Payroll Automation

Setting up Payroll Automation with Rutter

Introduction

This guide walks you through the steps for setting up payroll automation using Rutter’s API, enabling businesses to automate payroll processes efficiently.

With Rutter, you can automate payroll for both full-time employees and contractors, handling everything from wage expense recording to tax and benefit payments. This guide covers the primary steps to set up payroll automation using Rutter’s API.

1. Connect to a business entity’s accounting system using Rutter Link.
2. Create or link the business entity’s Accounts used for logging wage expenses and liabilities.
3. Create the relevant Tracking Categories (Classes, Locations, and Departments) to classify wages.
4. Create Multi-Line Journal Entries to represent payroll expenses for full-time employees, or Bills and Bill Payments to represent payroll expenses for contractors.
5. If applicable, upload Attachments to Journal Entries for any further documentation.
6. If applicable, create Journal Entries for tax withholding and other benefits payables.

Connect to the Business Entity's Accounting System

Embed Rutter Link into your application and walk through an end-to-end business authentication flow in order to create a new Connection. This Connection represents the business accounting system and contains an access_token used to read and write data for that instance.

Full-Time Employee (FTE) Payroll Workflow

1. Setting Up Wage Expenses and Liability Accounts

Before running payroll, you need to ensure that wage expense accounts and liability accounts (such as benefits payables) are properly configured. These accounts help track salary expenses and associated liabilities like benefits and tax withholdings.

You can link existing accounts or create new ones if necessary using the following API endpoints:

• To retrieve existing accounts, use GET /accounts.
• To create new accounts, use POST /accounts.

These endpoints allow you to manage accounts in your chart of accounts, ensuring payroll expenses and liabilities are accurately tracked.

2. Recording Payroll Expenses

Once payroll is run, you need to record the payroll expenses. This involves debiting the wage expense account and crediting both the cash account and the benefits payable account. Essentially, the business is recognizing the salary expense, reducing cash, and acknowledging any liabilities for benefits owed.

To record these transactions in your accounting system, use the POST /journal_entries endpoint. The journal entry will look something like this:

• Debit: Gross Wage Expense
• Credit: Cash (for the amount paid out)
• Credit: Benefits Payables (for liabilities such as health insurance or retirement contributions)

3. Handling Taxes and Deductions

After recording payroll, you also need to pay any taxes and deductions, such as withholding for income tax or other benefits. These payments reduce the liability for taxes and benefits.

To record these payments, you will again use the POST /journal_entries endpoint. This process involves:

• Debit: Benefits Payables (reducing the liability)
• Credit: Cash (indicating the payment was made)

4. Uploading Payroll Documentation

For record-keeping, it's important to upload any relevant payroll attachments, such as payroll reports or other supporting documents. This ensures that all payroll actions are properly documented.

You can upload attachments using the POST /journal_entries/attachments endpoint. This step ties payroll documentation to the specific payroll transactions in your accounting system.

5. Classifying Payroll by Departments

To get better insight into payroll expenses, classify payroll transactions by department or class. This allows businesses to see how much is being spent on payroll across different areas of the organization.

You can retrieve or create departments using the GET /departments and POST /departments endpoints. Similarly, use the GET /classes and POST /classes endpoints to handle classifications by classes. This helps with internal reporting and cost allocation.

Contractor Payroll Workflow

1. Setting Up Wage Expenses and Liability Accounts for Contractors

For contractor payments, you also need to set up accounts to track wage expenses and liabilities. Contractors may have different payment terms, but the principle remains the same: ensure that wage expenses and payables are correctly set up.

You can use the same GET /accounts and POST /accounts endpoints to either link or create the necessary accounts for contractor payroll.

2. Recording Contractor Payroll

When paying contractors, the business typically processes these payments through bills and bill payments rather than through a salary system like for full-time employees.

To record these contractor payments, use the POST /bills and POST /bill_payments endpoints. This ensures that the contractor's services are properly recorded and the payments are tracked against the business's liabilities.

3. Setting Up Contractor Entities

Contractors are treated as vendors in most accounting systems. To pay a contractor, you need to create or link them as a vendor in your system.

You can use the GET /vendors and POST /vendors endpoints to retrieve or create vendor records for your contractors. This ensures that all contractor payments are associated with the correct entity in your system.

4. Uploading Contractor Payroll Documentation

As with full-time employee payroll, it's important to upload any relevant documentation for contractor payments, such as invoices or service agreements.

Use the POST /bills/attachments endpoint to upload these documents and ensure they are attached to the corresponding payroll transactions.

5. Classifying Contractor Payments by Departments

Just like full-time employee payroll, it's useful to classify contractor payments by department or class to track expenses across different areas of the organization.

You can use the same GET /departments, POST /departments, GET /classes, and POST /classes endpoints to classify contractor expenses.

Best Practices for Payroll Automation

At Rutter, we believe that the best B2B products are integrated. By using Rutter's API, you can integrate payroll workflows seamlessly into your existing systems, allowing for more efficient operations and accurate financial reporting.

As payroll processes and tax regulations become increasingly complex, automating payroll not only saves time but also reduces the risk of errors. Here are some best practices to consider when implementing payroll automation:

• Ensure accurate account mapping: Always confirm that wage expenses, liability accounts, and benefits payables are mapped correctly to avoid discrepancies.
• Timely tax and benefit payments: Automate your payroll taxes and benefits deductions to ensure compliance with regulatory requirements.
• Classify expenses properly: Proper classification of payroll expenses across departments and classes allows for better tracking and reporting, enabling insights into payroll spending patterns.