Q. (cont.) Does anyone have any thoughts on this practice? I suppose it would be helpful to stop a manual journal entry process, but it is transferring the work from payroll to accounts payable and the only value-add I can think of, and I am not sure it is needed, is to be able to track the transactions at this pseudo record level. No employee detail will be entered, only the transaction.
A. Responses from our practitioner panel:
We have payroll related vendors set up – most of the transactions are managed through a payroll batch/settlement (document type PV) for these transactions AP does not touch the transaction itself, rather it allows the payment to issue through our payment runs. Other payroll related transactions such as benefit providers, that are not included in the batch/settlement are manually keyed by AP for payment.
We also have an employee vendor file to support payment transactions that fall outside the payroll payment cycle (travel advance). Maintaining an employee vendor file outside of the HR space is duplicate effort and risk – I hope to find a way to eliminate this by sharing the HR employee file for name, address and bank instruction only. Having the vendor file in AP means that if employee data changes in the HR space we must always revalidate information with every new transaction request to ensure the payment will not fail. We must also monitor for active employee status and block those employees that leave the organization.
Doreen Smuda, BAC, APM
Manager, Accounts Payable & Accounts Receivable
How is cash balanced at the end of the month? Do you not pay the payroll company fees and how they recorded?
You should already have a vendor profile set up in A/P to record the transaction. Even if you transfer the actual payroll from an operating account to a payroll account, these are still reconciling items.
Are you using an ERP system? And if so which one? Set will depend on system and account assigned. If you want your system to automatically enter the labor allocations into your ERP system talk to the payroll company for an automatic download.
I use MAS200 and we have a download we get each week for the employee labor allocations based on the accounts I have assigned.
If Payroll is not outsourced then journal entries or the actual transactions should record it.
For example, if using an operating account to payroll,there are outgoing and incoming items for that. Employer taxes, health care benefits. Section 125 benefits, gross amount, deferred compensation etc. If you do not have a vendor set up and payroll is done in-house then you don’t really need one because it is all done internally and can be done transactionally through postings.
Brigid Tara Heydt | Corporate Controller & HR Director | Ehmke Manufacturing Company, Inc.