How to ensure your VAT clients provide happy returns
It’s a situation that's far from ideal for most accountants - preparing a VAT return from a bag of receipts, or trying to reconcile a client’s bank account only to find dozens of transactions that have no matching paperwork.
Chasing a client eats up precious time that could be spent on other work. And it can be stressful when you’re working to multiple deadlines, even causing longer-term issues when it comes to preparing financial statements.
So how do you get encourage clients to keep and provide good VAT records?
Be clear, be concise
Remember, clients will often engage an accountant to manage their affairs because they only have a loose understanding of accounting and the tax system - they rely on your expertise to help guide their business. This gives the accountant some room to let the client know how best to organise their VAT records.
Accountants all have preferred styles and methods and it’s important to communicate clearly with your client as to how you work best:
- Prepare a sheet of general VAT guidelines to hand out to your clients. All clients have their own internal bookkeeping systems but laying out concisely what documents you need and how best to organise them can help the client work their system to your needs too.
- If something isn’t working, let the client know. It could be your client’s sales are being recorded in a confusing way, or they pay suppliers by cheque and don’t keep a record of who they have paid. Whatever the issue, discuss it with the client early so it doesn’t become habitual and harder to change down the line.
- Keep discussing! Nothing is set in stone, your clients will often change areas of their businesses, find new revenue streams and new suppliers with different standards. Do a quick assessment of the VAT records provided each quarter, and let the client know how to best adapt their record keeping to changes in their business.
Explain the benefits
Even after trying to communicate how to best provide good VAT records, there isn’t always incentive for the client to do so – they’re paying you to handle this sort of thing after all!
Make sure your client knows why their records are important - they won’t want to pay more tax than necessary and VAT records often provide the cornerstone for a business’s entire accounting system.
Poor documentation can lead to lost VAT claims, problems in preparing end-of-year accounts, higher corporation tax bills and difficulty preparing regular management accounts for the client.
Finally, don’t be afraid to be open with the client when it comes to calculating your fees. Accounting fees are normally time-based and, by letting them know by eating up your time can lead to a higher fee, they will often become far more receptive to your recommendations.
By focusing on the benefits to the client, whether that’s in accounting fees, tax savings or reporting, you’ll find a greater willingness to provide you with proper records. They are in business to make money and they understand that you are too.
Making tax digital
As part of the government’s Making tax digital strategy, the VAT return process is the first area that HMRC is aiming to digitise in April 2019. Making tax digital aims to improve compliance by making VAT Returns more transparent via the requirement of digital records for VAT transactions and receipts.
While this may prove a challenge for some businesses, it should hopefully improve the quality of VAT records provided as digital images of invoices and receipts will be required via a paperwork solution such as Receipt Bank.
This will make it far easier for accountants to read records – saving yourself time – but should also be sold to the client as positive too! After all, finding space for six years-worth of VAT records can be a challenge and by encouraging your clients to go digital both of you can benefit from improved records and less paperwork to store!
You can find more on Making Tax Digital here.
