How to create a loan/advance payment for an employee

KB469

Overview

Sometimes you may want to create a loan or an advance payment for an employee. You will need to record this debt in Accentis in order to balance your accounts, but you don’t want to create an invoice for the debt and affect your Accounts Receivables or risk having a GST event. The following process describes how to create a loan/advance for an employee without affecting your Accounts Receivable.

Note: This article is not a substitute for professional advice and is only intended as a guide to the setup of employee loan accounts and the processing of any payments made. There may be FBT implications with employee Loans/Advances and it is recommended that you seek advice from your accounting professional.

Process

The best way to create a loan for an employee in Accentis Enterprise is to establish a loan account to record the debt that is owed to you by the employee. A company can often have several of these loan accounts and it is a good way to manage loans/advance payments if you do them regularly.

Having a separate General Ledger account for each employee with a loan or advance will give you the ability to easily see the amount outstanding by each employee at a glance. It will also allow you to run reports to show the loan and repayments by the employee for each account.

1. Creating a GL account
  1. Create a new asset account.
    • This account represents the value of the amount that you have loaned your employee(s).
  2. Store it under a section that will be easily identifiable in your Chart of Accounts.
    • For example, you might set up a group account called “Employee advances” and use this as the parent account for the loan accounts.

The account would normally be set up as an asset account because you are owed the money.

However, you could also set it up as a liability account if you would prefer to have the accounts listed with your other employee/payroll accounts. As a liability account, the balance remaining on the account would show as a negative value, rather than a positive value.

2. Paying an employee an advance, or paying an invoice for them

When you pay an employee an advance or pay an invoice on behalf of an employee that is to be repaid, create a new Payment.

  1. Set the Type to Manual.
  2. The Drawing account will be the account the money was paid from.
  3. Add the Date and Payment Amount of the payment.
  4. Add a Memo for the payment.
  5. Enter the Employee loan account (set up above) into the Account code field and enter the Amount .

This payment will increase the value sitting in the loan account, which will reflect the full amount that is owed to you by the employee.

3. Employee repaying their advance

The employee may make repayments to you to repay the loan, or there may be an agreement in place to repay the loan through payroll.

  1. If repayments are made by the employee to your bank account, create a Receipt and set the Type to Manual.
  2. When an agreement is set up for the loan to be repaid through payroll, you will need to follow the steps in KB303 - How to manage loans to employees through payroll.
    • This will reduce the balance owed by the amount repaid from the employee's pay.

Once the loan/advance has been fully repaid, the general ledger account balance should be $0.

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Last edit 03/05/24