Xero - How to record business expenses paid with personal funds
Xero Central outlines how to use the Xero Expenses App to process business expenses that were paid for personally. Here’s the link to those directions: https://central.xero.com/s/article/Manage-funds-in-and-out-of-your-business#Introducecashorrecorddrawings
The Expenses App is designed to use for Employees who are incurring expenses that need to be reimbursed. If it’s the director spending money personally, then probably they don't need an approvals process and so can do it a quicker way. Here’s the way I do it:
- Add the paid Expense into Xero as a Bill - a quick way to do this is to photograph the receipt with the normal camera phone and email it either to Xero Bills, or through Hubdoc. This saves having to open an app and fill in details at the time - just click - send and it's done.
- When whoever is doing the bookkeeping logs in to Xero (Draft Bills), they can complete any missing details and approve .
- Find the Bill again, open it, and scroll down to the bottom where you can “Add Payment” (as shown below)
- Fill out the payment details, using the date you want for the transaction and using “Funds Introduced” in the Paid From box. Doing this will reconcile the transaction to the correct account without having to transfer funds to reimburse personal expenditure.
If you don’t see "Funds Introduced" as a Paid From option
The Paid From Box will show your bank accounts, and possibly other accounts as well. The options will only include accounts that have been marked in Xero as able to accept payments. So if “Funds Introduced” is not showing, you will need to edit the GL account to enable it to accept payments. Go to Accounting / Chart of Accounts (it’s in the advanced area), and search for Funds Introduced. In the Default Chart of Accounts in Xero it’s 970 – Owner A Funds Introduced.
Edit the code and you will see a tick box at the bottom “Enable Payments to this account”. This box needs to be ticked (as shown here). Once the box is ticked, you will find the Funds Introduced account will appear as an option when you mark a Bill as paid.
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