Salaries are what you pay to your employees as they have done their work. There are companies who pay in advance for the job performed in the next period, but as those are rare, we are not focusing on those occasions right now. Continue reading
Category Archives: 1.09 Payables to Employees
Recognizing a vacation reserve
In most countries the employees are entitled to a time off that’s to be paid by you as the employer (it’s your liability until you’ve paid what you owe). This “time off” is normally called as a vacation and as mentioned, within the company’s books this is a liability. Accounting for this liability, a reserve if you may, can be achieved two ways: Continue reading
Accounting for bonuses to employees
With bonuses to employees it’s important to remember one simple rule – they’re always supposed to be expensed within the reporting period they relate to. I know it’s obvious, but for some reason the mistakes happen often enough to have this explained further. There are questions people struggle with and hence it seems safer to recognize the bonuses within the period they are either paid out or when the answers are definite. Continue reading
Reversing bonus expense
Not always what you estimate works out the way you initially thought. An estimate in essence is “estimating” or “guessing” what might happen based on the information you have at your disposal at the time you’re making the estimate into your accounts. Continue reading
Negative vacation reserve
So what if you allow your employees to use more vacation than they have got to use. What happens in your accounting?
Technically speaking, let’s discuss regulation first. It’s crucial to understand if your legislation allows such activity and if you’d be required to pay additional fees on such “negative reserve”. It is really up to your local legislation so consult any guidance available beforehand. Continue reading
Sales bonuses based on revenue – consider delaying their payment
If you’re paying bonuses to your sales personnel based on the revenue they bring in, i.e. new contracts, price increases etc. you ought to think about the risks such bonuses inherently include within.
The highest risk would be fictitious sales. In this case sales are being manipulated with and falsely created in accounting to earn bonus. Normally such a thing requires cooperation. Continue reading
Make salaries depend on results!
The best way to motivate people to work better, more efficient and more profitable is making their salaries, the thing they work for; depend on the results of their work. That’s a no brainer.
Place it works the best obviously is where the employee actually feels they can do something to earn a better pay. For an example you cannot use such a scheme with support staff in the office – they have no contact with the customer, the customer doesn’t see the fruits of their work, i.e. if it’s an accountant we talk about. Continue reading