USA Third-party payroll adjusting entries

[slc813]

Hi, we have just started using third party payroll company, Gusto. They give us an IIF file for the payroll journal entries to import into Quickbooks. And they give us their employee payroll reports in their portal. But I can no longer see the employee reports in QB. I can no longer see direct labor in Cost of Goods on my P&L. Other than running a separate report to show general hours vs project hours and then exporting the P&L to excel and manually adjusting the report, there is no way to allocate the cost for those hours into the P&L.

Is there a way to enter payroll journal entries that will connect the transactions to the employee payroll report?
Is there a way to link the hours to the payroll via journal entries?

We only have 3 employees. The idea was to offset the payroll liability from me to the payroll company, but the added work to see our multiplier and cost per employee, which we do regularly, seems excessive unless I can use journal entry(ies). Or even a regular entry. I don't care which, but I would prefer to have my data in one place. Any help would be great. Thanks!

Also, we paid two employees for expenses, which are project identified. There is no way to allocate the cash to the bill. Is that another journal entry? Maybe this is not the best way to pay the expenses.

 

[rajkishancpa]

Hey,
It sounds like you are running into a common challenge when transitioning to a third-party payroll provider like Gusto, ensuring payroll costs are properly reflected in your P&L and maintaining visibility into direct labor costs.

Payroll Journal Entries & Linking to Employee Reports:
Since Gusto provides an IIF file, QuickBooks will import payroll data as journal entries, but these are often summarized and may not include the same level of detail as the built-in payroll module. To allocate payroll costs to jobs or direct labor categories, you may need to manually adjust the journal entry after importing:

1. Modify the Journal Entry – After importing the IIF file, open the journal entry in QuickBooks and reclassify wages to the appropriate accounts. You can also split wages by job if you track project costs.
2. Use Class or Job Tracking – If you enable class tracking in QuickBooks, you can allocate payroll costs based on project hours manually within the journal entry. This will allow them to show up in your P&L under the correct category.
3. Custom Reports for Labor Cost Visibility – Since QuickBooks won’t automatically link hours to imported payroll entries, you may need a workaround. One option is running a time-tracking report separately and cross-referencing it with payroll costs. While not fully automated, it provides insight into labor costs.

Employee Expense Reimbursements & Project Cost Allocation:
If you've paid employees directly for expenses and need to allocate them to specific projects, you have a couple of options:

Journal Entry Approach:

• Debit the appropriate project expense account (Job Materials, Travel, etc.).
• Credit the Cash or Payroll Clearing account used to pay the employees.
• This keeps the expense tied to the right project in your P&L.

Alternative – Use a Vendor Bill:

• Some businesses prefer setting up employees as vendors for reimbursements, allowing expenses to be linked directly to projects via Bills rather than payroll.

The goal of outsourcing payroll was to reduce liability and streamline payroll processing, but you still need detailed reporting to track your labor cost multiplier. If the manual adjustments become too cumbersome, consider integrating a third-party job-costing tool or syncing a project management system with QuickBooks.

Let me know if you need more specific steps based on how you categorize expenses in QuickBooks!