Track Money Lent to a Business

Company Directors/Owners may treat their business expenses or deposits into the company bank account as money being lent temporarily or longer term to the business.

To track this, a Liability account needs to be set up (under Add > Account) and you need to ensure the Bank Account option is ticked so it can be used as a transactional account.

You can capture general expenses paid for by the Directors/Owners personal funds as Purchases in Saasu against your Supplier contacts. You do this under Add > Purchase. Another option is to create one bulk purchase transaction which has a line item for each expense. This approach needs a payment to be applied using the Liability: Directors Loan account so that the purchase is closed as fully paid. This adds the amount to the Liability: Directors Loan account – The effect being that the liability grows.

To capture money deposited into the company account from a personal account, you create a bank transfer (under Add > Bank Transfer). Money then goes from the Liability: Directors Loan account to the Asset: Business Bank account.

Later when the liability is repaid, you enter a bank transfer from the Asset: Business Bank Account back to the Liability: Directors Loan account to reduce or clear the liability. This reflects a withdraw or transfer of funds back to the personal accounts of the Director/Owner.

Payments for Personal Credit Cards

The easiest way to capture money paid to a credit card provider is via the Add menu on the Bank Transfer screen. From this screen you can record the transfer money FROM one bank account TO your credit card account (you would set up the credit card as a “Bank Account”).

FROM Asset:ABC Bank TO Liability:Directors Loan (John Smith)

Where your Directors Loan represents money you have lent to the business via your cash, credit card, and other accounts to make payments for goods and services for your business.

FROM Asset:ABC Bank TO Liability:John Smith’s Amex

Where it’s a specific business credit card attached to a person.

When you have several credit cards, the latter method would become onerous because you have to maintain a separate liability account for each card. An alternative method is to capture these transactions using a common reimbursements method for repaying employees, directors, and the like.

Negative Amounts in Liabilities

This indicates that you are in credit (that money is owed to you). For example, this can sometimes occur with director’s loan accounts where the director has lent more money to the business than they have borrowed from the business.

Overdraft Accounts

To set up an overdraft account in your online accounting file, simply set up the account like any other bank account and apply payments as usual. The balance turns negative when withdrawals exceed the available balance. When you’re paying off the balance from another bank account, you can record this via a Bank Transfer transaction.

Loan Repayments

There are many types of loan products available for businesses. In Saasu you can account for most loans using the Journal screen and the Purchase Screen. If Repayments are consistent you can manage Repayments using Automated Purchases instead of a Journal.

Loans can have quite different booking requirements so we recommend you check with your Advisors as to suitability of the simplified example provided below.

NOTE: We haven’t considered any stamp duty, loan tax or consumption tax impacts such as GST or VAT. If tax is associated with the loan seek guidance from your Advisors

There are two elements to the transaction capture.

Receipt of funds

Create a journal where you bring the liability onto your balance sheet and capture the loan provider having put the funds into your bank account.

DebitCreditDescription of Entry
Asset: Banking A/Cfunds received into your business trading account
Liability: ABC Finance Cocreating the loan liability on your balance sheet for the full principal

Repayment of funds (using journals)

Each repayment period you will book a principal repayment and interest Journal transaction:

DebitCreditDescription of Entry
Asset: Banking A/Cpayment from your bank account to loan provider
Liability: ABC Finance Coprincipal portion being repaid
Other Expense: Interestinterest charge

Repayment of funds (using purchases)

Each repayment period you will book a principal repayment and interest Purchase transaction (if the amounts are the same each period you can use an automated purchase):

AccountDescription of Entry
Liability: ABC Finance Coprincipal portion being repaid
Other Expense: Interestinterest charge