Skip to main content

Guide for Managing Payroll Reconciliation For Small Business


Payroll Reconciliation means verifying all your employees are paid correctly. It also means, all taxes are paid and reported accurately. 
Regardless of your business, payroll reconciliation involves different accounts such as:
  • Retirement
  • Medicare
  • Federal taxes
  • State taxes
  • Insurance Deductions
  • Social Security Withholdings
Let’s take an example here: Your employee earned $2000 during the pay period but received $1500 as the rest of the money was disbursed appropriately on the above accounts. Here, payroll services reconciliation would entail verification of all the accounts involved with the transaction agreed upon. 
Payroll reconciliation:
While formulating payroll, accountants must make sure their calculations are correct. Prior to submitting payroll, the accountant audits for entry errors and makes adjustments as necessary. Ensure that the entries are posted to the right accounts. 
Validating transactions:
After the completion of payroll, CPA would review the entries for accuracy and validate things such as payroll tax entries, withholdings and overtime to ensure the transactions are correct. As part of reconciliation, CPA verifies the accuracy of payroll posted to the right accounts. 
Earnings and payroll registers:
Verifying earnings is also an essential part of payroll. It involves double or triple checking of overtime, hourly and salary wages. The figures from individual checks are compared against earnings and payroll registers. The transaction for the pay period must equals the payroll.
Reconciling against Budget:
This is another reconciling of payroll against budget. The CPA uses actual figures and compares them to budgeted figures for the period. A report can be generated to provide an overrun of budget to the department manager when the salaries are over or under budget.
How to reconcile payroll for small businesses:
  1. Around two days before payday arrives, reconcile accounts to confirm all workers have been paid accurately.
  2. Print a payroll register that summarizes deductions and wages for each employee.
  3. Balance the information against time cards and the figures the payroll system states your employees have been paid. In this process, make sure to verify salaries, regular employee wages, bonuses, commissions, overtime, any extra type of payment. You should also verify insurance, taxes, garnishments, and any other type of deductions.
  4. Anytime you spot an error, it's important to rectify the problem before you pay your staff.
  5. You can perform monthly payroll reconciliation.
LedgerBench provides small business accounting services.

Comments

Post a Comment

Popular posts from this blog

What are Operating Expenses? (Explanation) - Ledger Bench

  Operating expenses are incurred by businesses to keep the business going, includes staff wages, supplies not include manufacturing cost. Operating expenses does not include manufacturing cost or cost of goods sold (direct labor, material, manufacturing overhead) or capital expenditures (building or machinery)  What is included in Operating expenses? Following are included in operating expenses: Insurance Rent Research Utilities License fees Accounting fees Office supplies Attorney fees Vehicle expenses Travel expenses Payroll for staff excluding labor for manufacturing  Marketing including social media channels such as Facebook Building maintenance and repairs Property taxes on real estate Operating expenses are reflected in the company's income statement. What does an increase in operating expense mean? An increase in operating expense would mean less profit for a business. Often operating expenses receive ...
1 comment
Read more

All You Wanted to Know About IFRS 15

The Revenue Recognition Principle is the concept that determines how revenue should be recognized and reflected in a business’ balance sheets and Financial Preparation services statements. It differs in how one accounting principle does it than the other. The International Financial Reporting Standard (IFRS 15) was introduced by the Accounting Standards Board to provide a way to determine the revenue recognition model in its unique way. This helps improve comparisons within industries, across industries and in different parts of the capital market. Why is the IFRS 15 Important? The IFRS 15 is important as it helped outline the difference and therefore make a common ground between the revenue recognition of IASB and IFSB. As the guidance and principles of both differed, the IFRS 15 brought consensus to the same. Since when is IFRS 15 in Effect? The fresh IFRS rules have been in effect since May 2014 and the annual reporting period has begun from January 2018 and replaces all...
Post a Comment
Read more

What is Statutory Compliance in Payroll?

Payroll is a complex process with changing legislation, varying allowances and deductions and compliance issues. Many businesses manage payroll in-house while some outsource it to a third party. The goal is to adapt constantly changing legislation and to avoid compliance risk. One of the most important concerns of an employer is to meet statutory compliance in payroll. Payroll is one of the most regulated functions in an organization that must meet federal, state and local jurisdictions requirements.  What is Statutory Compliance ? Compliance is the process of fulfilling official requirements.  Hence, statutory compliance is a legal framework to which organizations must abide by. In nutshell, statutory compliance means adhering to rules and regulations.  A lot of hard work, time and money goes in to make sure payroll is compliant through statutory audits. Each company has different payroll challenges, but what you need is the solution that must be reliable, i...
1 comment
Read more