Is accounting a foreign language? A step by step approach to setting up a general ledger interface file

Elissa Hinze, CPP Payroll Client Support Manager
Are you tired of accounting asking you to create the journal entry for payroll or to provide them with documents so they can create it each pay period or each month? There is a better way to get this information into the general ledger without having to do any manual work.

Step 1: Creating a List of Items to Map

You will first have to make a list of all of the earnings, deductions, employee taxes, employer taxes, and other codes that need to be mapped to general ledger account codes. First start out with the list of items that are paid to the employee or deducted from the employee’s check. The second list you will make is of all the items that are calculated in payroll but do not actually have an effect on the current check amount such as employer taxes, employer matches on retirement plans, and possibly time away accruals (put the accruals aside for now as we will cover that later on).

Step 2: Mapping

If you are currently creating the journal entry manually it is time to map each code to its appropriate general ledger account code. If you aren’t creating the journal entry but supplying accounting with reports instead it is time to sit down with accounting to map all of the codes. Don’t get discouraged by what may appear to be a foreign language with words such as debits, credits, assets, liabilities, and expenses. Here is a simple breakdown:

Earnings – these are usually expenses so they normally have a debit value and will have a general ledger account code that is an expense account. However, as in everything there are exceptions to the rules. If your company accrues for certain items such as bonuses, or time away such as PTO or vacations, then the debit will be going to a liability account.

Deductions and employee taxes – these are typically withheld from the pay check and are liabilities which normally have a credit value and will have a general ledger account code that is goes to a liability account. Yes, there are some exceptions to the rules. For instance, some companies take the benefit deductions which are credits to an expense account decreasing the expenses for the benefits.

Net pay and direct deposits – these typically reduce an asset account so they have a credit entry to a general ledger asset account. Yes, once again there are some exceptions to the rules – these entries may need to debit a liability account and credit an asset account.

Once you have finished mapping it on paper it is time to enter it into your payroll system.

Step 3: Journal Entry

If you haven’t gotten lost, it’s time to create a paper journal entry to determine if everything is mapping correctly, and of course, that you are In Balance. “In Balance” is another foreign accounting term that means the debits and the credits equal each other. If the report is not In Balance then you have missed an item and need to return to Step 1.
Once the journal entry balances, it’s time to have accounting confirm the entry is correct. If not, you will need to determine which codes need changing by going back to Step 2.

Step 4: Interface File

You need to get the file specifications for your general ledger system. What are file specifications, you may ask? Well, they are basically a map showing how the file must look in order for it to interface into the general ledger system.
Once you understand the file specifications it’s time to write or have a programmer write the file in the payroll system in order to create the export file.

Step 5: Test, retest….

If you have completed writing the interface file, it is now time to test the file. If there are errors on the file, you will have to go back to Steps 1, 2, 3, or 4, depending on what the error is and repeat the steps.

Step 6: Deploy!

You have successfully made it through all of the steps and have learned what you thought was a foreign language. You think it’s time for a rest and what do you hear? Accounting wants a monthly accrual file?!

Step 7: Accrual Files

Well, an accrual file is usually a file that estimates the payroll expenses that the company will incur for the remainder of the month. If you are really lucky, your payroll has a period end-date and pay date as of the last day of the month. Most of us aren’t that lucky.
You need to determine how to estimate the payroll expenses and once you have determined this go back to Step 1 for any mapping changes and proceed through Step 6. And another thing to keep in mind, this journal entry needs to have a reversing entry or automatically reverse itself in the next month since the actual entries will be entered.

Step 8: Everything is Deployed and Working

Now comes the fun part! Everything is up and running and you get the question from a manager or someone in accounting about an expense that looks really high (they usually don’t complain if the expense is low). Hopefully you have a report or easy way to determine the details for the account in question. If not you could spend a lot of time trying to determine the employees and items that make up the amount in question.

Step 9: There’s a Better Way!

Ascentis Payroll has the ability to interface with any general ledger system. Better yet, we usually work directly with the accounting department so if you don’t want to learn a foreign language you don’t have to. We also have detailed reports that may be run on demand which shows fully itemized entries that were passed to the general ledger.

If you would like more information about Ascentis Payroll, call 1-800-229-2713 or visit the Ascentis Web site.