Payroll - Loan Repayment

Hi Helen

I have given below the whole process for your question covering payroll and accounting assuming you use Clear Books accounting too.

When you process the payroll for the employee concerned, click on post-tax payment and a box pops up which asks for the description and amount of the payment. Name it as Staff Loan and enter the loan amount say £1200.00. This then adds it to the pay and does not deduct tax on this. Then Import the payroll into accounts.

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Create an account code Staff Loan by going to Settings>account codes>create. Create it under account type other debtors in the Balance Sheet.

You will then have to go to accounting and process a journal crediting Salaries account and debiting Staff Loan account for £1200.00 since the whole net pay would have been posted to Salaries account. This then creates a debtor in the books as Staff Loan of £1200.00.

Next is to deduct this from payroll. If you are planning to deduct it say in 12 instalments then easiest thing to do would be to create recurring journal for 12 occurrences debiting Salaries and crediting staff loan for £100.00 per month or 4 weekly based on your payroll payment frequency. To create recurring journal you need to go to Settings>Organisation>Toggle features and switch the toggle on for recurring journals. You can then click on Tools>Journals>recurring to create the recurring journals and create the journal.

To process deduction every month in payroll, when you process the pay for the employee treat this £100 as a post- tax deduction and you can give the description as recovery of staff loan. The loan deduction is shown on the payslip under deductions.

The above steps then takes care of payroll and accounting when you need to process a loan and recover it.

Hope this has been helpful.