Note: This QuickBooks® tip assumes that you have an active QuickBooks® payroll subscription.
First, create an Asset Account to Track the Employee Loan and Repayment
This is a one-time setup task
- Go to the Lists menu and click Chart of Accounts
- Click Account at the bottom of the list and then click New
- Under Other Account Types choose Other Current Asset and then click Continue
- If you are using account numbers, enter the number in the Numbers field
- In the Account Name field, enter Employee Advances
- Click Save & Close
Next, you can either write a regular check (non-payroll) to the Employee for the Advance and post it to the Other Current Asset account Employee Advances or you can pay the Advance through Payroll in which case you will need to create a Payroll Item of the type “addition”.
This is a one-time setup task.
- Go to the Lists menu and click Payroll Item List
- Click Payroll Item at the bottom of the list and then click New
- Select the Custom Setup method and click Next
- Choose Addition and click Next
- Enter the name for this addition as Employee Loan
- Click Next
- On the Expense Account screen, choose the Other Current Asset account, Employee Advances, that you created in Step 1 for tracking this expense and click Next
- Select None as the tax tracking type
- Leave the taxes unchecked and click Next
- Select Neither in the calculate based on quantity screen and click Next
- Select Net Pay and click Next
- Leave the default rate and limit blank and click Finish
Use this addition on the Employee’s paycheck under Other Payroll Items. Enter this amount as a positive number.
Then, create another Payroll Item of the type “deduction”Again, this is a one-time setup task.
- Go to the Lists menu and click Payroll Item List
- Click Payroll Item at the bottom of the list and then click New
- Select the Custom Setup method and click Next
- Choose Deduction and click Next
- Enter the name for this deduction as Loan Repayment and click Next
- Leave the first two fields blank, then under the Liability account field, choose the Other Current Asset account, Employee Advances, that you created in Step 1 for tracking this expense and click Next
- Select None as the tax tracking type and click Next
- Leave the taxes unchecked and click Next
- Select Neither in the calculate based on quantity screen and click Next
- Select Net Pay and click Next
- Enter a default rate and limit if desired and then click Finish
Note: You should only enter a default rate and limit if the rate and limit will apply to everyone using the Payroll Item. The limit may be marked as an annual limit and if so, you will need to manually adjust or remove the amount at the beginning of the calendar year or it will start recalculating.
Use this deduction on the Employee’s paycheck under Other Payroll Items. Enter this amount as a negative number.
Create a Custom Summary Payroll Report to Track Employee Loan Balances
- Go to Reports
- Select Employees & Payroll
- Select Payroll Summary
- Click on Customize Report in the upper left corner
- On the Display tab, choose All Dates
- Select Payee in the Display Columns by drop-down menu
- Check % of Row and uncheck Hours and Rate
- Click on the Filters tab, select Accounts and choose the Other Current Asset account used for the Employee Advances on the drop-down menu
- Click OK
Manage Employee Loans that will be Repaid over Time on Multiple Paychecks
- Edit the Employee
- Change tabs to Payroll and Compensation Info
- Under Additions, Deductions and Company Contributions select the Loan Repayment Payroll Item
- Enter the amount to be paid by paycheck in the Amount column as a negative amount.
- Enter the balance remaining to be paid at this point into the Limit column as a negative amount.
- Click OK
Note: QuickBooks® will automatically deduct this repayment on each paycheck and will stop the deduction once the limit has been reached.
This article of QuickBooks Tips and Tricks was based on the 2012 version of QuickBooks.