Employee Advance

A cash advance is a loan by a company to an employee, Kat5515.

You'll have to create a deduction item to track the repayment. It will deduct in the employee's paycheck automatically. I'll guide you how:

1. Click Lists, then  go to Payroll Item List.
2. Click Payroll Item, then select New.
3. Select Custom Setup, then click Next.
4. Select Deduction, then click Next.
5. Enter a desired name, then click Next.
6. Select the liability account, then click Next.
7. Select the Tax tracking type, then click Next until you're in the Calculate based on quantity window.
8. Select Neither, then click Next.
9. Select whether to calculate on gross pay or net pay, then click Next.
10. Enter a default rate or limit, then click Finish.

Once done, add it to the employee's profile. This way, it will calculate on the paycheck automatically. Here's how:

1. Click Employees, then go to Employee Center.
2. Select the employee, then double click to open their profile.
3. Go to the Payroll Info tab.
4. Under ADDITIONS, DEDUCTIONS AND COMPANY CONTRIBUTIONS, add the deduction payroll item.
5. Add the amount that'll be deducted every paycheck and a limit.
6. Click OK.

Also, I'll share an article on how to edit a payroll item if ever you'll apply some changes.

If any questions pop up, please feel free to leave a comment below. Keep safe!

Thank you so much for a quick and detailed response!! 

I followed your directions and managed to set that up. 

Now much question is, how can I link it to the account that I used when I cut the check, is that even possible? As the employee pays back the loan each month, the Employee advance account I used should be deducted. Will I need to do that manually?

Thank you

You don't have to do it manually, Kat5516. You can easily link the account to the payroll item.

You'll have to edit the payroll item and change the liability account to the one you've selected in the check. Then, once you create a paycheck, the balance will be deducted. 

You can open the link I've added at the top on how to edit the payroll item and change the account.

Once done, when you create a paycheck, the amount will be deducted. You'll have to open a quick report to verify it. Here's how:

1. Click Lists.
2. Go to Chart of Accounts.
3. Select the employee advance account, right-click, then select QuickReport.

Get back to this thread if you have more questions. I'm just around to help you. 

I think the problem here is that I cut the employee a check outside of the payroll system using an account that is not on the payroll item list. 

What can I do to link the two?

Hello there, Kat5516,

You can record the transaction you've paid for your employee by writing a check in QuickBooks Desktop. Then, use the Expense tab to enter the liability account you've created to track the item. This will help link those two entries.

Feel free to read through the Create, modify, and print checks link for instructions and detailed steps.

Let me know if there's anything else you need. I'm always right here to help.