Payroll and Accounting integration

How the integration with payroll works

Once set up, a journal is created every time you complete a pay run in Payroll.

The journal is always recorded using the default ledger accounts set up in Accounting.

If you want to record the journal using your own ledger accounts, then you may need to continue creating the journal manually. You may need to do this if you want to run more detailed reporting or you want to use a different set of ledger accounts.

Set up the integration with Payroll

1. From Settings, then Business Settings, select Apps & Connections.

1. Select Sage Payroll at the bottom of the page.

2. Select Enable Journals from Payroll.

3. Choose whether to record your net wages as bank payment or as a liability

4. Click Save to enable the integration settings.

Record net wages as a bank payment

As you'll actually be paying money to your employees, save time by recording this bank payment automatically when you complete your pay run in Payroll.

Use this when you pay your employees from the same bank account and are happy to show this as a single payment, rather as an individual amounts to your employees.

• Just select Post employee net wages to the default bank account and choose the bank the payment will come out of
• When you choose Record Payment / EPS from the Summary page in Payroll, the corresponding bank payment is created in Accounting

Don't forget you still need to actually send the money to HMRC!

If you use bank feeds

Remember that the bank payment will also be imported from your bank.

To make sure you don't duplicate this payment, make sure you delete it from your bank feeds import.

To discard a transaction, just select the crossto the left of the transaction.

Record net wages as a liability

If you don't want to automatically record the bank payment, then your total net wages are recorded against the 2220 - Net Wages ledger account. Just choose Post employee net wages to liability account.

You will also need to

• Enter a bank payment when to show when you have paid your employees
• Enter a bank payment to show when you have paid HMRC

Record the bank payment for your wages

Once you've paid your employees, you'll need to make sure your record the corresponding bank payment. This will make sure that you correctly show your wages as being paid in your reports.

Whether you import transactions from a bank feed or create the bank payment manually, make sure you choose the Net Wages ledger account.

To make it easier for you to match with your bank statement, consider creating a separate line for each employee.

1. From Banking, open the required bank account.
2. Choose New Entry, then click Purchase / Payment.
3. Choose Other Payment then enter the date for the payment. this should be the same as your pay date.
4. Enter the total amount paid for the pay period.
5. Create a single line for the total or create separate lines for each employee with the following details:

For Ledger Account list, choose 2220 - Net Wages

Choose No VAT for the VAT rate

Enter the amount the employee was paid

If you're entering separate lines for individual employees, check that the total matches your net wages for the pay period.

Record the bank payment when you pay HMRC

When you actually pay HMRC, make sure you record the payment in your accounts. Make sure you record the payment against the correct ledger accounts to make sure your accounts are accurate.

Whether you create a payment manually or import via a bank feed or your statement, you'll need to record the payment against various ledger accounts, depending on the breakdown of your liability to HMRC.

1. From Banking, open the required bank account.
2. Choose New Entry, then click Purchase / Payment.
3. Choose Other Payment then enter the date for the payment.
4. Enter the amount paid to HMRC.

5. Add separate lines for tax, national insurance and any student loan payments, if applicable.

   Ledger Account	VAT rate
   2210 - PAYE to pay HMRC	No VAT
   2211 - Other taxes to pay HMRC	No VAT
   Student Loan	No VAT

If there is a negative amount due to be paid on your P32 in this period, you can either:

• adjust your P32, which moves the credit into the next P32 period This can only happen in Quarters 1, 2 and 3 of the tax year (before month 12 of your tax year)
• request a refund from HMRC, if you're doing this in Quarter 4 of your tax year. Check that your bank details are valid and up-to-date with HMRC before requesting this refund

HMRC reserves the right to refuse a refund, if they have reason to believe a refund is not due to you or your business.

How payroll details are recorded in your accounts

When you record details of your payroll, the money you owe your employees in wages and the money you owe HMRC is recorded as a liability on your balance sheet to show that this is money owing by your business. These are all entered as a Credit in your payroll journal

The other half of the payroll journal records the costs to your business, and is reported on profit and loss. These are all entered as a Debit value.

Your liability is then cleared when you record bank payment to pay your employees and HMRC.

Create a manual payroll journal