A client seems to be using their personal bank account to carry out business transactions when they already also have a business bank account.
They seem to be making payments from their personal bank account to purchase stock / pay for expenses (I guess this is quite common and can be allocated to the DLA), aswell as receiving payments from their customers in their personal bank account rather than the business bank account.
My concerns on the above issue regarding the receipt of payments from customers are:
- How will the bank reconciliation be completed / or can it?
- Will there be any VAT implications?
- Are there any other implications regarding this matter?
The VAT and the bank reconcile would be my biggest worry, not forgetting you wouldn't know what he/she has paid for or sold.
Alway's a tricky one, but if I was you, then I would tell him/her that you should really be using your business account only.
You could always create a dummy account for now and put it down as cash, don't forget to include the VAT as well. They probably don't want to pay any bank costs.
I'm afraid so, its like Luther says maybe to avoid some bank costs. Educate them and tell them the bookkeeping will cost alot me if they continue to muddle them up as its double the work, they will soon start doing what they are told!
Unfortunately, people do a lot - particularly those who leave seeking help until the last moment... Put those items through the DLA (set it up as a bank account if you're using software) and remember to include any money transferred to/from the business account (You should still be able to reconcile the actual business bank account) You need to watch that their DLA doesn't become overdrawn beyond £5k. He might have other benefit-in-kind issues.
I have a client who does this all the time - it is a new business start up and he is yet to be VAT registered, so that is one less complication but the Bank Rec is a nightmare! I have set up a suspense account to account for all the small expenses he pays for with his own cash, which I then total together and put through as his own investment into the business at the end of each month. I don't know if this is right or wrong but it's the only way I can think of to deal with it. It's a nightmare.
I have a client who does this all the time - it is a new business start up and he is yet to be VAT registered, so that is one less complication but the Bank Rec is a nightmare! I have set up a suspense account to account for all the small expenses he pays for with his own cash, which I then total together and put through as his own investment into the business at the end of each month. I don't know if this is right or wrong but it's the only way I can think of to deal with it. It's a nightmare.
Hi there,
I personally wouldn't use the suspense account as to make the Trial Balance agree, a suspense account is used as a balancing figure. In this case using a dummy account would be more appropriate and then you can just journal either over or make the payment as cash.
Personally, I wouldn't use either a suspense account or a dummy account, because that just involves additional journals (Also you might need to be able to see the changing balance on the DLA - especially if it's overdrawn) Each to their own, though, as long as you can get everything to balance and can do any necessary calculations
I have one just like this at the moment and when I posted earlier on I hadn't got to the bank account and realised how much he uses it for personal as well as business!
This one is only one account luckily but its a real mixture of business and personal, hes a soletrader (not LTD), so I was going to add up all the personal stuff and post it to drawings and then when hes transfered money from a savings account into it to help the business out when he needs to purchase stuff, I was going to put it as Capital Introduced or Loan? Hes a new start up so I have suggested he opens another account to save all this next time!
Is there better way to do this or would this suffice? Any thoughts would be greatly appreciated.
Personally, I wouldn't use either a suspense account or a dummy account, because that just involves additional journals (Also you might need to be able to see the changing balance on the DLA - especially if it's overdrawn) Each to their own, though, as long as you can get everything to balance and can do any necessary calculations
Hi there,
Can you explain how you would do this, as if the client is paying goods out of his own personal account, then I would simply treat this as a cash payment. Rather than use the petty cash(as sometimes you need to reconcile it) I would use create a dummy account to help balance it out.
It could be a dangerous area from a formal insolvency perspective because it can be seen as a misuse of company funds. This could result in the director being disqualified for anywhere between 2-15 years.
They should keep their business affairs separate to their personal affairs.
