Posting Payroll

[bullfrog]

Need some guidance w/payroll entries. Payroll function is managed by a company called Paychex. In processing, they debit our company's cash account by a lump sum of the employee withholdings and employer tax expenses. They create paychecks which are drawn from the cash account when the employee's cash them.
My predecessor has instructed me to post the payroll as a journal entry as follows: 1) Post one line for each of the employer tax expenses as a debit to the appropriate account (FICA, Medicare, etc.). 2) Post the total cash required for all payroll items (net pay, employee tax WH & employer tax expenses) as a credit to the cash account. 3) Post employees gross wages w/one line against the wages account and one line against the cash account.
This journal entry balances, but does not match the bank statement.
The bank statement reflects the individual paychecks cashed (net pay) and a debit for the lump sum of employee withholdings and employer tax expenses.
Can anyone please provide guidance on how to post these payroll entries -- I have no preference on using a journal entry or the PT payroll feature and am not required to follow my predecessor's instruction -- we just need to make it work. Thanks very much.
I can provide specific figures if that would help.

[TheWolf]

If you can get the per check deductions for each employee from your payroll service then just recreate the checks in payroll. This makes it much easier to reconcile the payroll account and keep track of the employee figures.

[bullfrog]

Thanks Wolf. I'm going to try using the payroll feature. I'll get back w/you if I have additional questions, but I think this should work fine.

[bullfrog]

Wolf, Having trouble - I'm not sure I'm doing this correctly. The posting I'm doing is to get this company's records current. I'm working on 2001. I've posted all receipts & payments. Before I can begin balancing bank statements I have to post payroll. They have an accountant preparing back taxes and he needs the GL printout.
I'm encountering problems posting because the PT date is set at 1999 & PT won't allow me to post for 2001. #1 question, can I can the date to allow me to post the payroll?
I have reports from Paychex itemizing employer expenses and pay & deductions for each employee. #2 question, is there a way for me to post these figures without using the tax table in PT?
#3 question, is there a way for me to see the deductions for each employee on screen while posting?
My version of PT, tax info. etc. will be updated after we've completed the first half of 2001, but right now I'm under the gun to get the 1st half completed.
Any ideas would be greatly appreciated. Thanks.

[bullfrog]

Wolf, Since posting my last response I've figured out each of my prior posted issues.
I've posted a few week's worth of payroll records. Then I checked the account reconciliation for the month because I'm expecting to see the figure of employer expenses that appears as a debit from Paychex on the bank statement. I'm not sure I've posted these correctly -- don't see them in the account reconciliation. I'll start doing a little more experimenting & reading to resolve until I hear from you. Thanks.

[awisnia]

We ran into the same issue with ADP a many years ago (I think they actually owned PT for a few years)

For a few years we had set up a separate payroll checking account so that we would not have to reconsile all of the paychecks as separate transactions within PT. We did one transfer to the payroll account for the total payroll liability, and then posted one single "payment" from the payroll account as described bellow. We reconsiled the payroll acount offline when we got around to it...(and it was easy)

A while ago we swithced to a "total -pay" plan with ADP where they cut the paychecks on their bank and just take a weekly debit from your checking account. (wish I found that sooner!)

Now thing are really simple..

We do the following with our payroll report from ADP each week:

1) we have created an excel worksheet to use as a voucher for the posts that we make later. There is a field for each of the expense accounts that we need to hit:

Factory Labor
Factory Supervision
Factory ER Taxes
G&A Labor
G&A ER Taxes

2) We pull the data right off of the payroll report - which is broken down by ADP into two departments using the Gross Wages for each. We then take the ER tax liability and split it in Excel between the two accts based on the ratio of the gross pay.

3) We cut a "check" to the payroll service using a memorized transaction with all of the g/l's already included - we use the pay date with a "PR" suffix tacked on (ie, 030803PR). We then Print another "check" for the weekly charge by ADP (using an AC suffix) and then a final "check" to Fidelity for the IRA deductions.

I put word check in "" marks because we print them to plain paper and file them with the payroll report. We actually do this for any direct debits from our checking account using the date with a "-x" as the check number. It gives us a voucher, as well as a reconsile-able transaction. (UPS bill, Lease payments, etc)

The goal is to end up with the same transactions in our checking account journal as the 3 debits that ADP sucks from our bank account each week. When we reconsile the checking account, they are all right there on the statment (actually, they break up the taxes and direct deposits, but it's a simple hand calc to find the debits)

along the way we've made some assumptions: Medical Insurance deductions are not recorded to the g/l with each payroll, we just use the gross payroll and catch the g/l when we post the invoices from our HMO.

