Your payroll system is vital when it comes to controlling and recording what you spend on your employees. This includes their salaries, wages and any benefits and contributions you give them.
Unfortunately though, your employees can take advantage of the system. They could change amounts and details so they end up getting more money each month than they should.
To prevent this, you need to have certain controls in place, particularly when it comes to reconciling bank statements with your payroll system.
Here's how to do this...
Here's what you need to do to control your payroll system by reconciling bank statements
There are often variances between your salary control account and what you actually paid out. This can happen for a variety of reasons ranging from a simple human error to someone corrupting the system.
To prevent this, you must always do a salary account reconciliation and check your control against what you paid out.
Check your account for the payroll expense as per your payroll system. The entries will be:
• Debit: Salary expense (Profit and Loss)
• Credit: Salary Control Account (Liability)
When you make the payment through the bank, the entries will be:
• Debit: Salary Control Account (Liability)
• Credit: Bank
When you do a salary account reconciliation, look out for these errors.
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Look out for these errors in your payroll when you do this reconciliation
Any remaining difference in the Salary Control account will point to errors you must resolve. Errors could include:
1. A staff member you underpaid;
2. Staff loans you granted/repaid;
3. PAYE you didn't submit accurately or correctly;
4. Payment that didn't go through due to an invalid bank account number; and
5. Additional payments to staff that you need to adjust in your payroll system.
So remember to do a salary account reconciliation to ensure the amounts you pay and the amounts in your payroll match up.