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Accounting for company purchases with a private card

November 23, 2020

Settling corporate purchases with a private card – what should we know about it? Virtually all of us keep money in a bank account, and very often we abandon cash payment in favor of a payment card. This also applies to business expenses.

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Payment by private card for company purchases

What about when we need to make company purchases? Entrepreneurs often keep company accounts and make payments just by using them, but do they have an obligation to do so? Can we make payment with our private card in this situation?

The entrepreneur is required to have a bank account, as the following payments require it:

Paying taxes, what an entrepreneur is obliged to do in the form of a transfer
VAT refund
Payment of social security (ZUS) contributions.

Conducting non-cash transactions mandatory

A person who runs a business, unfortunately, cannot rely on cash, and this is regulated by specific regulations. We can find specific mention of cashless transactions in the Business Law:

Making or receiving payments related to the business activity shall be made through the payment account of the entrepreneur, whenever:
1) the party to the transaction resulting in the payment is another entrepreneur, and
2) the one-time value of the transaction, regardless of the number of resulting payments, exceeds PLN 15,000 or the equivalent amount, with transactions in foreign currencies being converted into zlotys at the average exchange rate of foreign currencies announced by the National Bank of Poland on the last business day preceding the day of the transaction.
Article 19 of the Law on Entrepreneurs

Another piece of legislation we may come across is the Law on Freedom of Economic Activity. This law, however, is now obsolete and has been replaced by the aforementioned Business Law.

Is a company bank account mandatory? Is it possible to pay for company purchases with a private card?

People who do business often decide to set up a company bank account, which they use for all kinds of transactions. However, is there any regulation that would make it legally obligatory for us to use such an account? If we are not VAT payers, no regulation specifies such a necessity, so entrepreneurs who are exempt from VAT can quietly conduct business without paying any penalty for not having a company account.

Benefits of using a company bank account

We already know that there is no obligation to do so, but it is worth considering setting up a company account. This is useful especially if we make a lot of transactions during the month and have to make company purchases ourselves. Not only will it make it easier for us to account for our income, but it will also avoid the problem of distinguishing between company and private expenses.

When can’t a private card be used to pay for company purchases?

We can make company payments using a private account, but is every account suitable for this? Before using a private debit card in a store to pay for business purchases, let’s consider whether we are sure our account is suitable for this purpose. The account from which we want to make a company payment, mysi must be registered in the name of one person. This means that if you share it with your spouse, unfortunately, you cannot report it for business use.

The use of a business account is also mandatory when the situation requires us to join a white list. Only entrepreneurs with a business bank account can be included in this registry.

VAT payers vs. company account

We don’t have much choice if we are VAT payers. Why? Well, As of January 1, 2020, a provision came into force, according to which such payers must report their bank account to the white list of VAT payers . Only business accounts can be on this list, and it is maintained by the National Tax Administration. This is a registry where we can check our contractor’s information (as well as our own).

How to search for an entrepreneur on the white list?

In order to check the information about our contractor we need to enter his TIN, REGON, account number or name. What will I get from using this registry? By whitelisting, we can make sure that:

We have access to the contractor’s real data
Entrepreneur does not avoid paying taxes
The bank account is actually a business account, not a private account

Is it important for our contractor to be whitelisted?

White list matters need not concern us if we are making small purchases for the company. However, if we are in the process of executing a lucrative contract and there is a need to transfer to another businessman an amount higher than PLN 15,000, we must be vigilant. If we transfer such an amount to an account that is not registered as a company account, there is a problem. It is not about breaking the law, but about the fact that such an expense does not count as a business expense.

What about us?

For the same reason, settling company payments from a private account can be a problem for us if we are running a business. If we find ourselves in a situation where it is up to us to transfer a large amount of money, it simply won’t be worth it. So if we are planning to expand our business, it is worth thinking about registering on the white list.

For smaller amounts, we may also face reluctance to establish cooperation with us. If we are not VAT payers, then whenever we issue an invoice, it will be the person paying it who will have to pay the value added tax. It seems quite natural that few people feel like paying additional costs where it is not necessary.

Company payments from a private account

Keeping a business account is optional, but an entrepreneur is still required to make non-cash payments. In this situation, it is possible to make transactions using your private bank account. This applies to both business transactions and making company purchases.

Banks are resisting

However, some banks include in their terms and conditions a prohibition on the use of personal accounts for DG purposes. Depending on the bank, this can apply to a sole proprietorship as well as to running a larger company. Banks – as private companies – have the right to introduce their internal regulations, which we must accept when we sign a contract with them.

Company employee and accounting for company purchases – can an invoice be paid from a private account? Payment from a private account for an invoice issued to the company

When an entrepreneur hires an employee, it is often the case that it falls on the shoulders of the latter to do the company’s shopping. Of course, it is possible to arrange such purchases in such a way that the employer supplies his subordinate with the necessary funds in advance. Usually, however, it is more convenient if the employee has paid the invoice from his account, and only then does the billing take place.

Accounting for company purchases paid for with private funds. Payment of an invoice from another person’s account

What must be remembered when an employee has paid an invoice with his private card? For such settlement to be possible, the employee must not forget the invoice. At the time of payment for purchased goods, you need to ask the seller to issue an invoice for the company’s data. When the employee has paid for the invoice with his private card and when the entrepreneur reimburses the costs shown on the invoice, the employee must confirm the reimbursement with an appropriate statement or a KW form.

Employee pays by private card – how about an advance?

Another option is for the businessman to make an advance payment to the employee so that the former does not have to spend his private money. This is a very good option when we are not able to predict all the costs, or they may be so high that paying them becomes problematic for the employee. Such a form is often taken when going on a business trip. Prior to the trip, the employer makes an advance payment, and at the end of the trip a settlement takes place, which is an offset to the costs.

Documenting corporate expenses

To avoid any inaccuracies, all business expenses must be properly documented. This is a mandatory procedure not only for entrepreneurs, but also for those who make purchases on behalf of the company. All documents must match in order for settlement to be possible.

What are the posting requirements? Settlement is possible when the expense is recorded in the income and expense ledger, and for such an entry one of the following documents is needed:

account
invoice
customs document
VAT invoice RR
any document that meets the requirements provided for in Article 12 of the Ordinance of the Minister of Finance of August 26, 2003.

Recording of costs incurred

All costs incurred need to be recorded in a proper way, so that you do not have a so-called “paper mess. If we run a large company, the finance department will take care of this, but if we run a small business, we need to see to this ourselves. Regardless of the size of our business, record-keeping is a must.

Accounting for corporate expenses incurred by an employee

An example situation might be a business trip where an employee needs to use an overnight stay. If he pays for the hotel out of his own wallet, he submits the invoice upon his return, and the finance department pays him a refund. The situation is similar when an employee on company business needs to go to a store to purchase various types of goods.

It is in the interest of the business owner to issue such an employee with a KW printout, or to obtain from the employee a confirmation of receipt of the amount. An important issue here is the proper recording of expenses, so the entrepreneur must ensure that the purchase of goods and materials, incidental costs of such purchase and other expenses are recorded in separate columns.

Keeping full accounting records

If an entrepreneur does not use an income and expense ledger and instead keeps a full accounting, he must keep more detailed records. This refers to such business owners who do not qualify to keep a P&L, for example, due to annual revenues higher than €1.2 million.

Keeping full accounting requires documenting even the smallest business event, and this is essential in large companies. Transparency is required of an entrepreneur, keeping full accounting. The entire financial situation of the company must be presented in a transparent manner so that it can be viewed by state authorities. In addition to the state, such documentation can also be seen by people who are related to the company in various ways (such as shareholders).