How to Record Outsourced Payroll in QuickBooks | Advantages | Disadvantages

In QuickBooks Accounting software, the outsourcing of payroll enables employers to concentrate on their core businesses and frees up the […]

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In QuickBooks Accounting software, the outsourcing of payroll enables employers to concentrate on their core businesses and frees up the business person, HR professional or bookkeeping staff to work more diligently on important tasks which may eventually have an impact on your main concern. Always be sure that you always select the appropriate payroll taxes expense records to enter the entire employer payroll taxes as positive numbers. Enter a check to a vendor that matches the name of the company handling your outsourced payroll. Create a Check in the amount of the total payroll charge and record it as an expense.

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People prefer using a third party or outsourcing to handle their bookkeeping because of the significant advantages of outsourcing payroll. The majority of people undoubtedly use payroll services outsourcing for their paychecks. The use of payroll outsourcing is astounding, although the process of entering payrolls into QuickBooks is in some way perplexing. When entering Outsourced Payroll into QuickBooks, different businesses use different methods. Others prefer to first set the record on an internal register and then transfer it to the diary, while some people prefer to enter the information immediately.

Actual Payroll Checks

Some payroll providers will deduct a single lump sum payment from your bank account to pay for the actual payroll checks, Direct Deposits, Payroll Taxes, and their fee. If sometime they fail to do so then you will need to record each actual payroll check separately since they will see that how they will settle your checking account. Payroll expenses should be recorded as wages, and they should be broken down in accordance with your chart of accounts for example- management of wages, office wages etc. In the check information which enter wages as a positive number. All employee payroll taxes must put in the check detail as a negative figure and hit a liability account titled payroll taxes employee. A payroll liability account should be impacted by any Deductions for 401(k), cash advances, etc. These deductions should also be represented as negative numbers. As a result, the payroll check should contain the same amount as the check’s original amount.

Direct Deposits

There are two alternatives for direct deposit checks and each one complies with all legal requirements. The only difference is that you want to produce a single journal entry which lists all the direct deposit payroll checks or keep separate entries for each employee’s direct deposit check. Your option will determine whether you want to be able to look up each individual employee checks in QuickBooks or whether you want to rely solely on your payroll reports for this. A positive number should once more be entered for wages as a cost, a negative number for employee taxes, and a positive number for any additional deductions.

Payroll Taxes

Too many bookkeepers will make the Payroll Taxes component of accounting complicated. To the appropriate payroll liabilities account or accounts, add the employee taxes component as a positive amount. To the relevant payroll taxes expense account or accounts, add up all employer payroll taxes.

Service Fee for Payroll

Enter a vendor check with the name of the business that handles your outsourced payroll matching. The payroll fee should be entered as an expense with a check for the full amount.

Checking Yourself

By examining your Chart of Accounts and ensuring that every payroll liability account has the proper balance of zero is one technique to ensure that your work is correct. The amount of your payroll provider withdrew from your checking account is another approach to ensure that your work is accurate. This total should coincide with the sum of the direct deposit checks, the amount of payroll taxes (including employee and employer shares), and the sum of the payroll fee. The sum should also account for the liability of actual payroll checks, if your payroll business assumes that responsibility.

Way of Choosing the Outsourcing Payroll Provider

Understanding what to look for in a full-service payroll provider helps ease the move, reduce employee disruptions, and maintain peace of mind. Employers typically take the following actions to make sure that outsourcing payroll is a success while vetting potential partners.

  • Knowledge of Requirements: Payroll can be complicated due to several pay periods and employee classifications.
  • Describe Compliance: Payroll service companies must also adhere to multiple state and international jurisdictions.
  • Consider the Vendor’s History: Reputable suppliers typically have steady ownership, robust financial standing, and a history of successful deployments.
  • Consider Peer Evaluations: Decisions can be validated with the help of industry analysts and customers who have utilized the provider’s payroll services.
  • Ensure Stakeholder Support: When senior leadership and all staff are on board, outsourcing payroll is frequently simpler.

Effective Method to Record Outsource

You always need a special care and a specific procedure to record outsourced payroll in QuickBooks. Payroll should be carefully recorded, with information on expenses and overall profit which is provided. You can enter Outsourced Payroll in QuickBooks by classifying it into categories like:

  • Cost Associated with Preparing Payroll: This record would be classified as an expense.
  • Compensations: In this class, please list all of your compensations. The relative abundance of payments and compensations should be included, along with an amount.
  • Payroll Obligations: Payroll liabilities include all deductions that you may make from the compensation of employee.
  • Funds for Medical Expenses/Health Insurance: This includes garnishments and payroll taxes. You will remember the liability as a result of the class where these deducted payments are disbursed.
  • A Direct Deposit: Direct deposits are actual checks. It represents the net result of using checks.
  • Expenses Related to Payroll Taxes: Include FICA, SUI, and FUTA in this category. You can include all taxes, expenses incurred by them, and working expenses in this section.

Be sure that the expenses and obligations have been properly categorized. When you have completed all of the orders, you can easily maintain the Record Outsourced Payroll in QuickBooks. In order to prevent any form of mistake in payroll services, classification and specifics are the essential choices.

Least Demanding Method of Recording Outsource Payroll

Include the outsider in your QuickBooks records for the most effective way to keep track of outsourced payroll. You will make a tone of mistakes and blunders if you try to keep a record on your own. Despite taking great caution, you would forget to deal with the statistics and figures. If you don’t want to incorporate the outsider, you can cope up with the problems and mistakes, such miscalculating taxes, which lead to more problems like punishments. A series of numbers make up the process of keeping records for outsourced payroll in QuickBooks. It is a payroll service that requires the involvement of an outsider in order to be completed quickly and accurately.

