How to Do Payroll Accounting: A Step-by-Step Guide for Employers

It includes importing and categorizing transactions properly, reconciling these transactions and making sure they’re recorded according to your entry system and accounting method. This method doesn’t record invoices or your company’s outstanding bills until they’ve been paid. Establish any benefits programs that you will offer employees, such as retirement plans or health insurance. You’ll need to account for these deductions when processing payroll and send money to the correct benefits program.

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Initial Payroll Entry

One final stage in payroll accounting is to do a payroll reconciliation. A payroll reconciliation is a process you follow to ensure your payroll accounts within the general ledger accurately reflect the transactions that occurred in the payroll system. It also helps you to ensure that you are within budget throughout the year.

Those baby steps can help you manage your organization on a new and improved system. Small steps also give everyone time to familiarize themselves with the new bookkeeping software. Trying to juggle too many things at once only works to put your organization in danger.

Understanding Assets, Liabilities, and Equity When Balancing the Books

The process should be extremely straightforward, but if you run into trouble, don’t hesitate to contact your payroll solution’s customer support team. A pay-as-you-go workers’ compensation policy lets you calculate and make insurance premium payments whenever you run payroll. These smaller https://www.bookstime.com/ payments may be easier for businesses to budget for than the estimated, upfront premium payment required with traditional workers’ comp insurance programs. Once you have a quote you feel good about, you should be able to accept it directly through the payroll software you’re using.

• Your general ledger should be up to date so that your bookkeeping software is able to provide functionality that you can navigate easily.
• Even with these tools, you may not have the expertise you need to handle the responsibilities of a bookkeeper.
• If you’re using double-entry accounting, which is recommended, you will have a corresponding credit entry for any debit entry you make, and vice versa.
• Take the time to organize your records, whether that means buying a filing cabinet or breaking out the label maker.
• Because bookkeeping involves the creation of financial reports, you will have access to information that provides accurate indicators of measurable success.

From there, a complete picture of a company’s expenses and earnings can help locate apparent problems of identifying high-performance areas. The significant difference is that accountants are tasked with interpreting financial data. As a result, accountants require a four-year bachelor’s degree in accounting. A bookkeeper checks for errors when creating reports and managing the general ledger.

The Best Cheap Payroll Services for 2023

For example, it can’t determine if the hours submitted equate to the actual amount of hours worked—it’s up to you as the business owner to make those determinations. An essential piece of the payroll puzzle is maintaining accurate and organized records. At some point, the IRS may audit you and investigate to ensure that all of your employees are working legally and that you’re adhering to labor and payroll laws. This is a standard payment schedule for salaried employees because it offers consistency and predictability for staff and employers alike.

• Start building the professional skills you need to get a job as a bookkeeper in under four months with the Intuit Bookkeeping Professional Certificate on Coursera.
• This takes the task of processing payroll from hours to minutes for busy employers.
• Aside from facing monetary penalties, one-fourth of all workers that receive a paycheck with errors, will start looking for a new job.
• In addition, it gives its users the option to choose between a manual self-service plan or a fully automated service plan.
• Most business owners choose to hire candidates with a Bachelor’s in accounting or a related field since this role is critical to your company’s well-being.
• Be sure to confirm that your debits equal your credits (basic accounting systems should confirm this).

It offers tools that allow for a 24-hour direct deposit with unlimited payroll runs that speeds up the distribution of paychecks. It even has a Same-Day Direct Deposit tool that makes bookkeeping easy and less complicated. Wave is a free payroll software that allows bookkeepers to track expenses, send an invoice, and organize receipts at absolutely no cost. It can easily simplify the bookkeeping needs of startups and small businesses.