Payroll Processing and Fixed Asset Procedures:Computer-Based Payroll Systems

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Computer-Based Payroll Systems

AUTOMATING THE PAYROLL SYSTEM USING BATCH PROCESSING

Because payroll systems run periodically (weekly or monthly), they are well suited to batch processing. Figure 6-9 shows a flowchart for such a system. The data processing department receives hard copy of the personnel action forms, job tickets, and time cards, which it converts to digital files. Batch computer programs perform the check writing, detailed record keeping, and general ledger functions.

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Control Implications

The strengths and weaknesses of this system are similar to those in the batch system for general expenditures discussed earlier. This system promotes accounting accuracy and reduces check-writing errors. Beyond this, it does not significantly enhance operational efficiency; however, for many types of organizations, this level of technology is adequate.

REENGINEERING THE PAYROLL SYSTEM

For moderate-sized and large organizations, payroll processing is often integrated within the human resource management (HRM) system. The HRM system captures and processes a wide range of personnel-related data, including employee benefits, labor resource planning, employee relations, employee skills, and personnel actions (pay rates, deductions, and so on), as well as payroll. HRM systems need to provide real-time access to personnel files for purposes of direct inquiries and recording changes in employee status as they occur. Figure 6-10 illustrates a payroll system as part of an HRM system.

This system differs from the simple automated system in three ways: (1) the various departments transmit transactions to data processing via terminals, (2) direct access files are used for data storage, and (3) many processes are now performed in real time. We discuss the key operating features of this system next.

Personnel

The personnel department makes changes to the employee file in real time via terminals. These changes include additions of new employees, deletions of terminated employees, changes in dependents, changes in withholding, and changes in job status (pay rate).

Cost Accounting

The cost accounting department enters job cost data (real time or daily) to create the labor usage file.

Time-Keeping

Upon receipt of the approved time cards from the supervisor at the end of the week, the time-keeping department creates the current attendance file.

Data Processing

At the end of the work period, the following tasks are performed in a batch process:

1. Labor costs are distributed to various WIP, overhead, and expense accounts.

2. An online labor distribution summary file is created. Copies of the file are sent to the cost accounting and general ledger departments.

3. An online payroll register is created from the attendance file and the employee file. Copies of the files are sent to the AP and cash disbursements departments.

4. The employee records file is updated.

5. Payroll checks are prepared and signed. They are sent to the treasurer for review and reconciliation with the payroll register. The paychecks are then distributed to the employees.3

6. The disbursement voucher file is updated and a check is prepared for the funds transfer to the payroll imprest account. The check and a hard copy of the disbursement voucher are sent to cash disbursements. One copy of the voucher is sent to the general ledger department, and the final copy is sent to AP.

7. At the end of processing, the system retrieves the labor distribution summary file and the disbursements voucher file and updates the general ledger file.

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Control Implications

The real-time features of the payroll system provide many of the operational benefits discussed earlier, including reductions in paper, clerical labor, and the lag time between event occurrence and recording them. As mentioned before, these features carry control implications. Computer-based systems must pro- duce adequate records for independent verification and audit purposes. Also, controls must be implemented to protect against unauthorized access to data files and computer programs.

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