Features Provide by Outsourcing Providers

The following are the major characteristics that are typically provided by payroll outsourcing companies that have the expertise and technology required to deliver accurate, fast results:

  • If necessary, provides payroll processing that interfaces with an accounting system.
  • Tax filing for payroll
  • Self-service for employees whenever, anywhere, and via any device.
  • Methods for paying employees, such as pay cards and direct deposit.
  • Processing of tax returns, including Form W-2 Income Tax and Wage Statement.
  • Taking wage deductions.
  • Custom reporting and payroll.
  • Recordkeeping for employees.
  • New employee reporting.
  • Easily accessed customer service.

Advantages of Outsourcing

Outsourcing this crucial aspect of running a company is alluring because it comes with opportunities. Consider the benefits before giving a third party the responsibility for the payouts.

  • Saving of Time: Outsourcing payroll allows businesses to avoid the time-consuming tasks of calculating salary and allowances, sending checks to employees, and dealing with tax experts. Paycheck Stub Printing costs could also be reduced. You also save time by determining how long are owed for each payment period because some payroll companies provide check-in/check-out services for employees. Additionally, a company provides support in the form of direct transfer and online pay stubs to further ease the payroll issue.
  • Calculation of Taxes: Entrepreneurs are aware that employee payroll deductions can be complicated, including federal, state, and local taxes. In many cases, a payroll organization is better equipped to calculate these allowances accurately and consistently. The company must ensure that the taxes are paid on time. Punishes business owners as frequently as possible for paying payroll taxes incorrectly. The fines levied sometimes exceed the amount of the error.
  • Maintain Compliance: Employers don’t have to worry about keeping up with changing government requirements because payroll providers do, and they frequently take the initiative in filing all the documentation required for compliance.
  • Incorporate Data: Data accuracy is improved and single sign-on makes it simpler to access information when payroll is completely integrated with time and attendance, benefits, and other HR apps.
  • Enabling Self-service for Staff: Employees utilizing full-service payroll are often able to log their hours, examine their pay information, and manage their withholdings all from a mobile device.

Disadvantages of Outsourcing

It can be tempting to outsource this crucial aspect of running a company because it comes with risks. Consider the drawbacks before to entrusting a third party with the responsibility for wages.

  • The Wrong Company Can Produce Errors: A payroll firm that has never managed extraordinary components of an organization’s payroll, such as unionization and employee tips, can inadvertently introduce inaccuracies into the payroll, and correcting the errors can be expensive and difficult to manage. A payroll organization that doesn’t offer an interface that enables companies to directly enter their employees’ hours and as a result requires the payroll organization to include the data may present pay errors due to simple human error.
  • Business Owners Are Ultimately Responsible: If a company fails to accurately and on time pay the taxes it owes, it is responsible for those taxes. After paying cash to the payroll organization, the business can still owe taxes to the payroll company regardless of whether the payroll organization was negligent in handing over the tax money. This can be the case if the payroll company has a dishonest employee who has the ability to embezzle reserves. The payroll company advises all businesses to use the Electronic Federal Tax Payment System in order to make timely tax payments.
  • Business Overspending on Services They Don’t Need: Many payroll companies provide a variety of services and persuade businesses to join them by providing all-inclusive bundles. As a result, outsourcing payroll becomes more expensive, and it’s possible that the additional services provided are not actually beneficial to the company. Prior to searching for a service provider, a business is better protected from such an attempt to sell something by clearly stating what it wants from a payroll organization.

The above article will be very helpful for you in understanding that how to perform recording outsourced payroll in QuickBooks but still if you are facing issue than you can connect with Dancing Numbers team will help you in sorting it out.

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Frequently Asked Questions

How Many Organization Levels Outsource Payroll?

Payroll outsourcing is done by the associations throughout the period 2015–2019. The percentage of organizations as a whole that totally outsource their payroll job altered between 2015 and 2019, with a specified percentage of respondents in a 2019 survey stating they completely re-appropriate their payroll compared to eight percent in the year 2015.

How Do I Enter Payroll Conducted by a Third-Party Payroll Service in QuickBooks?

Create a journal section after paying your staff outside of QuickBooks. Request a payroll report or the payroll hits for your employees from your payroll service. Then, simultaneously hit select and then click New. The next step is to select the journal entry. The pay date must now be entered in the drop-down box for journal entries. In a different scenario, if the paycheck number needs to be followed enter it in the Journal number and you are through with this process.

What Advantages are there to Outsourcing Payroll Services?

As they are prepared, reviewed, and evaluated by competent professionals, outsourced payroll agreements provide greater accuracy than in-house payroll across the board. It allows businesses to focus on center assignments by saving time and resources. It reduces the costs and risks entailed.

What are the Steps for Entering Third-party Payroll into QuickBooks?

• First, you have to navigate to the Lists menu.
• Click on the Chart of Accounts from the list of option of menu.
• The drop-down menu of chart of accounts will appear in front of you on screen, select Account from it.
• Choose New.
• Now, you have to choose Expense option.
• Type the detail and correct account information of third party.
• Once you are done with above steps, navigate to the save button and click it for saving the changes you have done. At last, click exit button.

How is Payroll Outsourcing Carried out?

Payroll outsourcing is the practice of a company outsourcing all or a portion of its payroll processes to a third party. Full-service companies frequently assist with data security, unemployment claims, tax reporting, and regulatory compliance in addition to managing payroll.

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