Automatic bookkeeping when paying contractors via direct deposit

If you use direct deposit to pay contractors and connect your bank account to import transactions, Wave automates the bookkeeping as explained below. Automatic bank transaction imports are part of the Pro Plan. If your transactions are not importing automatically, create a manual transfer to ensure your bookkeeping is accurate.

When you pay contractor bills using direct deposit through Wave’s payroll feature, Wave takes care of the bookkeeping automatically. This happens in three steps.

1: Wave creates a liability

When you create a bill for your contractor, Wave creates a liability in your accounts payable. You can view this in your reports.

2: Wave marks the bill as paid

When you choose to pay a contractor by direct deposit and the approved payroll is processed, Wave creates an expense transaction on your Transactions page. This transaction is categorized as a Payment Sent for a Bill in Wave. There is a separate transaction for each bill payment, and each of these is recorded in your Wave Payroll Clearing account.

3: Wave categorizes the bank withdrawal

When the withdrawal transaction from your bank account imports into Wave, it is automatically categorized as a Transfer to Wave Payroll Clearing. This restores the balance that was withdrawn from your Wave Payroll Clearing account.

If your imported transaction wasn't categorized automatically, follow these steps.

The bill payment transactions generated for contractor payments made via payroll direct deposit cannot be edited or deleted.

Manually create a transfer to the clearing account

If the transfer transaction was not created automatically or you don't have automatic bank transaction imports, add the transfer transaction manually:

  1. On the left-side menu, select Accounting > Transactions.
  2. Find your bank-imported bill payment transaction, or create the transaction by clicking Add expense.
  3. Select the category Transfer to a Bank, Credit Card or Loan > Wave Payroll Clearing. If you’re creating a new transaction, fill in the other details too.
  4. Click Save.