We are often asked how to process personally incurred business expenses through a Farmplan Business Cloud account. The answer to this depends on what kind of business you have:
When you initially set up your company in Farmplan Business Cloud, you will have entered (or Farmplan Business Cloud will have automatically pulled from Companies House) the directors' names. A director's loan account(s) will have then been created as a bank account.
This account works in the same way as a bank account but is used to show how much the company owes to (or is owed from) the director.
Go to Banking > Bank Accounts
Business expenses incurred by a director personally can be entered here. Simply click 'Enter Transactions' next to the relevant director's loan account.
In the example above, the transaction shows electricity paid for personally by one of the company directors. This electricity expense will be included in the Farmplan Business Cloud records which will reduce the profit, and will show a director's account of -£240 (the amount the company owes to the director tax free).
If the business subsequently reimburses the director, a banking entry will be coded to the Director’s Loan account.
With a sole trader or partnership the process is slightly different. Let's take the example of a sole trader paying for an electricity bill of £200 + VAT on behalf of the business, i.e. it is paid through their personal bank account which is not included in Farmplan Business Cloud.
To set this up, go to Enter Transactions > Banking Tab. Click on 'Enter Transactions' for a bank account that allows manual entries – e.g. cash account. Alternatively you could create a ‘bank account’ specifically for this purpose. The net balance will always be 0.
Process the expense payment out in one transaction, with another transaction showing the same amount coming in (on the same date) categorised under 'Capital Introduced'.
As you can see from the image, the net effect is zero, meaning the account balance will not change. The electricity expense will be included in Farmplan Business Cloud and £240 will show as introduced from the owner/partner.
If the business subsequently reimburses the sole trader or partner then the banking entry will be coded to the Capital Introduced category.