You will go crazy trying to enter every single paycheck in your system - and essentially be doing 90 percent of the work that you are paying paychex for. (Trust me, I did it for 6 months many years ago before having the eureka momoent and started posting the thing as one big transaction every week)

I've always wished that I could get the payroll companies to offer a accounting system friendly service that took one single debit from our checking account and supplied us with a customized voucher for recording the debit - but we've had to make due.

Writing this from home, or I'd attach the spreadsheet.

Good luck!!

Adam

[bullfrog]

Adam, Thanks for the response. I'm hoping to accomplish posting payroll through PT without too many extra steps. I understand this is doable, but I'm not clear on all matters.

I've successfully posted a few weeks of payroll using the PT payroll feature. I've set this up to credit/debit the appropriate expense and cash accounts.

When performing my account reconciliation, I'm clearing deposits and checks that have cleared our account. The problem I'm having is that in PT on the account reconciliation screen I can't "see" the figure Paychex debits from our cash account for tax expenses -- this figure appears on our bank statement as a "other" debit.

I'm thinking that I'll need to clear the figure as part of my account reconciliation since it appears on my bank statement, but I'm not sure that is accurate or possible.
Can anyone enlighten me????

[awisnia]

Sorry, reading my reply of late last night, the late hour made it a bit disjointed.

You can't see it, because you probably never entered it into PT.

I'm not sure if you are using the payroll area of PT to duplicate all of the checks that Paychex gives you. But if you are, note that the checks are the NET amount of the payroll for each employee.

I would suggest recreating these payrol checks in the tasks/payments area and stay completely away fom the payroll section of PT. (I realize that since it's payroll, you are tempted to enter it there. BUT, you are not using PT to process your payroll - you are trying to get accurate data into your ledger from a 3rd party that is processing it for you)

You need to create ONE transaction for the amount of the tax debit that Paychex takes each payroll. Look at your paryoll report that comes with the checks and find where they give you the amounts of the Employer (ER) and total employee (EE) taxes.

Create a "payment" in PT that hits the expense accounts. Note that the ER taxes should post to a "payroll tax" GL and the EE taxes should hit labor accounts. (because they were part of the gross pay)

This will keep your ledger balances correct and simplify your weekly process.

I'm not sure how many payroll checks you process each week, but if its more than a few, I would strongly recommend a separate payroll checking account and not bothering with the reconsiliation of each and every employee paycheck.

If you still want to enter everything into PT, why don't you just consider dropping pthe payroll service and doing the whole payroll yourself?


adam

[bullfrog]

I have to think about this a bit. Sounds like it would definitely work -- although I've already posted some payroll and will have to delete those. I'd prefer to use the payroll feature in PT. My only problem is matching up to the bank statement. I'm wondering if I can edit the payroll I've posted to remove the reference of ER taxes, then post the ER taxes as a payment against the expense account. I think that should work, even though it may not be the "correct" way of accomplishing this.

[bullfrog]

Can anyone explain to me how the payroll features functions as far as where I will be able to "see" my postings for ER taxes to the main cash account? I'm thinking I'll need to "clear" this figure when I perform account reconciliation. Thanks.

[dringstrom]

I've taken a completely different approach for my clients: I create an Excel spreadsheet where they enter the various components of the payroll, then enter the net amount of each paycheck. From this, I create in import file that creates one journal entry for the payroll itself, then individual transactions for each employee paycheck. This allows for minimal data entry but still gives you all of the underlying detail that you need for the account reconciliation.

[awisnia]

EXACTLY!!!!!

As I said above - use a spredsheet as a voucher and ignor the details in PT.

WE don't even bother with the detail info on the spreadsheet as it's already totaled/detailed on the payroll report. My p & l doesn't really care how much each employee made.

The key to this "one big debit" scheme is using a separate checking account that is off-line from peachtree. OR, use a payroll company that cuts the checks on their account and lets you see one debit on your checking account.

The goal, in all cases is to avoid having individual paychecks to clear duiring reconsiliation.

[awisnia]

Bullfrog -

Don't feel that there is a "correct" way.

