Payroll reconciliation is the control that proves the payroll system, bank payments and accounting ledger tell the same story. Without it, a business can have apparently successful pay runs while PAYG, super or wage balances drift away from the underlying payroll reports.
This TNS Accounting guide gives Melbourne small businesses a month-end payroll reconciliation process that can also be used after major corrections or software changes.
What should be reconciled at the end of each payroll month?
Compare gross wages, PAYG withholding, super, leave-related balances where relevant, deductions, net pay and payroll clearing accounts. Review both the current month and year-to-date totals so errors carried from earlier periods are not missed.
How should net wages be reconciled to the bank?
Compare the payroll register’s net-pay total with the bank payment batch or individual transactions. Investigate rejected payments, manual payments, off-cycle payroll and duplicate transfers. The reconciliation should explain every difference.
How should PAYG withholding be reconciled?
Compare payroll PAYG totals with the PAYG withholding liability in the ledger and BAS workpapers. The PAYG and BAS payroll guide explains this connection in more detail.
How should super payable be reconciled under Payday Super?
Compare calculated super in payroll with actual contribution payments and the super-payable ledger balance. Old unpaid balances need investigation. Under Payday Super, frequent clearing of the liability should make unusual outstanding amounts easier to spot.
How should STP totals be checked during reconciliation?
Review STP year-to-date payroll figures against payroll records and the general ledger. A technically accepted STP file can still contain wrong classifications or employee setup, so reconciliation should focus on amounts and data quality.
How should payroll clearing accounts be reviewed?
Clearing accounts should normally resolve as the associated payment or journal is completed. Old balances can indicate failed payments, duplicate postings, manual adjustments or mapping issues. Investigate rather than simply writing them off.
How should payroll reconciliation be documented for future review?
Use a standard reconciliation template that shows the source report, ledger balance, difference, explanation and action taken. Attach or link to the relevant payroll register, bank evidence and liability account detail. The aim is for another reviewer to understand the reconciliation without asking the person who prepared it.
Where a timing difference is legitimate, carry it forward clearly and confirm it reverses or clears in the next period. Old unexplained reconciling items should not become permanent balances.
How can payroll reconciliation identify fraud or unauthorised changes?
Reconciliation is not only an accounting check. Unexpected bank accounts, unusual manual payments, unexplained rate increases, duplicate employees or repeated off-cycle payments can indicate control problems. Compare payroll master-data changes with approved source documents and restrict who can both create and approve sensitive changes.
What should be reviewed when payroll does not reconcile to the general ledger?
Check posting dates, manual journals, payroll integration mappings, duplicated imports, reversed pay runs and adjustments entered directly to wage or liability accounts. Trace the difference to a specific transaction rather than forcing the ledger to match. A documented root cause is more useful than an unexplained balancing entry.
How should a business reconcile payroll after a software migration?
Before the first live pay run, compare opening employee balances, year-to-date wages, PAYG withholding, super and leave with reports from the old system. After the run, reconcile the new payroll register to the bank and ledger, then compare year-to-date totals again.
Keep the migration reconciliation as evidence. If a difference appears later, this gives the business a clean starting point for determining whether the issue came from imported balances or post-migration processing.
How can payroll reconciliation improve management decisions?
Once payroll data is trusted, owners can use it to monitor labour cost, overtime, leave trends and staffing changes. Reliable payroll information supports pricing, hiring and cash-flow decisions because management knows the numbers are tied back to actual payments and liabilities.
How should payroll reconciliation handle off-cycle and manual payments?
Identify every payment that sits outside the normal payroll batch and confirm it is included in payroll records, STP reporting and the general ledger. Manual employee payments can create duplicate or missing entries if payroll is later processed without reference to them. Keep a clear reconciliation note showing how each off-cycle amount was treated.
Why should reconciliation differences be cleared promptly?
Old differences become harder to trace and can distort payroll liabilities, BAS workpapers and management reports. Resolve them while source documents and pay-run details are still easy to retrieve.
Why should payroll reconciliation be signed off?
A documented reviewer creates accountability and helps confirm that open differences were considered rather than ignored.
What questions do Melbourne businesses ask about payroll reconciliation?
How often should payroll be reconciled?
Perform pay-run checks each cycle and a fuller reconciliation at least monthly.
Should payroll totals match the general ledger exactly?
They should be reconcilable; documented timing or mapping differences may exist.
What if net pay differs from the bank?
Investigate rejected, manual, duplicated or off-cycle payments.
Should PAYG be reconciled before BAS?
Yes. Resolve differences before lodgement where possible.
Should super payable ever have an old balance?
Old balances should be investigated promptly because they can indicate unpaid or failed contributions.
Can manual journals cause payroll differences?
Yes. Manual entries are a common reason payroll and ledger totals diverge.
Should leave balances be reviewed?
Yes, especially unusual negative balances, terminations and system migrations.
Can STP be reconciled monthly?
Yes. Regular year-to-date checking reduces year-end finalisation problems.
What evidence should be saved?
Keep payroll reports, bank evidence, liability reconciliations and explanations for adjustments.
Can TNS Accounting perform payroll reconciliations?
Yes. TNS Accounting can support recurring payroll and accounting reconciliations.
What if a difference is immaterial?
Understand the cause before deciding how to correct or document it.
Should payroll software integration be trusted automatically?
No. Integrations can fail or map accounts incorrectly, so reconciliation remains necessary.
What is a payroll clearing account?
It is an interim account used to connect payroll calculations and related payments or postings.
What is the biggest reconciliation warning sign?
Balances that grow over multiple periods without a clear explanation.
What should I read next?
Read the payroll compliance audit checklist.
For a broader payroll framework, visit the TNS Accounting payroll management pillar or Payroll Services.
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