Best practices for improving payroll reporting accuracy

1) Establish a consistent schedule (and keep to it)

Conducting purposeful payroll reconciliation starts by adopting a consistent schedule. At a minimum, this should include a spot check before each pay period to ensure any major errors are caught early and addressed. Additionally, depending on your Canada Revenue Agency (CRA) remitter type (e.g., quarterly, regular, accelerated), special attention must be paid to meeting deadlines to maintain a strong compliance record.    

2) Follow a consistent reconciliation checklist

While all the different checks and balances you perform might be second nature to you, the act of documenting and following a checklist ensures that your reconciliation process is consistent and repeatable, for you or anyone else who might be asked to support it. This includes taking action at three points: pre-payroll (e.g., adding/removing employees, updating salaries), during processing (e.g., identifying and investigating large variances) and post-payroll (e.g., checking bank records to ensure disbursements match your payroll summary). If possible, involve multiple members of your team by having one person process and review payroll first and another take a second look to catch any errors or inaccuracies. 

3) Maintain open lines of communication between finance and human resources

Payroll depends on receiving timely, accurate information about employees, which requires open and clear communication between the finance and human resources departments. This includes accounting for new hires, departing employees, salary changes, bonuses, time off (paid and unpaid), overtime and many other variables. While some communication may be simplified by linking payroll software to employee tracking and timesheets, there are always going to be exceptions that need to be discussed employee-to-employee. And if something is missed, a good relationship between departments will leave room for a productive chat about why it happened and what can be done differently next time, without defaulting to blaming or finger pointing.

4) Stay on top of changes to payroll legislation and administration policies

While many automated payroll systems are designed to automatically integrate changes to CRA deductions, it is important for your team to understand them as well. If you are not staying informed about updates to payroll legislation and when they come into effect, you are taking a significant risk by assuming these systems are always foolproof. You can periodically review the CRA’s website as part of your weekly routine, as they regularly post updates about what’s new and important for payroll professionals.

5) Keep good records and create an easy-to-follow audit trail

Aside from maintaining accountability, transparency and trust, keeping good records protects you if you’re challenged on your process, whether through an employee dispute or CRA audit. In these circumstances, the ability to show your work is critical, and strong documentation creates an audit trail that will clearly answer key questions (e.g., What amount was paid? Why was it paid? How was it calculated?). This includes working closely with your team to establish how and where key information will be stored following each reconciliation period. Being asked to justify your payroll decisions can be stressful for anyone, and poor record keeping will only add to that pressure as you scramble to pull together information that should have been properly documented along the way.