In a perfect world, the program would have a place to enter payroll that is done by a 3rd party service. AND, the 3rd party service would give you a computer generated voucher with all of the correct info for you to post in this task. (actually in the perfect world you would click a button in PT and it would be retreived via IP and posted automatically)

PT's payroll section is very clearly designed for those that process payroll themselves. IMHO, it's the wrong place to post ADP, or PAychex payroll.

Essentially, paychecx is just another vendor that you pay via direct debit. The only rub is the fact that they write checks against you bank account in addition to the debit.

You'll get it...

adam

[tap1946]

Guess I't time for me to weigh in on this. Only you know how many paychecks you need to process per pay period and how much self effort you want to put into handling payroll details on your computer (even though you are actually outsourcing to Paychex. Only you can decide if you want to duplicate payroll on your computer.

I use the Paychex payroll service including their TAXPAY function so I have gone through exactly what you are facing. I have taken a somewhat different approach to handling my internal and external payroll accounting.

I use Paychex primarily for their TAXPAY service because I don't want to be bothered with the reporting and payment of payroll taxes. If it wasn't for that, I'd do the entire payroll in-house. So, I go ahead and duplicate the payroll on my computer in order to give me historical information that is tied into the rest of PT. Although you could set up a separate payroll account as others have suggested, if you "re-create" all the payroll checks, they have already been subtracted from your cash balance and can then be treated just like any other outstanding check. Once you have written the check and given it to the employee, you have an outstanding liability and it needs to be recorded as such. Having the outstanding check out there effectively does this.

The reason you are not seeing the TAXPAY figure when you attempt to do a reconciliation is that you have not entered it. Paychex provides all of the needed information on the payroll sheet where they show you the net cash requirements for each particular payroll run. If you have subscribed to direct debit, which it appears you have, they will also show you the date that the debit will be processed against your account. What I have done to make matters quicker and easier for me is create an employee called TAXPAY that contains some creative structure and formulas. When I receive my payroll run back from Paychex, I go to the cash requirements section, pull up employee PAYCHEX in PT, and enter the employee and employer tax figures directly in the payroll form. The form is set up so that when I enter positive numbers in the form just as they appear on Paychex's report, a journal entry is made crediting cash and debiting each of the various payroll tax liability accounts (remember - the payroll tax liability accounts were credited with each payroll entry that was originally entered).


1) Paychex's TAXPAY figure that is periodically debited to your account appears on your cash account reconciliation.

2) Your cash balance properly reflects funds disbursed at the time period they are actually disbursed - no month end corrections and surprises to worry about.

3) Once set up, it's a matter of a few seconds to post the required entry to account for payment of employee and employer payroll taxes.

4) You have an all-in-one place historical record of all your TAXPAY transactions by the date they wer made - a great audit trail. Just pull up the payroll history for employee TAXPAY.

5) 941'S are not affected because Paychex is doing your 941's for you based on their records and they are not entering information for any employee called TAXPAY.

5) You can set up the journal entry days in advance of the actual debit to your account by entering the date of debit shown on Paychex's cash requirements. You don't have to remember to come back a few days after you receive the report and make the entry.

If this is something that appeals to you, I'd be glad to work with you to help you set it up. As I write this, I'm not at the shop and don't have access to PT. I'd have to look at what I set up and get back to you. Let me know.

Tom

[bullfrog]

Tom,

In PT's payroll feature I've set up payroll with each employee's gross salary, EE (as -$0.0) & ER (as +$0.0) paid deductions posted to the appropriate expense accounts. I thought that I would see the ER figures if I posted it this way. Although I can see them on payroll reports, I can't see them in account reconciliation.

What you've described is EXACTLY what I'm looking for. It never occurred to me to create a PAYCHEX record in payroll. I can remove the ER paid entries from the individual employee's payroll entries I've established. Then I'll create the PAYCHEX
employee' w/the breakdown of ER paid taxes.

Thank you so much!!!!!!!!
I think you've resolved this issue for me. Have a great day!!

[awisnia]

Guess I'm one of the few that doesn't want my employee's entering a bunch of information that has no effect on reasonable accounting reporting.

I still say keep the detail data away from PT's payroll section if you are not processing in-house.

But then again, what matters is that it works for you and is understandable.

