Decoding Payroll Reconciliation

Similar to reconciling any other account on the general ledger, payroll reconciliation is important to make sure that a company is making payments in accordance with its contractual obligations. Moreover, it's crucial to ensure:

• Workers are receiving the promised compensation in accordance to the labor laws of relevant jurisdictions.

• The company is remitting and filing for taxes appropriately.

Guide for Running Payroll Reconciliations

1. Prep Documents

• Gather all of the relevant bank statements, wallet transactions, contractor invoices, etc.

2. Prep Accounting Software

• Determine how granular you want to organize payroll taxes on the chart of accounts. Options include:

  • Salaries & Wages

  • Contractor Payments

  • Employee Paid Taxes

  • Employer Paid Taxes

• Consider breaking out your tax accounts to track on a per state basis.

• Be sure to also separate out payments for any perks programs like health insurance and 401(k) programs.

  
  

3. Define the Reconciliation Period

• Typically, this is for the last month or quarter. Due to the filing requirements of each state, monthly reconciliation is recommended.

  
  

4. Company Reconciliation Process

• Line the payroll journal report from your payroll system against all of your documentation.

• Ensure that the debits from your bank and wallet accounts match the totals charged in the payroll history.

• Break down the transactions into how they should be split or organized into the relevant chart of accounts.

  
  

5. Check Sum

• Ensure that the totals for the period match your debits again once all of the entries are made in your accounting system.