Firstly I apologise for being only as the title suggests, I have read many forum Q&A's where the topic has strayed onto the merits of the question rather than the question itself.
I have found this forum to be refreshingly helpful on the whole so will wade in with my first post.
Left full time employment of 20 years through the choice of my arrogant, awful, blood sucking, stress demanding, money grabbing High Street Bank (not bitter though).
With 10 years experience as Business Bank Manager and real world experience of accounting / admin / leadership etc deciding working for someone else was a mugs game (remember I had been a mug for 20 years) so rather than jump back into that frying pan have set up my own Bookkeeping business.
Left in October last year, studied with Ideal Schools (big thumbs up) now AICB level 2 computer and manual plus Diploma in Payroll, Practice Licence with ICB and all fully Sage'd up within their Accountants Club division (certificates on wall ).
Signed first client last week.
And here we (eventually) come to the point of my post.
Records have been kept reasonably well but Director found he had less and less time since November last year hence need for someone to help out a few hours per week.
I have moved all the easy stuff to Sage - i.e sales and purchases - a lot of trade in Euro but not worried about that and Sage handles this very well. He is Director but invoices the company monthly (oh no not more IR35 I hear you scream) but as he freelances as a consultant in the same industry for other companies may not fall foul of this just yet-----------though I have put him in touch with my tame Accountant for proper specific advice on this subject and fully expect him to go salaried on April 6th.
Anyhoo what I have a problem with are 6 months worth of 'personal' receipts that need accounting for. He travels throughout UK and Europe doing his consulting firstly putting his expenses on company credit card but when that runs out paying for everything else by cash or his personal debit card.
So I am sitting with a box full of hotel bills, sandwich purchases, mileage records at 40pence per mile and frankfurter delicacies et al,some in Euro, some in Sterling. He has randomly raided the Business Bank Account on a frequent basis of £500 or £1000 round amounts with the only reference being 'expenses' ........ How on earth do I account for this in Sage?
In trying to answer my own question I have thought of the following:
1: Open a 'Personal Bank Account' within Sage bank accounts.
2: From Personal Bank - click payments and post everything to the relevant expense nominal codes. Good for reporting purposes though dubious about the many frankfurters as a business expense - may create a seperate nominal code for these.
2a: Personal Bank shows in Sage 'overdrawn'
3: Working through the bank statement for every bankdebitto 'expenses' transfer the amount from the Business Bank account in Sage to the Personal Bank account. Hey presto everything will balance.
Or probably not.
Pretty sure I will be left with a lot of these 'expense payments' but no receipts to match them and a 'Personal Bank account' with a false balance on it.
SO in typing this out I have confused myself even more and I am sorry you have had to read this far.
If anyone has real world experience of dealing with a company director claiming expenses (or is it just his companies expenses... ) and how they should be posted in this scenario I would be forever grateful.
Bit of a long winded first post but welcome anyway.
If you client is paying for business related expenses personally, i would simply adjust them through his directors loan account eg
Dr Expense Dr VAT (where have relevant VAT receipt) Cr Directors Loan
Effectively what he is doing is paying for business related costs personally therefore would credit his on loan account.
The only issue is if HMRC raises the question as to backup documentation. This will be for your client to justify not you. All you can do is record the information that he gives and advise does he want you to include where back up info isnt available as this may be disputed by HMRC. Where documentation is available it may also be disputed by HMRC to prove that the cost is "wholly and exclusively" incurred in the course of business.
I also do what you have suggested, and open a private psuedo bank account for the Director. Any expenses paid for by the Director go through that bank account and at the end of each month/ qtr/ year or whatever, I transfer the balance to the Directors loan a/c. I suppose you could do a bank transfer for the random "expense" withdrawals from the company account to the psuedo a/c, then transfer the balance to the DLA, so at the end of the year there is some kind of audit trail to the DLA.
I would only be inclined to post receipted expenses, I assume that he is drawing the £500/ £1000 to cover out of pocket expenses. Any amount he takes out in excess of the receipts will leave a debit balance on the DLA, any excessive payments not reimbursed will leave a credit balance on the DLA
I agree totally with Wella and Mark above, but I would probably not set up a bank account but just CR Directors loan account, DR vat (if any), DR expense account and then when the cheque is paid post it to the Directors loan account.
Yes it will be up to the Director to make sure there are receipts and records of the expenses so they are all posted, otherwise the loan account may be overdrawn. If it is overdrawn you need to let them know that this needs to be sorted within 9 months of the end of the accounting period or there could be corporation tax implications.
I personally would not have a separate bank account for personal expenses.
What I would do it collate all the expenses paid personally and mileage into months and record them on an expense claim form per month and then post each month via a journal as MarkS has suggested.
You can then file the all the expense claim forms in a separate file to go with the main books and records.
You can then use the expense claim form on a monthly basis going forward.
In addition, try to get as much info from the Director as too what the expenses were for....ie.....what client did he see!
With regards to the round amounts the director has taken out of the company account, put these into the directors loan account code so they offset against the expenses claims.
Then balance can be sorted at the year end via dividend or as a benefit in kind unless there are excess payments as Wella has suggested.. (The Accountant doing the year end accounts is in the best position to sort this.)
) and how they should be posted in this scenario I would be forever grateful.
