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Running Payroll

Running Payroll

Publicado el
Published on
September 6, 2023
Actualizado en
Updated on
December 20, 2023


Payroll processing is the process by which employee salaries are calculated and paid. It includes considering employment contracts, hours worked, bonuses, deductions, and other salary components. This process is carried out in three key steps:

  1. Enter Payroll
    In this step, we add employees and updates, taking into account all applicable components.
  2. Review and Approve
    Here, we conduct a thorough review to ensure that the data is correct. Once approved, the payroll is recorded in the accounting system and generates the payable account.
  3. Confirmation
    In this final phase, the payroll is complete and shows the pay stubs for each employee. The payroll cannot be modified after this point.

Before running a payroll, it is necessary to:

  • Add your employees in the employee area.
  • Set up employment contracts for each employee.
  • Have created and applied additional components if applicable.

This article will guide you through these essential steps to efficiently and accurately carry out this process, ensuring that employees receive their correct and timely payments.

2. Running a New Payroll

2.1 (a) Enter Payroll

To create a new payroll, follow these steps:

  1. In the main menu, go to Payroll and then click on Payroll.
  2. In the list of Payrolls, click on the (+) button.
  3. In the window that appears, choose the type of payroll (Regular, Temporary), description, frequency, period, currency, date, prepared by, and click on Generate & Continue.
  4. On the Payroll Execution screen, click on the "+ Employee" or "Add Employees" button.
  5. In the window that appears, activate the employees you want to include in the payroll and click on + Add. You can use the search field to find employees.
  6. If you need to add updates to your employees, skip to the next step "2) Add Updates."
  7. You can also add Notes and Comments by clicking on the "Open" option under the Save and Save & Continue buttons.
  8. Click on Save & Continue to save and proceed to the next step.

2.1 (b) Add Updates

If you need to add updates to an employee, click on the "+ Updates" button for the employee.

  1. In the window that appears, you have the tabs Benefits, Deductions, Receivable. Choose the tab according to the update type.
  2. To apply an update of type Benefits or Deductions, click on + Add, choose the Component, and enter the Amount. To apply a Receivable update, choose the employee accounts receivable you want to deduct in this payroll.
  3. Then click on Save & Continue to save and return to the payroll.
  4. You can repeat these steps for each employee who will receive an update.
  5. Click Save & Continue to save and proceed to the next step.

2.2 Review and Approve

In this step, review the payroll and ensure that all data is correct.

  • You can view the details of additional updates and the distribution of deductions by clicking on their respective amounts.
  • You can view the payment voucher for each employee by clicking on Preview for each employee.
  • If you need to go back and make any changes, click on Back.
  • To approve the payroll, click on Approve Payroll.

2.3 Confirmation

In the confirmation step, the payroll has been recorded in the accounting system and is ready for payment execution.

  • You can view the payment voucher or send it via email to the employee.
  • To record the payroll payment, click on Pay Payroll.
  • This will take you to the checks and payments module, where you can record the payment.
Payroll States

Payroll management is divided into different states that reflect the phase in which the process is. Each state indicates the progress of the payroll and the actions that can be taken at that time. Here are the key states in payroll management:

Draft: In this state, payroll data is entered. No reviews or final adjustments have been made.

Under Review: The payroll has been entered and is in the process of being reviewed for final adjustments before confirmation.

Posted: The payroll has already affected the accounting, generating the corresponding accounts payable. Although registered, it is still pending payment.

Partial: Refers to when part of the payroll has been paid but not in full.

Paid: Means that the payroll has been paid in full, fulfilling all financial obligations to employees.

Cancelled: The payroll has been canceled, reversing all related accounting entries and accounts payable.

Understanding these states allows for a smoother and more efficient handling of payroll, facilitating the transition between different stages of the process.

3. Modifying a Payroll

You can make changes to a payroll as long as it has not been approved (Closed status). To make changes to a payroll, follow these steps:

  1. In the main menu, go to Payroll and then click on Payroll.
  2. In the list of Payroll runs, find the one you want to modify.
  3. Click on the action menu (three horizontal dots).
  4. Click on Edit.
  5. Make the necessary adjustments.
  6. Click Save to save the changes or Save & Continue to save and proceed to the next step.
Modify Payroll
You can change data in a payroll while it is in "Draft" or "Under Review" status. However, once the payroll has been approved, you will no longer be able to make modifications.

