A payroll reconciliation means that the payroll you're now preparing balances the payroll in the general ledger
Payroll is definitely one of the company's largest expenditures, so doing things right is critical. The simplest way to do this is to conduct a payroll reconciliation per pay cycle. If you use payroll tools or a payroll service, you can do a payroll reconciliation. When it is time to remit income taxes, you'll be glad you took the time to reconcile your payroll.
A payroll reconciliation means that the payroll you're now preparing balances the payroll in the general ledger. And if you use payroll tools or payroll systems, the payroll reconciliation process must still be done on a regular basis.
When reconciling salaries, be certain that you noted the right amount for each employee. Additionally, check to see if each transaction was registered in the right ledger account. Test to ensure that all of the accounts impacted by a paycheck are in agreement with the gross earnings. This covers payroll costs, withholdings, and employer liabilities.
Factors to consider in Payroll Reconciliation
When reconciling payroll to general ledger entries, there are several aspects to take into consideration. You should reconcile payroll before submitting payroll and issuing checks to employees. It is much more difficult to correct discrepancies after employees have been paid. Payroll should be reconciled at least two days before payday.
Check if the below specifications are accurate when reconciling payroll:
Verify that the figures you recorded are appropriate. Examine previous payrolls to see if the new salary cycle is identical. If there is a significant variation, determine the cause. Then, double-check that each transaction you entered is valid.
The Payroll Reconciliation Process
To accurately reconcile payroll, you'll need to go through a series of steps. These steps must be followed before you can finish payroll processing, even though your payroll software integrates with your accounting software. If this is the case, just skip Step 5.
Step 1: Evaluate your payroll records
Your payroll ledger, whether it's a Microsoft Excel spreadsheet or a register issued by your payroll service provider, contains the data you've entered for the payroll period. If you're familiar with your standard payroll totals, you'll be able to see if the payroll total is too high or too low by looking at the register.
When it differs from previous payroll runs, check to see if there have been any updates to the payroll, such as the addition of a new employee or the elimination of an employee. Bonuses and commissions will also cause the regular payroll totals to be off. Scan for personnel modifications first before assuming anything has been entered incorrectly.
Step 2: Review salaries and pay rates
If you just have a few employees, this should be a quick operation. However, if you have more than 50 employees, focus on new hires or employees who have received a promotion or a bonus to ensure that the information has been entered correctly.
The quickest way to do this is to keep new employee records and compensation adjustments apart from the rest of the payroll before accessing payroll details. This way, you can double-check that the modifications and improvements were entered right. It should be fine if an employee's pay does not change.
Step 3: Check the working hours entered
Here's where you might like to put in some extra effort. Employee hours are likely to be automatically recorded into payroll if you use an electronic time and attendance system, but this is not always the case.
If you're doing payroll for many departments, the department managers may be double-checking and authorizing hours served for their employees, so if you have less than 25 employees, this responsibility will fall to you.
Keep completed and accepted timecards or time sheets on hand to ensure that all hours, including overtime, have been entered correctly. Employees feel irritated when their pay is inaccurate.
Step 4: Ensure deductions are appropriate
Again, if you have more than 50 employees, you cannot have time to double-check tax deductions on each one. However, it is important that you review all new hires as well as those whose deductions have changed.
For example, if your receptionist becomes eligible for Medicare benefits this pay cycle, you must include the additional deduction. Similarly, if one of the staff updates their withholding information, double-check that the updated withholding information is entered.
Step 5: Finish the ledger entries
This step will be done for you if your payroll software or service integrates with your accounting software. However, in order to accurately reconcile costs, you would frequently need to schedule and log a payroll journal statement.
You would also need to file your returns and other employer bills individually, as they are your primary responsibility.
It's important that you don't miss this step because you'll use this detail when you file Form 940 at the end of the year.
Step 6: Run payroll tax report and settle taxes due
The details in the journal entries you make for each payroll can be used to file your quarterly Form 941, which lists the sum deducted from your employees' paychecks.
You may also be required to remit the withholding on a semi-weekly or monthly basis, depending on the number. For more information on filing Form 941, see the IRS website.
Never skip the reconciliation step
It's easy to believe payroll is accurate because you have a thousand other things to do. However, failing to reconcile payroll will result in a large number of erroneous paychecks, resulting in a large number of distressed employees. Spend a few more minutes reconciling the payroll. You and the employees will be glad to have an error-free payroll execution.
Disclaimer: No Asian Age journalist was involved in creating this content. The group also takes no responsibility for this content.