Partially clearing a batch in QB?

[Coloradomom]

I have a client, a temporary labor company, that uses a payroll service to cut & send checks. They transfer money from their bank account to the payroll service to pay for checks and direct deposits. They record these transactions in QB as a batch, one batch for direct deposit funds, one batch for all the checks.

The problem is when they try to reconcile their payroll bank account, if some of the individual checks from the batch haven't cleared, they can't clear the check batch. So if the checks totaled $17,000 but only $15,000 cleared, they can't clear the $17K transaction.

Is there a way to adjust the lump sum for checks, to reflect the uncleared checks? Would you delete the $17K and reenter it as $15K and $2K?

They had an inhouse bookkeeper that was reconciling their accounts. She quit about a month ago, without telling them how she does any of the books. I'm trying to help them figure out what she did, and how to do it, or change it to another method.

[Business-Bytes]

Instead of deleting and reentering (which with double-entry accounting is not a good idea to me [JMO ]), could you do a journal entry? Then as other checks clear, you just do adjusting (journal) entries for them. You would also have an audit trail this way. You could use the batch number in your explanation for the journal entry(ies) for future reference.

[bluewaterbusiness]

Does the payroll service offer a download of the transactions listing each check or direct deposit that you could import to QB and then clear them manually? Never using a payroll service, I am not sure if this is an option, but I would check.

If you keep a spreadsheet showing all the checks and which have cleared, I think that your solution of deleting the $17K and reenter it as $15K and $2K? Should work as long as you are sure about what has cleared and what hasn't.

[debhowardgreenleaf]

I would enter all the net checks individually, not as a batch. If you try the JE route, you could have a major hiccup and not catch it for months! It's a little more work, but worth it, IMHO!

Deb

[leedrozak]

If you are writing individual payroll checks you should be entering them manually (or via download if your service provides). You should have correct employee payroll payments for each employee in your own system. Since you get detailed records of withholding, and I am assuming the services gives you the necessary information for tax payments, you can net our the check amount.

The prior person probably entered as a batch to save time but if they are individual checks and deposits they should be recorded as such.

It has been a few years since I did bookkeeping for someone who used a payroll service and if I can think of how exactly I booked everything I will let you know. But you should have individual records for each check that is written as you would with any other check payment.

[sfdbooks]

The way they are currently doing it (as one lump transaction) would be more for if the checks were being cleared from the payroll services' account and the payroll service debited the company for the total amount. Since the checks are being cleared against the company's account, they should be recorded individually. The service should be able to give you a download that has all the individual info for each pay period.

[A_Virtual_Jewel]

I agree with Deb Howard (Greenleaf) regarding the difficulty in journal entries. The listing of checks provides the best audit trail. Besides that, it reduces speculation and saves you time in the end.

Judy

[Karen Mitchell]

I currently have a client who uses a payroll service. When I receive the reports from the payroll service I use the information to enter each individual check into the QB's program - under the 'employee' module. These payroll checks have a different check numbering sequence. By entering each individual check, with the withholding detail, you can go back and review an employees earnings as needed or requested, pull reports with accurate information, keep track of employee advances and garnishments, and be able to clear your checks as they clear the bank. This system works very well.

[Tomekia Lloyd]

Hi,

Here's some accounting that may help you figure out how to adjust it based on what they are doing.

From what I understand. There is a main bank account and a payroll bank account used to write paychecks from.

There are two transfers made to the payroll bank account for paper checks and direct deposits.

Here are the manual journal entries:
When transferring the money over
Debit-Payroll Bank Acc. / Credit Main Bank account, Credit Payroll Liabilities. (split trans.)
This is because once the payroll is cut... the money is a liability until it clears.

When the money clears
Debit-Payroll Liabilities / Credit Payroll Account

All that said....
1. The checks should be individually tracked out of the payroll account, but not necessarily from the main bank account when the money is originally transferred over.
2. As they clear they should individually decrease your payroll liability as your bank balance decreases.
3. The total amount not cleared is your outstanding payroll liability. This amount should be reflected on your financial statements at the end of the month for paychecks written, but not cleared.

Let me know if this helps.