BTW, I think you can get 3rd party tax deposit as a stand-alone and just go ahead and cut the checks yourself...letting someone els make the tax deposits via debit.

FWIW

adam

[bullfrog]

Tom (Tap1946),

Now that I've had a chance to step through your explanation a little more thoroughly I've got some questions. You mentioned that you do not have access to PT right now -- when will you be in the shop? I'd like to take advantage of your offer for help, but I'm under a bit of a time constraint. If you wouldn't mind, can I provide a brief explanation of what I've set up? -- just want some clarification that I've posted things properly -- I feel like I'm overlooking something. I can use real numbers, attach a file, whatever, if that would help.
I appreciate your time/efforts!! Thanks, TC

[tap1946]

awisnia

I'm sure your correct about getting third party processors that only handle the payroll taxes; but there is much more involved in my case. In Ohio, Worker's Compensation has been an employer nightmare for years. My business is construction related, albeit a special type. Ohio Worker's Comp does not have a classification for my specialty so I am lumped together in a construction trade category that includes employees involved in frequent ladder work. The current Ohio Worker's Compensation rate for that category is approximately 25% of wages (that figure is not a mistake!!!!!). Ohio also offers group compensation rates that are individually negotiated with the group at a significant savings - often approaching a savings of 95% or even slightly above. Besides payroll processing; Paychex offers other services, one of which is Worker's Compensation Group Rating to those who qualify. Because of their large customer base, their group is correspondingly large and the savings is close to the 95% figure just cited. Entry into the group is limited to approved Paychex customers meeting other requirements for eligibility into the group. I have been in their group rating plan for over a year now, and my annual savings has been in the tens of thousands of dollars. The cost of processing my payroll through Paychex is minimal when balanced against the Worker's Comp savings on the other side.

As far as entering payroll data into PTwhen you have an outside P/R processor , that is purely a personal decision.

Tom

[awisnia]

tap-

Sounds like a great deal on the comp....

adam

[tap1946]

bullfrog

I'll be in the shop tomorrow after 9:00am and you're welcome to call me at 1-800-551-1170.

In the meantime, here's what I remember.

1) My chart of accounts has separate liability accounts for Federal, Social Security EE, Social Security ER, Medicare EE, Medicare ER, State, Local, FUTA, and SUTA taxes payable.

2) I believe I set up my TAXPAY "employee" as salaried with no default hours or salary figure.

3) I established wage codes and corresponding G/L accounts for this employee using the above names. I believe I entered a rate of $0.00 for each wage code.

When I bring this "employee" up to enter information from the Paychex cash requirements sheet; I enter "TAXPAY" for the check number, and the date that Paychex will debit my bank account for the check date. On the left hand side of the payroll entry screen, you should see the names and G/L accounts of the items discussed in (1) above. I chose to set this up so these items appeared in the gross payroll section to distinguish the fact that these entries were intended to debit the liability accounts. Wouldn't have had to be this way; but it just seemed easier to work with. My pay codes are set up so they appear in the same order as the Paychex report. When I enter data in this area from the Paychex cash requirements report, I enter the information on the appropriate line as a positive number. When you are finished, you should have a series of positive numbers down the left hand box of the payroll entry screen and a positive figure for the check total that ties to the P/R tax portion of the Paychex report. As far as PT is concerned, you are writing a check for your P/R taxes and distributing the figure across several P/R tax liability accounts. You could do the same thing with a payables entry and a check entry; but I like to keep all payroll transactions together.

Once this is properly set up, it takes me about 10 seconds to make the entry to recognize Paychex's payment of my P/R taxes and to have an entry that shows up on the PT account reconciliations.

I am not subject to GAAP requirements for my internal financial statements and this is what works best for me. As with all advice on this forum, you may have to tailor my suggestions for your own particular situation.

Feel free to call me if you would like to discuss further. I'll be glad to help.

Tom

[bullfrog]

Tom,
Thanks very much for your reply. I have been at this for too long today -- my head is splitting. I contacted our accountant earlier this evening and asked him to review this and let me know where/how he would suggest this be posted. However, he called me back a few times because it's been a while since he's used PT -- he knows where he'd like things to post, but is facing the same difficulty I am in matching posting to each of the necessary accounts and balancing. I've posted a second thread, which I hope clarifies my situation a little better. I appreciate your offer and will most likely call you tomorrow from the shop.
Have a good night. TC