foreign Trader for foreign currency transactions;
For more detailed steps see our earlier article Switching to VAT Cash Accounting on Sage 50
