When a limited company makes a payment to a director, it is essential to create a clear and concise payment reference. This reference should indicate the nature of the transaction for accurate bookkeeping and compliance. Typically, the reference may include the director’s name and the type of payment, such as “Director Salary,” “Director Fees,” or “Expense Reimbursement.” It could also include the payment period or invoice number if applicable, such as “JohnDoe_Salary_Sept2023” or “JaneSmith_Exp_Reimb_Inv12345.” This clarity helps both the company and the director track payments efficiently, ensures transparency, and aids in the preparation of financial statements and tax returns. Furthermore, maintaining clear records can help avoid potential conflicts with tax authorities by demonstrating that payments to directors are legitimate and properly documented.