When we do the bookkeeping for small companies we so often see payments to Wimpy, Dischem, Pick n Pay, Spar and the like. All quite obviously personal expenses.

Is there anything wrong with this? Not in law, because the astute bookkeeper will debit these expenses to the business owner’s loan account.

The problems are –

• Some personal expenses will get missed and will be deducted from the company’s taxable income. This is tax fraud.
• Some business expenses may be inadvertently treated as personal expenses and not be deducted from the company’s taxable income.
• The additional bookkeeping time spent sorting out this mess will end up being charged by the bookkeeper, pushing up the cost to the company.

But, the BIG one –

• The day will come when the company tax returns are audited by SARS, and then
• SARS will disallow ALL expenses, add them back to taxable income and whack penalty taxes plus interest onto the company.
• The 5 year limit will not apply, so SARS will go all the way back to day one.

So, don’t be stupid. Keep your personal affairs and the company affairs entirely separate.

• When you need money from the company, make a bank transfer into your personal account.
• You bookkeeper will then easily Debit it to your loan account.
• Your bookkeeper will also advise you how to deal with that loan account.