Employee Records

QuickBooks Payroll Tip-Tracking Employee Advance/Loan Repayments

Published May 11, 2011 | By Nancy Smyth

Tracking employee advance or loan repayments can easily become part of your normal QuickBooks payroll function and is a must for companies that do have a policy that allows giving employees advances/loans for personal reasons.

Earlier this week, in our post QuickBooks Payroll Tip – Tracking Employee Advances or Loans, we discussed three different ways in which to record an advance or loan that was given to an employee. Today we will discuss how to track repayment of that loan through an agreed upon payroll deduction that will continue until the loan is paid in full by the employee.

Create a payroll deduction item to record the loan repayment

If your payroll item list doesn’t currently have a payroll deduction item to record loan repayments, you will need to add one.

From the Lists menu -> choose Payroll Item List
Click the Payroll Item button (lower left of the window) -> choose New
Select the radio button next to Custom Setup -> and then click the Next button
Select the radio button next to Deduction -> then click the Next button
On the Name used in paychecks and payroll reports window -> enter the name of the deduction item (I recommend using the loan date and employee name) -> click the Next button
On the Agency for employee-paid liability window you don’t need to enter an agency name since the money will be going to your own company -> from the Liability Account (employee-paid) drop down menu you want to select the Other Current Asset account that you created to record the loan – do not select an actual Payroll Liability account here -> click Next
On the Tax Tracking Type window -> select None -> click Continue
On the Taxes window -> no tax items should have a check mark next to them -> click Next
On the Calculate based on Quantity window -> select the radio button for Neither -> click Next
On the Gross vs. net window -> select the radio button for gross pay -> click Next
On the Default rate and limit window -> both should be set to 0.00 -> uncheck the This is an annual limit option -> click Finish

Add the loan repayment deduction item to the employee record

From the Employee Center -> Employees tab -> select and edit the employees record -> Payroll and Compensation Info
Click into the first blank row of the Item column of the Additions, Deductions and Company Contributions section -> from the drop down list -> select the loan repayment item -> in the Amount column enter the agreed upon weekly amount that the employee wants deducted from his paychecks -> in the Limit column enter the total amount that the employee was loaned

Right click on the image to enlarge it

The next time that you run your payroll, the loan payment amount will be deducted from the employees paycheck AND the loan balance will be reduced by the same amount.

ALTERNATIVE METHOD

Sometimes an employee will opt to repay the loan with cash or a personal check by some agreed upon date in the future, instead of through a payroll deduction. In this situation, when the employee gives you his payment – either in full or partially – you will record the receipt through the Record/Make Deposits window. Select the Vendor/Other Name List entry in the Received From column -> in the From Account drop down, choose the Other Current Asset Employee Loan Receivable account -> enter other details and proceed with the deposit as usual.

employee loan repayment with personal funds

Right click on the image to enlarge it.

QuickBooks Tip – Employees With Multiple Rates of Pay

Published June 23, 2010 | By Nancy Smyth

A customer called with the following question:

We have 25 employees on the payroll at all times – more in the summer when things are busier. My employees can earn multiple rates of pay in one week (sometimes even in the same day) on the same or multiple jobs. How do I handle this in QuickBooks without always having to manually change the pay rate when I create their paychecks? To be more specific, let’s talk about “Joe”. Joe can work as:

a laborer making $12.00 per hour
a dozer trax operator making $17.00 per hour
a skid steer operator making $18.00 per hour
a supervisor making $25.00 per hour

_____________________________________________________________________

Answer:

This is indeed a complex situation, as well as a very common one, and having to manually change the rate of pay accordingly when creating the paycheck is highly error prone.

To successfully handle this task:

Create new hourly payroll wage items in QuickBooks called Laborer, Dozer, Skid, and Supervisor – which represent each of the different Work Classifications that your employees are paid under.
Edit Joe’s employee record, go to the Payroll & Compensation tab, add these new payroll wage items to his Earnings section by clicking into the Item column and selecting the newly created payroll items and assign the correct rate of pay.
While you are in the Payroll & Compensation tab, make sure that the option to “Use time data to create paychecks” is checked.
Enter Joe’s hours using the Weekly Timsheet function, splitting out and assigning how many hours he work on each job during the week and selecting the appropriate Payroll Item for the task.
When you create Joe’s paycheck, QuickBooks will automatically pull in the correct rate that you assigned to each Payroll Item in Joe’s employee record.

Setting up QuickBooks in this manner makes the program work for you, instead of you having to always remember to manually make the pay rate changes.

Benefits include:

A clearly visible audit trail for Worker’s Compensation Audits, as these Payroll Items now correspond to employee work classifications.
Accurate pay checks.
Less stress.

_____________________________________________________________________

Author’s Note:

Having to manually create new payroll items AND then update 25 employee records with new payroll wage items and rates of pay is a time-consuming process as you have to do each payroll item and employee one at a time.