I sometime make payments on behalf of others and then claim back the money from them.
Previously I created an invoice and in the category I had whose expense it was for so that when the money came in we could see it was paid. My accountant is telling me that this expense should not appear in the creditors control account. Please can you advise me how to go about making the payment so that it does not appear in the creditors control account.
I would create a nominal code named disbursements if one doesn’t already exist… In the past, I have used 6185.
All transactions in and out could then be coded here and it’s easy to see the whole listing. Best to give a detailed description when entering transactions.
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So are these payments non business related? im guessing so.
Therefore, you tag money out and in as either proprietors drawings if self employed or directors loan account if a ltd company.
All transactions in this section still go to trade creditors which is something I am trying to avoid.
I need to enter an expense that does not go in to the creditors control account.
You shouldn’t be raising invoices for this type of transaction. Any invoice you raise will automatically end up in creditors control account no matter what code you give it. You can create a separate nominal code, something like 2240 and call it “Payments on behalf of others” (Reports>Chart of Accounts>Create New Account). All bank/cash payments made on behalf of others are then tagged to this code and all monies received back in are also then tagged to this code. You can give a description of each one as it is tagged…hope this helps.
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This seems the ideal situation but there I can not add a proof of the payment. I can only make a memo in the description.
That is where wages but it is a nuisance because I can not attach a payslip there.
Any other ideas?
Can you give some examples of the kinds of things you pay for on behalf of others? You mentioned wages and payslips and this may mean a different treatment.
No leave that out that is not a payment for others.
Sometimes we buy things for others and then they pay us back.
Previously I entered the purchase and in category I had different people so everybody had their own code and we knew who the things were being purchased for and proof of payment was attached. When we invoiced them then each had their own loan code in the sales. At the end of the year we journalled the expenses to the loan code and the balance was for the accounts.
This has gone from the assumption these transactions are non business related, to something that’s starting to sound like you are acting as a middle man for client purchases.
Depending on which it is, will also depend on the correct treatment.
We need to establish if this behaviour is relevant to the business or if these are personal transactions unrelated.
Middle man for client purchases.
So you are not reselling these items, just buying on behalf of clients and then collecting the money from them? Are you charging them for the service? Is this because you can get them a discount by taking advantage of a trade account, for instance?
Are the things you are purchasing related to your usual trade or entirely different and what type of things are they?
I’m not quite sure how this differs from trading?
Just a middle man for other people no purcahses related to my business and to do not charge for the service.
So the method described by @Bagpipe would seem to be the best way - but I would add the code in the 3000s range, and include it with Proprietor’s drawings/funds, assuming you are a sole trader. If this is entirely non-business related, then you definitely shouldn’t be raising invoices for them and you shouldn’t be entering purchase invoices either. Personally, I’m still not sure why you are even doing this through your business account.
How much money is involved and how many people are you doing this for?
Would this be the same for me? I buy lights for clients to be fitted, so wouldn’t they just be general purchase and just part of the job?
You have to be very careful with interpretation when it comes to things like this.
A kitchen fitter couldn’t argue he was buying the kitchen cabinets for his clients and so do not form part of his income or expenses.
So before anyone can give you an answer, there needs to be a lot more detail given before asking thaf question.