Payroll Services is an important part of business expenses. You must make sure that you run payroll and record it accurately in the books. Your employees are dependent on their salaries. What if the salary is not paid accurately or there is a delay. This would take a toll on the employees and might affect your business productivity.
What is Payroll?
Payroll is a list of employees who are paid by the company. The total amount of money an employer pays the employees.
What is reconciliation?
It is a process of balancing two records of the same event that exactly match each other.
Payroll entries in the general ledger:
Every time you run a payroll, make sure to make an entry in the general ledger. It involves different accounts in the books including expense and liability accounts.
Usually you record the following payroll transactions in the ledger:
• Employer liabilities
• Employee liabilities
• Salary and wages
The entries in the ledger must match information in the payroll books. Payroll reconciliation is a process to verify both records are the same.
What is Payroll reconciliation?
It is vital for a business to match payroll with the payroll expense account in the leger. Hence, payroll reconciliation is a process that helps you to keep accurate accounting records, which is necessary for financial health of the business and tax filing.
While you reconcile the payroll, make sure you record the correct amount for each employee. And also make sure each transaction was recorded in the correct ledger account.
It is a key to maintaining accurate records of employee wages, withholdings. It is a tedious and crucial part of business.
For example: An employee earns $4500 during a payroll period. But the employee doesn’t receive the entire amount earned. Some of the money goes into taxes and other withholdings. So let’s say an employee receives $4000 after withholdings.
You need to make sure all transactions are recorded accurately in the books. Expenses and liabilities need to be debited and credited correctly.
If you fail to do this, it may bring a problem when you have to file quarterly or annual taxes because the books will not balance.
How to do Payroll reconciliation:
There are several things to keep in mind when doing payroll reconciliation. This must be done before submitting payroll and issuing checks to the employees.
Check for the following details, when you reconcile payroll:
• Employer taxes
• Wages and salaries
• Withholdings and deductions
• Hours worked- including holiday, overtime, sick days etc.
The following steps will help you to reconcile payroll:
1. Your payroll register:
This is a document to run payroll. The payroll register includes each employee's total hours, wages and deductions for the payroll period.
2. Match each hourly employee’s time card to payroll register:
Confirm that you added each employee's time correctly. It should match the payroll register. Also take into account sick days, vacations or overtime when doing payroll.
3. Make sure the pay rates and salaries for each employee are correct:
This is a record of each employee’s hourly pay rate. Account for overtime pay, unpaid , double time pay.
4. Check that you took all deductions out of employee paychecks:
Make sure all correct deductions were taken out. Check if you were supposed to deduct or chase any amount. These deductions may include medicare, health insurance, wage garnishments, retirement benefits, social security payments, workers compensation, federal and state income taxes.
You can refer each employee's W-4 form to double check their exemptions.
5. Make entries in the general ledger based on your payroll register:
• Add an entry for employer liabilities with a debit.
• Include an entry for employee liabilities with a credit.
• List the total for each type of wage deduction with a credit.
• Record salary and wage costs as a payroll expense with a debit.
Make sure payroll expenses match the entries in the ledger. Lastly, submit Payroll reconciliation rec and pay your employees. You should Payroll reconciliation at each pay period and also at the end of the year.

Author's Bio: 

James Kahnwald