Company leaders must find ways to create, implement, review, and manage all the tasks that keep the organization competitive, efficient, and profitable. The information at their disposal can guide them in better understanding the business, making informed decisions, and preparing for tax time. Perhaps ironically, 43% of American small business owners surveyed say they procrastinate when it comes to tax preparation.¹ Yet myriad tools, processes, and systems exist to arm organizations with the data they need to run their businesses properly. A payroll ledger is one of them.
Payroll ledgers offer companies a variety of advantages that can help secure long-term viability and success. Knowing how to create and use a payroll ledger should be a priority.
What is a payroll ledger?
A payroll ledger is a payroll recordkeeping tool that logs who has received payroll funds. The recipients may be employees, contractors, freelancers, and other businesses.
Payroll ledgers are not the same thing as payroll registers. A payroll ledger documents the entire payroll expense, while a payroll register only holds employee payroll data.
Why do organizations need to use a payroll ledger?
Payroll ledgers have more than 1 intelligent use for the organizations that recognize their value.
Ledgers keep payroll information in one place
Just like most general ledgers, a basic payroll ledger keeps important information easily accessible. Instead of shuffling through papers and clicking on files, the employer can simply refer to the ledger for vital information. This method is especially helpful during tax time.
Ensuring employees are accurately paid
Payroll expenses can be tracked by employee, giving employers a record of how much they’ve paid out and to whom. If mistakes or discrepancies in an employee’s pay occur, the payroll ledger will help catch them quickly.
Determining the total cost of payroll for a specific time period
Statistically, payroll is among the largest expenses for companies. Keeping track of payouts provides employers a succinct method for monitoring payroll costs and their relation to the bigger picture: staying profitable.
Types of payroll ledgers
Depending on the person keeping it, a ledger can exist in 1 of multiple forms:
Regardless of their form, payroll ledgers typically contain the same type of information.
How to create a payroll ledger
The first step is choosing where the ledger will live. For instance, will it be built in Excel, a Google Doc, or within your payroll software?
Once you know that, payroll ledger templates can get you started. Make 6 columns on the spreadsheet and label them with the following:
- Employee name. This should be either the employee’s first and last name or the employer ID.
- Pay period. Add a date range in this column, depending on how the pay period runs.
- Gross pay. The total pay (hourly rate, overtime, bonuses, etc.) without taxes or contributions deducted will comprise this column.
- Tax deductions. Tax withholdings, and any other state or local deductions, must be entered here.
- Other deductions. Life and health insurance contributions and any other deductions get added to this column.
- Net pay. Once taxes and other deductions have been subtracted, the amount left will go here.
Employers can pull information that should be logged into a payroll ledger from invoices or pay stubs.
Tips for using a payroll ledger
These tips make keeping an accurate ledger simple.
Log complete information
The quality of the results depends on accurate, timely data. Fill out the spreadsheet completely for a 360-degree picture.
Use payroll calculations
Adding different sections of the report provides multiple views (and insights) from the same data. For example, figure how much payroll went out per employee, and use a different calculation to determine total labor costs.
Enter data consistently
Missing or outdated information won’t perform as it should or show a true picture of the company’s payroll expenses. Set a specific time for the data to be entered into the payroll ledger. This practice will keep the information accurate and complete and maximize the ledger’s usefulness.
If the company keeps a general ledger, transferring payroll ledger information into it can save time and improve the organization’s overall bookkeeping. After all, it shouldn’t be necessary to run down the information more than once.
Keeping a payroll ledger can have a positive effect on business
Using a payroll ledger is much like relying on any other tool. Employers must decide where the data will be stored, then commit to keeping it updated with complete information. Finally, they need to review it regularly and digest the insights the report shares regarding employee, and other, payroll costs.
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