ZenPayroll – How to Book Payroll When the Banking Doesn’t Tie

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Payroll can be very complicated, but it doesn’t have to be. ZenPayroll does a great job of providing “delightful payroll” with a beautiful and clean interface. For starters I would not recommend processing your own payroll under any circumstances. It can be very tricky to calculate the withholding and taxes. One mistake can be very costly. For these reasons I always recommend using a service, and ZenPayroll is a good one, but there are some things you need to understand about how ZenPayroll processes the entries and imports them into QuickBooks.

The first time I went to import payroll from ZenPayroll I noticed that they use the “iif” file format. This made me nervous as the iif file can create all kinds of problems. For example if an account is not named exactly the same way in the iif file as it is in QuickBooks you will wind up with new accounts on your books. No prompt, no, “hey you’re about to add a new account, are you sure you want to do this?” I wound up with a new Payroll Tax Expense Account on my books on the first import because I forgot to show the whole account string in the mapping – Payroll Expenses:Employer Taxes. I just had employer taxes (the sub-account portion). I really don’t love the iif format.

Other than that small hiccup which was very easily fixed, the import worked out fine. Everything worked. My Gross Payroll was good and my Employer tax expense was accurate. Perfect! Then it started to get weird. I noticed the entry that went into my bank account was for the grand total of the taxes and the net pay. A little unusual – we’re accustomed to seeing two entries in the bank account; one for the net pay and the other for the taxes.

Here’s the question. In QuickBooks there is one entry in the bank account after the import for a total of 11,128.18. So I thought, oh ok then there must be a single payment coming out of the bank account for this. I like that, it makes reconciling easy.

Zen Payroll Total Amount Debited

 

Zen Payroll Payroll Entry

This works. The Gross wages and employer taxes are both correct. You don’t need to worry about the liabilities. This took me a minute to wrap my head around. Traditionally we would show the payroll with a reduction from gross payroll to go into the payroll liabilities account and then the tax payment that comes out would be split between the Employees share and the $897.41 you see above.

The way ZenPayroll handles the entry works and it’s actually cleaner. No need for the liabilities in and out. They take out the net pay and taxes and it adds up the same.

Here’s the next problem though. Let’s see what this actually looks like in the bank account:

You can do the math and see that these two entries total the $11,128.18. If you look up at the image above the QuickBooks screen shot you will see that the amounts are exactly the same.

To summarize the banking problem you have when you import your ZenPayroll transactions, you have a single entry for the total amount in QuickBooks. Then you have two entries that come out of the bank account adding up to this total. This makes reconciling confusing, especially for a bookkeeper who doesn’t know this is coming.

There’s also no way to map the payroll with different expense accounts for different people. In other words I would love to be able to set up departments so I can distinguish Officer’s Salaries for an S-Corp. Also I have clients who are manufacturers. In their cases some employees’ salaries go to a COGS line while others go to G&A Payroll.

These are issues that the company is aware of. They are great people and they offer amazing customer service. After speaking with them I am confident that in 2015 they will have most or all of these issues resolved. Meanwhile watch the video on this to see the work around.

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