Payroll Is Paid From What Type of Bank Account?

Payroll funds are a piece in your company's financial puzzle.

Payroll can be paid from virtually any type of bank account, although payroll processing and record keeping is considerably simpler if you have a separate account for your business, and even a separate account for payroll. Whether or not your company has a separate payroll account, it is important to keep track of the pay checks you have written and the sums you have withheld for state and federal taxes.

Clarity

Using a business bank account exclusively for payroll provides a degree of clarity not possible when payroll checks come out of a general business account. If you have a payroll account, you know that all of the funds coming out of that account have gone to payroll, and all of your payroll checks have come out of this account. If you take payroll taxes out of the same account, you will achieve additional clarity by keeping these interrelated expenses together.

Simplicity

Using a separate payroll account provides the simplicity of separating this expense and making your financial picture easier to untangle. But using a separate payroll account also complicates your business by forcing you to keep track of one more bank account. It especially makes sense to open a separate payroll account if your company has a dedicated payroll or human resources division, or if you have enough employees to make a general set of books feel cluttered or difficult to understand.

Professionalism

Keeping a separate payroll bank account communicates to employees that your company is organized and professional. Projecting an organized and professional demeanor will motivate employees to be organized and professional themselves when representing your company. This practice also minimizes the possibility of bouncing payroll checks by making it easier to determine your balance, lessening costly damage to employee morale.

Payroll Services

Many banks offer payroll services, or management of separate payroll accounts. It is not necessary for your business to use a payroll service, although many companies find that the convenience justifies the expense. A payroll service calculates, writes and distributes employee paychecks. Payroll services also keep track of payroll taxes and withholding, setting these amounts aside. Many payroll services also complete quarterly and annual payroll tax forms for their clients, calculating balances due, sending in payments and keeping track of relevant information. In addition, payroll tax services complete annual W-2 forms to distribute to employees.

References

• Custom Payroll Services: Payroll Banking and Bank Products
• The Entrepreneur Network : Payroll Accounting
• Labyrinth, Inc.: Payroll Service Bureaus: Payroll Internal Controls Checklist