By: Merle Capello CPP Apr 11, 2016

What’s a Payroll Reconciliation, and Why Do I Need One? Part I

No matter the size of your payroll, you know that payroll is one of the largest expenses your company incurs.  It’s necessary for you to take steps to verify your totals.  Here are some things you need to verify:

  • Does the total payroll align with the previous payroll?  Are the numbers reasonable?
  • If there is a large difference in your gross payroll between periods, can you account for the difference?
  • Are your voluntary deductions in line with what you expect?

In order to maintain your payroll’s integrity, your payroll will need to tie (balance) to your general ledger payroll expense.  The GL will serve as a detailed map for all your payroll gross pay, taxes and deductions.  Since your payroll team probably does not manage the GL process, you can help by reconciling your payroll from period to period so that you know the details.

Sounds like a big job, doesn’t it?  It may not be as intimidating as you think.  Depending on the number of employees on your payroll, you can find a method that works for you.  We’ll first focus on methods of reconciling your gross payroll.

For a small payroll – 1-150 employees

For any employees earning a fixed salary, you can create a simple excel spreadsheet, listing each employee alphabetically.  List the salary for each in the next column (see sample below).  The total should equal your non-variable pay each period. 

Name 5/15/2016 5/30/2016 Difference
Anderson, M.      2,000.00      2,000.00                –  
Baxter, N.      1,500.00      1,500.00                –  
Campbell, G.      3,000.00      3,000.00                –  
Franklin, M.          875.00      1,000.00      125.00
Hammond, G.      4,000.00      4,000.00                –  
Jones, K.      2,500.00      2,500.00                –  
Miller, H.      3,000.00      3,000.00                –  
Porter, C.      5,000.00      5,000.00                –  
Rogers, B.      2,750.00      2,750.00                –  
Sanders, G.      3,200.00      3,200.00                –  
Thompson, E.      1,975.00      1,975.00                –  
     29,800.00    29,925.00      125.00

 

By adding a column for each pay period, you can update any changes and reconcile your gross payroll from period to period.  Otherwise, simply copy over the data and this can stand for your fixed salary cost.  By using excel or another spreadsheet program, you can facilitate the difference process with simple formulas that result in the dollar-amount differences between periods. 

For a smaller group of employees, it should relatively simple to identify any changes or issues with your payroll before it is processed as final.

For hourly, non-exempt overtime, you can create an ad hoc report or use another type of spreadsheet, even adapt an import document from your timekeeping system.  Import name, employee ID, department or cost center, regular hours, overtime hours, and other paid hours, and tie to your payroll register or preview run.  If you also include hourly rates, you can confirm gross pay.

Questions? 

In our next post, we’ll give you tips on two other reconciliation methods.  One of the three should work for any size or type of company.  We’ll also take a look at review and reconciliation of deductions.  If you’re the payroll lead, it’s important to have the peace of mind knowing you’ve put out a balanced and correct payroll.

Also, if you have a comment or question, please leave a reply down below! We will try our best to respond as fully as possible. 

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Category: Payroll

Merle M. Capello, CPP, is the Director of Payroll Compliance at Fingercheck. Merle has 25 years of experience spearheading the development, enhancement, and transfer of payroll and HRIS operations. She also serves as President of Capcill Consulting.

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