4. Voiding or Deleting a Payroll

To void or delete a Payroll, follow these steps:

  1. In the main menu, go to Payroll and then click on Payroll.
  2. In the list of Payroll runs, find the one you want to modify.
  3. Click on the action menu (three horizontal dots).
  4. If the payroll is in Draft status, click on Delete.
  5. If the payroll is in Open or Closed status, click on Void Document.
  6. You will be asked to confirm the action.
Void or Delete a Payroll
If the payroll is in "Draft" status, you can delete it. For payrolls in "Under Review" or "Posted" status, you need to cancel them. Please note that payrolls in "Paid" or "Partial" status cannot be deleted or canceled as they already have a linked payment.

5. Payroll List and Options

The Payroll Execution module provides a list of all created payrolls and a set of options in the action menu (three horizontal dots) for each payroll that allow you to manage and track each stage of the salary payment process easily. The options in this menu are:

  1. Preview
    This option allows you to preview the Payroll with the list of employees and payments in a print-ready format.
  2. Edit
    This option allows you to make changes to a payroll that has not yet been approved.
  3. Duplicate
    With this option, you can duplicate the payroll with all employees and their calculations.
  4. Pay
    This option takes you to the checks and payments module to complete the payroll payment.
  5. Delete
    If for any reason you need to delete a payroll, you can do so using this option. You can only see this option if the payroll is in Draft status.
  6. Void Document
    If for any reason you need to void a payroll, you can do so using this option. You can only see this option if the payroll is in Closed status.

These menu options are designed to facilitate the management of your payrolls and provide greater flexibility and control in handling your entire salary calculation and payment process.

Tips & Best Practices

To make the most of the payroll module in Cashflow and ensure an efficient and smooth salary calculation and payment process, consider the following tips and best practices:

  1. Keep Information Up to Date
    Ensure that employee and salary component information is kept up to date. This ensures accurate salary calculations.
  2. Review Payroll Before Approval
    Before approving the payroll, conduct a detailed review of all data to prevent errors. Remember that once confirmed, the payroll cannot be modified.
  3. Use the Duplicate Function
    If you have payroll structures that are similar, you can use the duplicate option to save time and effort.
  4. Consider Salary Components
    If you are applying additional salary components such as bonuses or deductions, make sure you understand how they work and how they affect the total payroll calculation. Review related tips on salary components.
  5. Comply with Legal Regulations
    Familiarize yourself with local laws and regulations regarding salaries, deductions, and other salary components to ensure compliance.
  6. Conduct Testing and Simulations
    If possible, conduct testing and simulations of the payroll before the final execution. This allows you to identify and correct potential inconsistencies.
  7. Document Processes
    Document and follow a standardized procedure for payroll execution. This ensures greater consistency and efficiency in the process.
  8. Employee Communication
    Ensure clear and timely communication with employees regarding any changes or updates to their payroll.

These tips are designed to help you manage the payroll process efficiently and effectively. By following these best practices, you can ensure that the process runs smoothly and that your employees receive their correct and timely payments.

Common Issues

Managing payroll can present certain challenges and common problems that may arise during the process. Below are some of these issues, along with guidance on how to resolve or avoid them.

  1. Data Entry Errors
    Entering incorrect information about hours worked, salaries, deductions, or bonuses can lead to calculation errors. Be sure to review and validate data before processing payroll and use controls and validations where possible.
  2. Payroll Calculation Errors
    Ensure that all component formulas, including custom ones, are up-to-date and correct. Accurate review of these formulas will help prevent incorrect calculations in payroll.
  3. Inconsistencies in Employment Contracts
    Failure to update contracts can cause discrepancies in salary calculations. Keep employment contracts up-to-date and regularly review them to ensure they reflect current employment conditions.
  4. Issues with Additional Components
    Omitting or making errors in applying additional salary components (such as bonuses or deductions) can affect the final amount. Verify that all additional components are created and applied correctly according to individual employee needs.
  5. Delays in Payroll Approval
    Lack of timely review and approval can cause payment delays. Establish a clear schedule and follow a structured review and approval process.
  6. Difficulties in Payment Confirmation
    Problems in the final confirmation phase can lead to payment delays or even incorrect payments. Be sure to review all vouchers and payment details before confirming, and if in doubt, consult documentation or seek assistance.
  7. Issues with Voiding or Editing Payroll
    Modifying or voiding payroll in certain states can be problematic. Understand the payroll states and associated restrictions for editing or canceling, and follow the appropriate procedures as described in the guide.

By considering these common issues and their corresponding solutions, you can optimize your payroll execution process and avoid many of the obstacles and challenges that may arise. Attention to detail, regular review, and clear communication are essential for a successful salary calculation and payment process in the payroll module.