Insider Tips - Business Expense - Personal Funds
I get asked a lot about a confusing issue.
“What happens when I use my personal money for business expenses?”
Wow, great question. That one can get confusing.
But I have good news.
If you have this question too, you can relax now.
Because #1, You’re not alone.
And #2, I have the answer.
No matter what type of software you use or what kind of accounting system you have in place, this answer will work for you.
Are you ready?
First, you need to decide if you want to be repaid the money from your business or not.
That is step one: Do you want your funds back?
The next step depends on the answer to that question.
If yes, decide if the funds are going to be paid back in one lump sum soon or will it be paid back over time at a later date?
If it’s going to be paid back quickly in one lump sum in the near future, you will use the Expense Report method.
If you don’t know how to make an expense report, I have you covered. Here is a template that you can save and use. You’re welcome!
With the expense report method, once you’ve filled out the expense report, you’ll enter at as a Vendor Bill payable to yourself. Yes, this will treat you just like you’re a regular vendor. Then, simply mark the bill as paid when you’re paid back. Simple!
If your funds are going to be paid back at a much later date or at irregular intervals, you might use the Loan method. You would set up a loan payable to yourself instead of a vendor bill like you did in the first option. Don’t forget your documentation (expense report or loan documents).
Now, let’s move on to the second option. What do you do if you don’t want to be paid back?
If you don’t want to be paid back, you’ll simply enter the funds spent as equity contributions and consider those funds invested into the business.
It’s that simple. Cheers