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Reconciling your VAT is one of the easiest tasks using Sage Software and yet so many small businesses seem to struggle with the task.

It's the end of the VAT quarter and panic sets in because they have to check lots of reports and they aren't entirely sure what they are doing.

When introduced to a new client I have always asked the question "How long does it take to reconcile your VAT return?" The answer's I get back vary from a couple of hours to a couple of days!

The answer I should be hearing is no more than a couple of minutes. When accounts staff are presented with this, and they usually go on the offensive, stating that it takes them ages to go through all the reports and check them. Twaddle!

Their response tells me instantly that they don't fully understand the software they're using. And this doesn't just apply to Sage Software users either.

Every time a transaction is entered into the Accounts it is automatically collected in the VAT Control Accounts, In the case of Sage Software, Vat on purchases is collected in nominal code 2201 and VAT on Sales is collected in nominal code 2200.

So let’s take a step back to entering the data on a day to day basis.

With Sales invoices it doesn't really matter if all of your sales are standard rated VAT because the program will add 17.5 % (UK) to the net anyway.

If you have a mixed bag of sales, that is, you sell goods which are standard (17.5%) exempt, zero or reduced rated. Then your products vat code should be set to the rate applicable. If that is the case then there is little need to worry about the Sales VAT at the quarter end.

VAT law states that your invoice must tell the recipient which vat rate you have charged them with

Which brings us to the other side - When you receive a Purchase invoice or make a payment the document tells you whether you have been charged at standard

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