When you’re starting a business there’s lots to get set up at once, including bills to pay immediately. This can mean that not all business expenses go through your business bank account, especially if you’re still opening it. There’s also online purchases, and if your business doesn’t have a credit or debit card, then you end up paying for them personally.
You’ve probably wondered:
- Are these actually business expenses?
- How do I record them in my business?
- Most importantly, if you’re GST registered, how do I get my GST back?
There are different ways for different accounting systems. And whichever way you use, we always suggest doing it promptly so you don’t have to try and remember what you spent at the end of the year.
You can use the bills, creditors or payments function of your accounting software to create the expense. If you’re using Xero Starter, Standard or Premium there is a neat email to bill function which lets you email in a copy of your receipt, and the software will create a bill out of it.
You can also use the bill function to manually enter in your cost without emailing the receipt (but we think attaching a photo of the receipt to the bill is a useful idea too!)
Once you’ve entered your bill, either transfer the dollar amount from your business account to yourself and match it in your bank reconciliation, or (slightly more complicated) pay the bill using the Owner Funds Introduced account.
If you’re using Xero Starter, you can only enter a maximum of 5 bills a month.
There are some clever apps that let you take photos of your receipts, which then extract the information and create the bills for you. Just download the app on your phone, and link it to your accounting software. Sometimes there’s a subscription cost (there are free ones available), so if you’re the only person needing reimbursement and are on Xero, just use the free email to bill function above.
Some apps are:
Once you’ve got the bill into your accounting system, it’s the standard process. Either transfer funds to repay yourself and match off against the bill, or “pay” the bill using the Owner Funds Introduced account.
If you’re not too bothered about getting transactions into your system in any hurry, or there just aren’t that many of them, keep a record in a google doc or spreadsheet so that when it’s time for year-end, you know what still needs to be included.
Think about things such as, flights or phone bills paid for personally, any food or drink while travelling for work, subscriptions for services or products that relate to your business etc. Make sure you keep your receipts somewhere handy too, so you have the right records. You can send your summary into us as part of your year-end information, and we’ll make sure those costs get included in your tax return.
If you’ve purchased something personally and want to make sure you claim the GST pronto, another option is to enter this to your accounting system through use of a journal entry.
A journal is a manual data entry into your accounting system, to reflect a non-cash transaction for your business (i.e. it didn’t go through the business bank account). Journals are a technical accounting function which uses debits and credits, and we always recommend that these are posted by an accountant.
If you’re using Xero, the simplest way is just keep a summary of your expenses, and then contact Beany Support at GST time. Our team will make sure they get entered to your accounting software as a journal so that GST can be claimed in your GST return.
You’ll want to include all your business costs as part of your business, whether at the time they happen or at year-end when your accountant prepares your tax return. It means you’ll know exactly how your business is doing, and (most importantly) be in the best tax position.
Talk to Beany Support if you’d like to know more about the solutions mentioned above.
Sorry you didn't enjoy this post.
Give us some feedback.