Payroll accruals for bi-weekly payroll

I have struggled with this for years and recently created my own solution to the QB payroll accrual issue. The issue is that if you make a journal entry in QB, it shows up in the cash and accrual basis reports. If Intuit just create an "accrual-only" type journal entry this would resolve the issue. Until then, here is my work-around.

Create a vendor called "PAYROLL ACCRUALS". Enter a bill for the gross payroll, taxes, etc for the weekending date or month-ending date (the date incurred) you want your payroll to show up on the accrual report. Then enter a credit on that vendor reversing the bill. Date the credit the same date as the paycheck date. Go to "Pay Bills and offset the credit against the bill so its not outstanding. I don't think this date matters, but use the paycheck date.

Now the payroll will show up on the paycheck date for cash-basis reports and on the incurred date for accrual-basis reports. Try it...it works!

BTW - if you are running accrual-basis report for reporting purposes you will probably have an accounts payable for the "PAYROLL ACCRUALS" vendor at month-end (depending on how you date it). This liability is actually an Accrued Payroll liability and should be reported as such (not A/P). So you will need to reclassify that for your financial reporting.

In it's simplest form, an accrual entry like you are talking about is a journal entry that debits an expense account and then credits an other current liability account. The next step then is to either reverse that entry when the expense is actually paid, or put the payment into the other current liability account so that it wipes out the liability.

The Accounts Payable module in QuickBooks is a beautiful example of how that can work.

In your case, the trick is going to be calculating the accrual. You're either going to have to wait until the payroll is done so you can go back and split it up by period, or you will need to collect payroll hours worked daily and estimate from there.

Your question does highlight one weakness of QuickBooks that may or may not be relevant to you and your business.

In food service, hospitality, and entertainment businesses the week is a basic unit of measurement. Usually the week begins on Monday and ends on Sunday. The year is broken up into thirteen 'months' of four weeks each, or maybe a pattern of 5 weeks 4 weeks and 4 weeks repeating each quarter.

That way payroll and nearly everything else can be recorded on a weekly basis and useful comparisons made between periods with equal numbers of weekends and fri-sat nights in them.

Since QuickBooks is date-sensitive, instead of going on a pre-assigned set of period numbers and period ending dates, the default reports don't match up with even-weeks. Although, you can select each week one at a time and then combine them in Excel for a useful management report.

I your case, have you thought about changing your payroll to semi-monthly so that it fits more neatly with the calendar months?

Thanks so much for your help. You explanation was easy enough to understand, and I really appreciate that.

I don't know why this business was set-up on bi-weekly payroll to begin with, other than the managing partner said that's how he wanted it done. I think semi-monthly would make so much more sense. Our company is pizza dine-in and delivery. Most fast food type businesses, from what I've heard, manage payroll on a semi-monthly basis. Now I understand why.

I may have to see what I can do about changing from bi-weekly to semi-monthly...

Thanks again!

We also pay on a biweekly basis and many payrolls cross boundaries of the month. We cannot get Quickbooks to automatically accrue part of the payroll to one month and the other part to the next month. It handles payroll on a cash basis. You would think if timecards are being filled out daily that quickbooks would accrue a payable liability on a daily basis; then debit cash and clear the payable when payroll is posted. If you are telling me that this requires us to go back and make special journal entries to handle the split, then I would say Intuit doesn't understand accrual vs. cash and needs to go back to understand basic accounting.

It's not that Intuit doesn't understand basic accounting. You have to understand what QuickBooks is.

There is always just one more thing that a piece of software can do. Sometimes the code writers can make an assumption and make the program do it one way in all cases, and sometimes the user must understand what the choices are and tell the software which method is desired.

Every one of those choices adds complexity, and at some point the software becomes more expensive and more complex than is appropriate for the intended market. Third party add-ins will often provide the desired function for a particular user, although I don't know whether there is one for what you want or not.

It should not be difficult to make the calculations for payroll accruals although with larger numbers of employees it can become time consuming. Remember that in accounting the use of estimates is integral, and making accrual entries may require (and allow) more estimating that might otherwise be apparent. You can spend a lot of time trying to be accurate to the nearest tenth of a cent, when accuracy to the nearest ten dollars or one hundred dollars might be sufficient.

I hope this helps,

Scott

Scott thanks for the response - It is good to know that there is no way to do this - The software engineers could have easily handled this by implementing everything on a day basis in the database - especially for job cost accounting - I am sure they store the data on a day to day basis they are just not applying it correctly - If the software is structured cleanly, I would think this would be an easy fix - we write a lot of Java/J2EE stuff and it would at least be easy in this domain - I have no idea what language Quikbooks utilizes -we are an electrical engineering company and most of our expenses are in payroll - if we let that payroll fall in different months than the ratios and matching of expenses to revenues goes to pot - at least on monthly basis - if we look at a long time period it is down in the noise as you suggested - it is just nice to manage your companies operations through finances on a monthly basis - Once again thanks for your help, I really appreciate it ! now that I know it is a limitation of the system I can stop looking for an answer - we will just have to drive our operations to do bi-monthly payroll

It sounds like I didn't tell you anything you didn't already know about accounting.

For another approach, you could construct your own payroll data front end. Use your favorite search engine on the terms "QuickBooks Sybase IAnywhere" and see if you find anything that helps.

Scott

Scott,

Thanks for all the help; you have gone beyond the call. We will check out your suggestion.

Thanks,
Larry

I understand your point. If you go over to the payroll forum, there was an extensive thread on this very topic, so the QB people are well aware of it.

I am currently in charge of keeping the books and maintaining the budgets for a "city funded" non profit. I simply use the cash based reporting of QB to feed the spreadsheets, and adjust things to accrual.

I have worked with different accounting systems since the early 80's, and have seen the capability of hardware and softwate system grow in leaps and bounds. Currently, you can buy versions of QB for several hundred dollars, and its' capabilities are 10 times what PC based systems can do in 1993, when I was selling PC based systems, with AR, AP, and GL modules costing $1,000 retail price each.

Then, in the late 90's, I went the other end of the spectrum, and was part of a team doing SAP, enterprise software for large firms, with a budget exceeding $40 million on completion at one place. Yes, it can and do ALMOST everything.

Yet, I recall going to a meeting with the lady in charge of AP, and she asked if bills can be scanned in, and have the computer read it. We said we can do that. And she wanted to know if we can create payables from a computer program reading these scanned bills by hooking up a mike to her workstation, and she can speak a command in:"do the bills", and it'll be done.

The IT guys looked at one another and we explained, that it's theroritically possible, but the development cost is beyond what we had it the budget, and it's probably cheaper to hire a clerk for now to type the bills in.

I see no problem with QB being able to do the accrual that you mentioned. It's a matter of "marketing". Are they going to include these low end versions, or are they going to stick it into enterprise, where each copy costs a few thousand??

QB does a lot of things, and as was mentioned, it can always do another thing more here and there. Maybe someday, you can scan a bill in, say "do the bills", and it'll be done too. As to how much, and what version it'll be in, it'll be another marketing decision.