As an entrepreneur, keeping your VAT records is essential. Not only because the tax authorities require it, but also because properly kept VAT accounts give you insight into your cash flow and financial health. In this blog, we explain exactly what VAT bookkeeping entails, what you should pay attention to, and how to approach it smartly and efficiently.
What does VAT booking mean?
Accounting for VAT involves correctly recording the VAT you pay and receive in your accounts. This is usually done in your accounting software, indicating the VAT amount associated with each purchase or sales invoice.
There are three main components:
- VAT on purchases (input tax) – The VAT you pay to suppliers.
- VAT on sales (VAT to be remitted) – The VAT you charge to customers.
- VAT return – You periodically report the difference between the two to the Inland Revenue.
Common mistakes in VAT accounting
Despite the fact that the process seems simple, mistakes are often made. Some examples:
- Using the wrong VAT code (e.g. 0% instead of 21%)
- Booking VAT at the wrong moment (e.g. at payment instead of invoice date)
- Incorrect processing of VAT on foreign transactions
- Booking private expenses as business expenses including VAT
These errors can lead to retrospective assessments or missed refunds. So make sure you check properly and work with up-to-date VAT rules.
Smart VAT booking: tips for efficiency
Want to make VAT booking easier? Here are some practical tips:
- Use automatic recognition: Many accounting software (such as TriFact365) automatically recognises VAT on invoices.
- Work with standard VAT codes: Set these per supplier or customer to avoid errors.
- Check your VAT return before sending: Compare with previous periods and check for noticeable differences.
- Integrate your accounting with your bank: this way you book payments and receipts directly and avoid double entry.
VAT and digitisation: the future
More and more entrepreneurs are opting for digital solutions to automate their VAT administration. Think OCR technology, e-invoicing and real-time VAT reports. This saves time and reduces the risk of errors.
