Key Data Drives Financial and Operational Decision Making

Key Takeaways:
  • Payroll is typically one of a company’s largest expenses 
  • Payroll data helps manage cash flow and ensure compliance 
  • Reviewing payroll reports at least monthly is a best practice 

 

Payroll is typically one of the largest expenses employers have, so the reports that flow from the payroll process are critical to helping a controller manage a company’s cash flow and ensure compliance with tax authorities and employee benefit plans. Additionally, your employees are the most important part of your business, so these reports help you ensure they are paid accurately and on time. 

Payroll reports provide detailed data on the impact that wages, payroll taxes and employee benefits have on the company’s bottom line. Moreover, when reviewed properly after every payroll period, these reports can signal when the numbers don’t look right.  

Following is a list of the key payroll reports that should be generated after every payroll period and shared with the company’s controller, as well as other key managers, as necessary. Whether you do your payroll in-house or work with an outsourced payroll provider, these reports can play a critical role in managing your company’s cash flow. 

Key Payroll Reports 

Payroll Register

The payroll register provides a list of all the checks or payments you are issuing to employees during a particular pay cycle. It details gross wages, taxes, any deductions and the net amount that goes to the employee, as well as which employees receive their pay by direct deposit, and which employees receive a check. It will also include any memos about employer expenses. The payroll register is important because it reflects the actual amounts that are going to your employees.  

The payroll register should be reviewed before the payroll is finalized to catch any anomalies or mistakes that must be corrected. Catching and correcting mistakes before the payroll goes out helps avoid unnecessary impacts on taxes for both the employee and the company. The payroll register should also be double-checked after the payroll is submitted. 

Cash Requirement Report

The cash requirement report tells you exactly how much money you need to pay for the payroll. This includes net amounts paid to employees, amounts to cover taxes and amounts paid to third parties such as retirement plans and healthcare insurers. This report also shows the amounts needed for direct deposit pay and for checks.  

Cash to cover direct deposit payments must be deposited in the bank at least 48 hours before the payroll goes out, leaving time for the funds to be transferred to the Federal Reserve, then transferred back to the bank for the payroll payments.  

Additional Payroll Reports 

The payroll register and the cash requirement report detailed above are the two critical payroll reports that help a controller manage cash flow. If you work with an outsourced payroll provider, they may be the only payroll reports you need. However, several additional reports can help key managers ensure the company remains in compliance with several entities, as well as round out the cash flow management. 

Payroll Tax Liability Report

The payroll tax liability report shows the controller what taxes the company is paying, when the taxes are due and which taxing authorities are being paid. Since taxing authorities often have different payment deadlines, this report can help you establish a calendar showing how much the company owes and when the tax bills must be paid. This will also help the controller ensure that the necessary money is set aside for tax bills. 

Employer Benefits Report

The employer benefits report shows what has been deducted from employees’ checks and what related payments the company must make to be in compliance with the benefit providers. This would include 401(k) and other retirement plan contributions, health insurance deductions and any Health Savings Account contributions. Companies use this report to reconcile what was withheld vs. what they will owe on a monthly basis to the benefit provider companies. Companies also use the report to calculate the amounts they need to pay in matching contributions or premium support. 

Reviewing this report after every pay cycle and reconciling it once a month is critical to ensure that employee benefit premiums are not paid for workers who have left the company, and that they are being paid for new employees who have joined the company. 

Labor Cost Report

A labor cost report is an operational report that breaks down labor costs by department, job site, location or any other metric that would be meaningful to a business. Its data can reveal why costs have risen or dropped sharply, why overtime might be higher than normal, and how staffing and scheduling impacts results. The labor cost report shows trends and anomalies that key managers may use to make changes to a company’s operations.  

The labor cost report is customizable, and growing companies may find they need to add metrics to it as they get bigger to get the full picture. 

The trends that are revealed in a labor cost report can be used to project out over the next four to six months to get a clear picture of how any anomalies, such as high overtime rates, will impact the company’s cash flow over time. 

General Ledger Reconciliation Report

The general ledger reconciliation report shows the controller exactly what dollars are being allocated to which accounts on the general ledger. It details which accounts various payroll payments are being posted to, and illustrates how the payroll is being booked on your financial statement. 

The PTO accrual report details how much and what type of paid time off is owed to each employee. If a worker has earned four weeks of vacation annually, but leaves the company after taking only two weeks, depending on your company’s policy you may owe the employee the cash equivalent of that unused vacation time when they separate.  

Some states require that these amounts be paid when employees leave a company, but Kansas and Arkansas do not. Individual companies’ policies determine whether the payments are made. As a result, the PTO accrual report must be customized to reflect your company’s policies or state laws. 

Questions? 

Payroll reports are important tools for managing a company’s cash flow, and for providing actionable insights that help controllers and key managers make timely decisions.  

If you would like to discuss how using payroll reports can help bring clarity to your financial reporting, contact an Adams Brown payroll provider.