Modified on: Mon, 1 Oct, 2012 at 3:30 PM
Pay advances can be operated under 2 separate models:
1. Employee receives an advance with their normal pay – if this is the case use method 2 below.
2. Employee receives an advance as a bank transaction separate to payroll – if this is the case you can use either of the below methods.
There are 2 methods you can use to handle pay advances:
1. Informal Method - Create the next payslip at the time the advance is given and apply the advance as a pay cheque. You can apply multiple pay cheques to payslips. You wouldn’t need to finalise the payslip just create it, confirm it and apply the advance. The payslip could then be released and updated as required.
2. Formal Method – Setup a payroll deduction item to track the advances. There are 2 steps to set it up:
a) Setup a Chart of Account to Track Advances. Go to Setup -> Chart of Accounts and add a new detail account in the Payroll Liability section called Employee Advances. NB: You may already have such an account and could skip this step if that is the case. Tip: To simplify tracking of advances you could setup a separate chart of account for each employee utilising the advance system so you can always see the current balance, if you use the same account for all employees at some point it is likely you will need to reconcile the account.
b) Setup a Payroll Deduction item for pay advances. Go to Payroll - > Setup -> Deductions and create a new deduction called Advance or Pay Advance or whatever terminology works for you. Set the method to fixed, decrease net pay (so it is outside any tax calculations) and select the account created in a) above. Set the special field to Hidden so that it does not display on the employees end of year payment summary. The amount field can be set to $0 as this is can be set on the employee record or payslip.
(You can read the help file on deductions here: http://login.shoebooks.com.au/Help/ow.asp?setupPayrollDeduct)
Now that you have the payroll deduction item Advance setup you can use it on payslips. The item will be available for use on the Details tab of the payslip in the deduction category. To provide an advance enter a positive amount, to deduct a previously provided advance use a negative amount.
If you operate the separate bank transfer model just record the initial advance transaction using a Make Withdrawal from the banking menu and select the Advance account setup in 2 a) above. This will record the transaction to the Advance account as owing, then when deducting the money on the next payslip use the Advance deduction item on the payslip which will record the payback transaction to the same Advance account. The end result if the amounts are the same is the Advance account balance will be $0.
So if you want to be prompted that the employee has had an advance the Informal Method is the easiest as when you go to make the pay cheque the amount due on the payslip will already have deducted the advance.
Did you find it helpful?Send feedback
Sorry we couldn't be helpful. Help us improve this article with your feedback.