How to Create an Employee Advance in QuickBooks?

If your particular business has a certain policy that enables you to grant advances to your employees on the payroll, […]

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If your particular business has a certain policy that enables you to grant advances to your employees on the payroll, then using QuickBooks payroll software is the best-recommended option for you.

As per industry experts, this is the best way to record the advance that can be reimbursed to the organization via payroll deductions.

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What is an Employee Advance in QuickBooks?

An Employee Advance account in QuickBooks is used to monitor the funds which are paid to any employee to take care of the travel expenses or any early withdrawal of paychecks.

A great method to assist your employees out in a pinch is to advance pay. To pay them, you can create an advance item. To get your money back, set up a deduction item on their paycheck.

Read More: How to Import Employees into QuickBooks Desktop using Dancing Number?

Why do You Need to Create Employee Advance in QuickBooks?

If you are a business owner, you must be aware of the fact that there are situations when giving employee advances becomes unavoidable.

There are two possible reasons for this, you either purchased an item for the employee and he/she has made an agreement to pay you back or you are providing an employee an advance on their upcoming check.

How to Create an Employee Advance in QuickBooks?

Here are the steps to create an Employee Advance check in your QuickBooks account:

Step 1: Go to your QuickBooks Desktop Banking menu, and choose Write Check.

Step 2: Choose the particular bank account in the Bank Account drop-down list.

Step 3: Choose the date for the particular check.

Step 4: Choose the employee from the specific drop-down list that says Pay to the Order and then press OK displayed on the screen.

Step 5: Put the dollar amount of the particular advance right beneath the check date.

Step 6: Choose the account from the particular Expense tab Account menu list.

Step 7: Mark the Print Later box right next to the particular Print icon.

Step 8: Choose Save and Close.

How to Pay an Advance to Your Employee?

To pay an advance to your employee there are several ways such as you can:

● Give them cash
● Make a paycheck with advance items alone.
Write and Print a checks (desktop only)

You must create an advance pay item if you choose to create a paycheck for the advance.

QuickBooks Online Payroll

  • Configure the Other Earnings pay type.
  • Select Other Earnings from the list of additional pay types section. To rename it Advance Payment, choose the option of Edit✎.
  • When processing payroll, either add the sum or input it.
  • After finishing, choose Save.

QuickBooks Desktop Payroll

  • Payroll Item List can be found under the Lists option.
  • Choose New from the Payroll Item dropdown menu.
  • Next, choose Custom Setup.
  • Choose Addition, then click on Next.
  • Type the item’s name here, like Employee advance.
  • Choose the expense account for the item you want to track. Choose Next.
  • Type None as the tax tracking type and Choose Next.
  • Choosing Next twice. The next two windows require nothing from you.
  • In the Gross vs. Net window, choose Net Pay. Then click on Next.
  • Default rate and limit fields should remain blank. When you create your employee’s paycheck, you can add the amount
  • Lastly, after completing click on Finish.

How to Set up an Advance Repayment Item?

To get your money back from your employee set up a cash advance repayment item.

QuickBooks Online Payroll

  • First, you have to go to Payroll, and then click on Employees.
  • Choose an employee.
  • To start or edit a Deduction & Contribution, choose the Start or Edit option.
  • Select + Add Contribution/Deduction.
  • Add the following items from the dropdown menu:
    • Type of deduction or contribution: Other Taxable Deductions
    • Type: Repayment of Cash Advance
    • Add a name for the deduction, like Cash Advance Repayment.
  • Choose a Flat Amount.
  • Enter the amount to deduct from your employee’s paycheck.
  • Enter the total amount owed in the Annual Maximum field if you need to collect the advance payment over more than one paycheck.
  • After finishing, choose Save.

QuickBooks Desktop Payroll

Step 1: Create a Repayment Item

  • First, you have to go to the Lists, and then go to the Payroll Item List.
  • From the dropdown menu select Payroll Item, and then click on New.
  • Choose Custom Setup, and then click on Next.
  • After that select Deduction and click on Next.
  • Enter a name, like Repayment of cash advance.
  • Select the expense account that was used to give the advance in the Liability account field.
  • Type None as the tax tracking type. Choose Next.
  • Choosing Next twice. The next two windows require nothing from you.
  • In the Gross vs. Net window, click on Net Pay. Choose Next.
  • Default Rate and Limit fields should remain empty. Choose Finish after completing.

Step 2 (Optional): To the Employee, Profile Adds the item

  • You have to first go to Employees, and then go to the Employee Center.
  • Then choose your employee.
  • After selecting your employee you have to add the repayment item under Additions, Deductions, and Company Contributions after selecting Payroll Info.
  • When finished, click on OK.

How to Create a Paycheck with the Repayment Payroll Item?

