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Money Talk: Why it's so important to keep an eye on your bank account

There's a common history relating to almost every major IT project especially those undertaken by government departments: they take far longer to implement than planned, cost several times more than they were budgeted for, and usually create havoc when they go live. So with that sort of background the expectations surrounding the introduction of VAT returns into the Making Tax Digital (MTD) programme weren't very high. So credit where it's due: by and large the transition of VAT into the MTD system appears to have worked remarkably well; we're aware of only a few, relatively minor glitches in the first one or two quarterly return submissions, although some of these did seem to affect a number of users.

One of those glitches went like this: a VAT return was submitted (via an accounting system) on time, and the appropriate confirmation received from HMRC. The retailer was then advised that their bank account would be direct debited at the usual time around the 10th of the month. All's well, it seemed. The retailer was then rather surprised some two weeks after the due payment date to receive a letter from HMRC advising that her VAT payment was late and that while no action was being taken on this occasion in view of the system being new, future delays could result in the usual surcharges, interest, etc. Cue some checking: according to the retailer's online VAT account nothing was outstanding; however her bank statement showed that HMRC didn't apply the direct debit on the expected date they actually took the money over a week later.

So it appears that because the direct debit was delayed at HMRC's end, another part of their system generated the 'late payment' letters.

In a similar instance however, the first that one retailer knew about the issue was when he received a text message from his bank warning that his account would go into an un-arranged overdraft position unless he transferred money into it by 3pm that afternoon, due to payments being applied that day.

Fortunately he had other funds available which he could transfer online, and did so. It was only when he looked at his account online that he realised what had happened. There had been enough in his account around the time of the expected direct debit to pay his VAT bill but by the time that the delayed direct debit was about to hit, other payments had been made and that's why he needed to top up his bank account. Again, fortunately he was able to do so otherwise he could have ended up with additional bank charges, even assuming that the bank hadn't bounced the payment to HMRC.

bonus period

Now some people will find that odd. If you have say, £5k put aside in the bank ready for a VAT payment debit on the 10th of the month, and the payment is delayed by a week, surely you'd still have that money there on the 17th, and you've just had a bonus period of a week? But the reality is that in many businesses cash flow is always tight, and over the years the ability of business owners to control when they make individual payments has been severely eroded. As just about every supplier insists on customers signing up to direct debit terms before they'll open a trade account, these days the old stand by "the cheque's in the post" hardly ever works. In reality there are fixed dates when certain payments have to be made wages, PAYE/NICs for example then there are suppliers' direct debits almost at random dates, depending on previous deliveries, and finally any one-off payments (such as utility bills, rates, insurance, etc). Essentially the business operator has virtually no choice over when the money is going to leave their bank account.

automated payments

While the issue of automated payments and receipts isn't going to change for the better, at least our second retailer had the advantage of using online banking, so not only was he able to go into his account to see what was going on but, because he had other online accounts, he was able to make the required transfer.

For all of the scare stories concerning online bank scams, there's really no excuse for anyone running a business not to use the ability to see and manipulate their bank accounts in real time. And once you do online banking, the next step is to use direct bank feeds into your accounting system - modern accounting applications will take feeds from all of the major UK banks. Not only does that make it very easy to view all of the business bank accounts in one place, but it also makes bank reconciliations much easier for you or your accountant!

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Weekly retail fuel prices: 2 December 2019
RegionDieselLPGSuper ULUL
East130.4464.90137.85126.18
East Midlands129.9982.90139.43126.05
London130.54139.65126.88
North East128.54136.77124.41
North West129.2561.90138.14125.60
Northern Ireland127.29130.90123.52
Scotland129.94136.84125.21
South East131.0865.90138.76126.97
South West129.90137.19125.67
Wales129.05134.76124.63
West Midlands129.85138.70125.98
Yorkshire & Humber129.2763.90138.21125.38

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