When running your own limited company, there are a few responsibilities that you need to take on. It all helps to facilitate the smooth running of your contractor business. We know that as a contractor you are busy working hard and using a contractor accountant can help reduce your administrative burden significantly.
One of your requirements as a limited company director is to ensure you maintain a clear record of payments and transactions from your business bank account to your personal bank account.
A few ways to make the administration and filing of this simpler is to use payment references. These don’t need to be complex at all; in fact the more concise the better. Ensuring your transaction references are labelled correctly can cut down any hassle and stress later down the line should you need to go back overpayments made.
This month, our top tips blog talks you through the best payment references to use to keep banking records clean and clear:
Types of payments:
- Salary: This is a transfer to the employee(s) of your limited company to pay salary. When making a transfer from your business bank account to your personal the payment reference that you should use is ‘Salary’.If you have more than one employee, you need to include their name in the reference and make each employee’s transfer separately. For example, ‘Salary Firstname Lastname’.
- Dividend: This transfer relates to the distribution of dividends. When making a dividend payment, you should use the reference ‘Dividend’.As with salary, if you have more than one shareholder you need to include the name of the shareholder in the reference. For example ‘Dividend Firstname Lastname’.Remember that when you distribute dividends to the shareholder(s) you need to ensure that the amount transferred is in line with the shareholding percentage.
- Expenses: This transfer relates to expenses that need to be repaid to the employee(s) of the company for any reimbursable expenses incurred. The reference here is ‘Expenses’.As with salary, if you have more than one employee, each expense transfer will need its own transaction and a payment reference per employee. For example ‘Expenses Firstname Lastname’.
- Loan: The reference ‘Loan’ should be used when you withdraw money from the business bank account and that transaction does not relate to any of the following:
- Employee Expenses
- Business Expenses
The same reference applies when repaying a loan back into the business bank account.
By using these references you can make transferring funds and handling your business bank account easier for yourself. In addition, we can help you keep things in order by using the same payment references and take more of the administration hassle from you.
Churchill Knight & Associates Ltd is proud to have been helping contractors for over 15 years and we want to continue to provide contractors with support and guidance to run a contractor business.
Our services include payslips, invoicing, payroll, bookkeeping, dividend voucher and unlimited support and advice so you can make the most of your contractor business.
If you enjoyed this blog, you may be interested to read about the recent changes to legislation in the Autumn Statement.
If you would like more information about payment references, click the request a call back button or if you would like to refer a friend to our services click refer a contractor.