To create your paychecks and use the repayment payroll item follow the steps:

Assign a Pay Schedule to Your Employees

Running your regular payroll can be made more effective by adopting pay schedules. Create a payroll schedule for your employees if you haven’t previously.

Create Your Paychecks and Send Your Payroll

You must next prepare your paper paychecks or direct deposits and send them to us for processing.

You can create a scheduled payroll or an unscheduled payroll if you’ve set up a payroll schedule.

  • Schedule Payroll: Paychecks you regularly give to your employees are known as scheduled payroll. These paychecks can be added with bonuses or other pay.
  • Unscheduled Payroll: You could need to pay your employees’ bonuses, commissions, a final paycheck, or report fringe benefits outside of your regular payroll.

QuickBooks Online Payroll

Create and Send a Scheduled Payroll

  • Select Employees from the Payroll menu.
  • Then Choose Run Payroll.
  • Choose the paycheck schedule you want, then click Continue.
  • To track your payroll, the Pay Period, and the Pay Date, select or review the QuickBooks Bank Account.
  • Then select the employees you would like to pay.
  • Enter any relevant paycheck information, such as hours worked, money, memo, etc.
  • Select Payroll Preview.
  • Choose either Submit Payroll or Preview Payroll Details.
  • After finishing select Finish Payroll.

Create and Send an unscheduled Payroll

  • Select Employees from the Payroll menu.
  • Choose one of the following options from the dropdown ▼ menu: Bonus only, Commission only, or Fringe benefits only.
  • Choose between As Gross Pay or As Net Pay.
  • Any information about the taxes or paycheck calculations (if applicable).
  • To keep track of your payroll, the pay period, and the pay date, choose or review the QuickBooks bank account.
  • Choose the workers you want to pay.
  • Add hours, paycheck, memo, and any other paycheck info that is required.
  • After that select Preview Payroll.
  • Select Payroll Preview, Publish payroll, or save it for later.
  • After confirming the amounts and payment methods, click Finish Payroll.

QuickBooks Desktop Payroll

  • Choose Pay Employees, after click on Employees and select from the check types such as Scheduled Payroll, Unscheduled Payroll, or Termination Check.
    • In case you need to skip 3 then you need to run an unscheduled payroll.
  • Select Start Scheduled Payroll after choosing the proper schedule.
  • Check the Check Date, QuickBooks Bank Account, and Pay Period Ends.
  • Choose the employees you want to pay.
  • You can enter hours using the grid, or you can choose Open Paycheck Detail to view a breakdown of everyone’s paycheck.
  • To go to the next employee, select Save & Next, or to return to the Enter Payroll Information box, pick Save & Close.
  • Choose Continue.
  • Review your printing options for checks and direct deposits.
  • Select Create Paychecks once you have checked the amounts for each employee.
  • Print pay stubs and paychecks whenever is convenient for you. Send your payroll information and direct deposit paychecks to Intuit if you use QuickBooks Desktop Payroll Assisted or direct deposit paychecks.

How Dancing Numbers will Help You?

Dancing Numbers is SaaS-based software that can easily be integrated with your QuickBooks account. You can import, export, and delete lists or transactions from your company file. Using Dancing Numbers you can simplify and automate the process, saving time and increasing productivity. Just fill in a few fields and apply the relevant features to complete the task.

It saves your time and money that you can invest in your business. It has no human errors, works automatically, provides a user-friendly interface (easy to use and learn), and more. You can also have access to the comprehensive features set if you use it to Bulk import, export, and delete services.

With the help of the above article, you can clear your doubts regarding Employee Advance. This article can help you out in many things. In case you are still having any issues related to this then you can connect with Dancing Numbers experts via LIVE CHAT any time as they are available round the clock. Your problems will be resolved within a few minutes without any hassle.

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Frequently Asked Questions (Faqs)

Do the Cash Advance needs to be Reported in the Company Account?

The cash advance is required to be reported as a reduction in the Cash Account of the company and also as an increase in the asset account like Advances to Employees.

Will the Account be Reported as a Current Asset?

If the particular amount is repaid in a year, the account will be reported as a current asset.

In QuickBooks, can you use other current Asset Accounts to Monitor the initial Check issued to the Employee?

Yes. In QuickBooks, any other current asset account can be used to track and monitor the initial check that has been written to the particular employee.

How You Can Record Advance Payments in Accounting?

The accounting entry is always a debit to the asset Cash for the amount received whenever an advance payment is made. Additionally, a credit for advance payments, unearned revenue, or customer advances must be provided to the liabilities account.

Employee Advances – Are They Taxable?

Advances. For payroll tax reasons, payments you make to your employees for services they’ll perform or finish later are taxable wages. If the employees are legally obligated by law to repay the advances, then the advances are not considered wages for tax purposes.

Where do Employee Advances go on the Balance Sheet?

On a company’s balance sheet, advances are recorded as assets. They are recorded on the income statement for the period in which they are incurred as these assets are used up.

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