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Why do some accountants tell clients to pay...

... for business expenses on personal card rather than company debit card

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I have taken on 2 unrelated clients from different accountants recently (both single director service companies) and was surprised to hear they have both been advised to ALWAYS pay for business expenses (travel etc) on their personal card and then claim it back from the company later.

To me that seems crazy as there's more scope for missing transactions and it adds unnecessary extra steps into the accounting process.

I am wondering why some accountants do this. I can think of 2 possible reasons:

  1. It is less work for them at year end as there is one expense line rather than several on bank statements each month
  2. They would rather put in over-inflated expense estimates rather than actual expense transactions (as seemed to be the case with client #1)

Any other thoughts? Am I missing something?!


Replies (18)

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By Truthsayer
04th Feb 2020 11:26

If clients have a business card, they will usually end up buying personal stuff with it while also making business purchases with their personal card. Therefore having two cards just complicates matters in most cases.

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Replying to Truthsayer:
04th Feb 2020 11:44

Agreed- gauge what you think your clients can deal with, those who are switched on can have a business credit card, those who are not likely ought not.

I personally am now in the latter category having by mistake purchased via Amazon a pizza oven using my credit card from my employer rather than my own one:- I blame the fact that Amazon defaulted to the business card as I sometimes use it for business purchases, but still not a very good example to set- at least I picked it up and corrected which is more than can be said for most clients who likely will end up with a fair few posted as DRs to their DLA or drawings)

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By lionofludesch
04th Feb 2020 12:04

You can still be charged a premium for using a business credit card.

But not a personal credit card.

But who knows why they've been given that advice ? Either way, the statements need checking. Everyone uses the wrong card from time to time. I've done it myself.

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Replying to lionofludesch:
By philaccountant
05th Feb 2020 10:36

"But who knows why they've been given that advice ?"

Or even if they've been given that advice. I find there's usually a gulf between what the clients think they've been told and what they were actually told in reality.

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By Matrix
04th Feb 2020 12:12

Petrol should be paid personally then mileage claimed separately. Other than that I can’t think of a reason.

I also had a contractor whose accountant had put through £15k of expenses. I only put through my fees. There are some real cowboys out there, I don’t see why they would overclaim.

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By SWAccountant
04th Feb 2020 12:43

Some clients just will not be told. "My accountant told me to do it" could actually be "my accountant never stopped me doing it".

I've many a client who insist on using their personal card to make business purchases. Sometimes its through disorganisation or ignorance, other times its for the points/air-miles/discount.

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Replying to SWAccountant:
By WhichTyler
06th Feb 2020 10:57

"Will Smithers, like most of the overpaid and underscrupulous bastards Arthur know in advertising, made a point of changing his car every August so that he could tell people his accountant made him do it, though the truth was that his accountant was trying like hell to stop him, what with all the alimony he had to pay, and so on"

So Long and Thanks for All the Fish, Douglas Adams

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By SXGuy
04th Feb 2020 15:38

I have a client who repteadly uses his business debit card to places bets and eat out, given the choice I'd probably wish he paid for everything with his personal debit card as it would make my life easier.

No amount of telling him changes anything. Time to increase my fee I think.

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Replying to SXGuy:
04th Feb 2020 15:53

But there is nothing new,

Years ago 9late 1980s/early 1990s) we did accounts for a farm in the Borders, I visited the farm, wrote up the books, produced the vat return. The trouble was the owner had one bank account and everything went through it, I kept pointing out that she was paying us to analyse all her personal transactions/cash withdrawls (which were 3-4 times as many as the business transactions) but to no avail, could not get her to change.

This was in the days when cashbooks were made by Guildhall , written and squared by hand., so in effect a whole day charged re one vat return/quarter's cashbook.

She was a lovely lady, she always served me a great meal in an enormous farmhouse dining room and chatted over lunch (I knew the area as my Uncle had once owned the cafe there and my father acted as solicitor for the farm on the other side of the valley) but it was really incredibly wasteful of my time and she was paying vastly over the odds as a result of refusing to use two accounts.

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Replying to DJKL:
By Moo
10th Feb 2020 16:13

Ah bless.
She probably thought it money well spent and a great relief to have someone other than sheep to talk to.

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By kestrepo
04th Feb 2020 15:48

A few more reasons from me:

1) Purchases on a personal credit card would be covered by the Consumer Credit Act which is especially useful if something goes wrong - purchases on a Business Card are not covered by this legislation.

2) Bonus points, Air miles and cashbacks are often more favorable on personal credit cards.

3) (Cynically) No reconciliation of credit card statements is required, nothing in sundry creditors and less likelihood of a directors loan account at year end!!

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Replying to kestrepo:
By atleastisoundknowledgable...
04th Feb 2020 18:25

You’re assuming it’s credit cards being discussed by the OP ... I assumed it was debit cards.

Removes your #3 point.

I can only assume that the reason is that it removes a lot of the reconciliation from the accountants and places more work on the client. Who are well known for doing extra bookkeeping work well.

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By Carl London
05th Feb 2020 09:49

Interesting comments, thanks all!

For most new clients I seem to be OK at getting them to use the right card for business/personal, but there are a couple of serial offenders. Even if I told them to only use their personal card for everything, I think I'd still have as much work sorting it out!

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By Charlie Carne
05th Feb 2020 11:15

I would always prefer to get the client to use their business card (preferably debit card) as I can then use bank feeds in QuickBooks (and this would also be the same for Xero) to match up payments to the receipts via AutoEntry (or Receipt Bank etc.). If there are only a few personal payments made on the business card, it's not too problematic to post them to the directors' loan account (DLA) but, if personal use on the business card becomes excessive, you can dissuade the client by charging them an additional fee for each such item that you have to process. Even if you only charged 50p per personal item, that is likely to be enough to make them think twice. And, if it isn't, well then, that's a nice, easy fee to post a few transactions from an automated bank feed to the DLA each month.

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By HeatherSimpson
06th Feb 2020 10:26

Possibly for Research Tax claims? Employee R&D travel = R&D staffing cost if refunded to an employee, rather than paid directly by the company.

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By Peter Windatt
06th Feb 2020 11:24

Whilst I'm an accountant who has never traded as such, having already moved over to the dark side and become an IP, I thought it worth just mentioning Directors and Officers ("D&O") Insurance which I have often suggested might be better paid personally and claimed back.
The reason for this being that the chances are, when you may be in need of D&O cover, is when things are starting to go wrong and maybe the Company bank account/credit card is not making the payments without you necessarily becoming aware.
Better to be out of pocket for a few premiums than be left without cover just when it is needed.

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By ShayaG
07th Feb 2020 15:54

A cynical interpretation I can come up with is that they want some substance to rather generous estimates of expenses paid out of pocket.

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By pg424
25th Feb 2020 12:37

There are several reasons why i (sometimes might) recommend my clients use a personal card

Cost is cheaper and rates often lower
Credit process is easier - no bank facility letters and indemnities
Don't have to pay entire the balance off the next month - assists cash flow.

I usually tell them to keep one card for exclusively personal use and one for business expenses.

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