At the end of each financial year, we have set procedures to ensure that correct payments have been allocated throughout the year. Let’s look at end of financial year checks for ‘Payroll’ in QuickBooks Online.
There are three main accounts we need to check: Wages, PAYG and Superannuation. If transactions in these accounts have not been entered correctly, or if they have not had the correct payments entered, this could impact: compliance; PAYG Summaries to employees; PAYG paid to the Australian Taxation Office; Superannuation that was paid to employees; and fees may be incurred and possibly interest charged.
These errors will be seen when comparing the ‘Profit and Loss & Balance Sheet Reports’ to certain payroll ‘Reports’.
Let’s walk you through some of these procedures.
When running payroll each week, fortnight or month, there are transactions that happen behind the scenes. These transactions are posted to what we call control accounts:
- Wage expenses.
- PAYG Liability.
- Superannuation Liability.
Each of these accounts needs to reconcile back to amounts that have been paid through the ‘Payroll Centre’ during the process of pay runs. If these accounts do not reconcile, there could be several factors impacting these control accounts. Either the pay run may have been deleted by accident, an amount may have been changed, or incorrect amounts may have been allocated to control accounts – just to name a few.
Some of the ‘Reports’ that need to be reviewed are:
- Balance Sheet & Profit and Loss.
- Detailed Activity Report, Super Contributions and PAYG Withholding Report. These are found in the ‘Reports’ section in the ‘Payroll Centre’.
Let’s look at the profit and loss report & detailed activity report
The ‘Wage expenses’ and ‘Superannuation’ accounts in the ‘Profit and Loss Report’ – both these accounts need to reconcile to the ‘Detailed Activity Report’ under the ‘Gross Earnings & Superannuation’ amounts. Both reports are run from 1st July to 30th June.
Wage expenses & Gross Earnings = $8,200 in both reports (see below).
Superannuation & Super = $779.00 in both reports (see below).
Awesome. First step reconciled!
Reconcile any unpaid superannuation in the balance sheet from the ‘Superannuation Liability’ account, to the ‘Super Contributions Report’.
From the ‘Payroll Centre’:
- Select ‘Reports’.
- Select ‘Super Contributions Report’, then ‘Date Range’, then choose the next period after the quarter or month that you last paid superannuation, and ‘Run Report’.
- Compare any unpaid superannuation in this ‘Super Contributions Report’ to the balance sheet figure for ‘Superannuation Payable’ to 30th June. These figures should match. If they do not reconcile, click on the ‘Superannuation Payable’ balance from the ‘Balance Sheet’ to see more detailed transaction reporting.
Looking into this drilled-down report, the balance as at 1st July 2015 is not 0.00. This means it’s more than likely there is an amount outstanding from the previous year, and this needs to be looked at. As you can see, there are transactions from July ‘14 to Sept ‘14 – total balance of $2346.51. You many need to address this with your trusted advisor, bookkeeper or accountant to help you sort this out.
Quite clearly, if you add the transactions that have occurred in the 2015-16 financial year they equal $779.00, which happens to be the ‘Super Contributions Report’ total.
Second step reconciled!
This amount is what is outstanding to be paid in super contributions to the employee’s super fund. When allocating payments of superannuation paid, the payment should be allocated to the ‘Superannuation Payable’ account, as this reduces the amount of super owing.
You can easily pay employee super contributions directly to any registered super fund in Australia by taking advantage of the inbuilt integration with the ClickSuper super fund clearing house from the ‘Payroll Centre’.
To find out more, check out this this blog: SuperStream Made Seriously Easy with QuickBooks Online and KeyPay
Reconciling any unpaid PAYG withholding amounts in the balance sheet is crucial. The account is called ‘PAYG Withholding Payable’ or similar, and this needs to be reconciled to the ‘PAYG Withholding Report’ that is found in the ‘Payroll Centre’. This will ensure the Australian Taxation Office (ATO) has collected the correct amount of PAYG during the year.
From the ‘Payroll Centre’:
- Select ‘Reports’.
- Select ‘PAYG Withholding Report’. Specify the full year, and click ‘Run Report’. This will reflect all PAYG that was withheld from your employee’s payroll and is required by law to be paid to the ATO.
- Compare any as-yet-unpaid PAYG:
- This will normally be the last month (i.e. June if business is on monthly IAS or BAS for PAYG reporting).
- It will be the last quarter April to June amount if BAS is paid quarterly.
When comparing the PAYG report above to the balance sheet amount for ‘PAYG Withholdings Payable’ at 30th June, these two amounts should match.
As seen in the June amount above, ‘PAYG Withheld’ is $2,210.00. This figure is also stated below in ‘PAYG Withholdings Payable’.
This payment of PAYG will be recorded in the ‘June BAS Report’.
If these amounts do not reconcile, click on the ‘PAYG Withholdings Payable’ balance in the ‘Balance Sheet’ to see a more detailed transactions report.
Third step reconciled!
Leave history report
It is probably a good time to ensure that any leave taken throughout the year has been entered and allocated against the employee. Run a few leave reports and review them, as you do not want to go into a new financial year with incorrect leave.
There are a couple of different leave reports. The main ones I use are ‘Leave Balances Report’ and the ‘Leave History Report’, which will show accruals for each pay run and any leave taken.
A good idea is to run these during the year and keep an eye on the accruals and taken leave; it will be much easier to correct during the year than at end of year.
It is crucial to get the control accounts correct and reconciled, to ensure the right amounts have been paid to the ATO and superannuation funds for your employees.
To help us get this right, we run the same checks every BAS time throughout the year, to ensure the correct payments go out. It is also a good idea to use an end of financial year checklist. This ensures you cover off all compliance that is required.
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