Recording advance payments to employees

How to record advance payment to an employee and adjusting the same amount at the time salary payment?

Since Manager doesn’t have any payroll functionality yet, you will need to create custom asset account in your Chart of accounts called Advance payments to employees.

So when you give your employee advance payment, categorize this payment as Advance payments to employees.

Next time, when you pay salary let’s say $1,000 but you already gave employee $400 as advance payment therefore net pay to employee will be only $600, then categorize this payment as:

  • Wages & salaries: $1,000
  • Advance payments to employees : -$400

So the total comes to $600.

What it does is that $1,000 will increase Wages & salaries expense account and Advance payments to employees will be reduced by $400. So net result that comes off your bank account is $600.

You can also use sub account numbers to track each advance individually.

1300 Advances
1301 advances - Jon Doe

1302 advances - Jane Doe

It would be great if in this example the 1300 totaled all the amounts in the dependent accounts below.

How it will reflect in Bank/Cash Account.

If you are paying employee from a bank account, then record those payments in bank account. Go to Bank accounts tab, click on bank account and then click Spend money button.

Can you please share me the snap shot of the page where i need to enter advance payments & wages(Bank Transaction).

WHEN ADVANCING LOAN

  1. Create ‘Loan and Advances to Staff’ Asset Account under chart of accounts( when you are spending money to give the loan to the staff make sure you select the Loan and Advances Asset account as the recipient account, include all details like staff name etc. An asset of the amount given will be created immediately.)

WHEN COLLECTING LOAN BACK
2. Go to Payroll Items in Settings
3. Go to Deduction Items
4. Click on New deduction item
5. Type ‘Loan and Advance Payment deduction’ (under Name)
6. Select Loan And Advances to Staff which you created Earlier Under Asset in Chart of Accounts (under Account)
7. During payslip creation for that staff, select the deduction item and enter the value’ when you click on create the Asset account will be deducted and the staff’s earnings will also be deducted by the amount entered.

You could take loan back in installments (ie at every payroll day) or you can take all at a go.
If you are charging interest on the loan or salary advance to staff, then you must create extra ledgers that will take care of that

OK that’s one way.

Although I think it’s easier just to debit Employee clearing account when giving money to employee (whether in advance or earned wages).

Works perfectly, I was amazed, I cant wait for improvement in payroll administering.

Thank you very much

This is useful information