Business Finance Assistant will automatically create a sales receipt for the transaction and will categorise the transaction as ‘Other Income’. Amend the category to ‘Pre-payment from a customer’ and set the VAT rate for the transaction by following these steps:
- Go to ‘Bank Transactions’ in the left-hand menu
- Select the correct bank account
- Select the transaction by pressing 'Split/Attach
- Amend the category to ‘Pre-payment from a customer’ from the category list
- Click on the VAT rate and select the correct VAT rate from the dropdown list and select ‘Update’
- Press 'Confirm'
Once you’ve created the invoice, attach the sales receipt to page 2 of the invoice by selecting ‘Allocate a payment deposit’.
For customers who use accrual-based VAT accounting, once the pre-payment is applied to the invoice, the VAT on the sales receipt will no longer be recorded on your VAT return. Instead, the VAT applied on the invoice is registered like any other invoice. This ensures that there are no duplicate VAT entries on your VAT return.
If you use a separate invoicing system, follow the same steps as above and create an invoice as a ‘shadow invoice’ in Business Finance Assistant. The shadow invoice should contain the same details included on the invoice created in your separate invoicing system.
It is important to ensure that bank transactions have been matched to invoices correctly before filing a VAT return.