How to bookkeep your payroll in Wave if you use ADP

If you use ADP or a different payroll software to run your payroll and want to use Wave to bookkeep it, here’s how:

This article will walk you through how to manually account for paying employees through payroll, as well as how to account for paying contractors.

Accounting for Employee Payroll

Accounting for Contractor Payments

Accounting for Employee Payroll

Step 1 - Running Payroll

Every time you run a payroll, enter a journal transaction in Wave to record the amount of payroll expenses and the amount of money you owe (to your employees and to tax authorities)

  1. Navigate to Accounting > Transactions and click on More at the top right of the page and select Add Journal Transaction

  2. Under the Debit column, select the account Payroll Gross Pay to record the total gross expense before deductions and taxes

  3. Under the Debit column, select the account Payroll Employer Taxes to record the total employer tax expenses
  4. Under the Credit column, select the account Payroll Liabilities to record the total amount which includes: Total net pay owing to employees, Total employee tax owing to third parties and Total employer tax owing to third parties

    You may prefer to break down Payroll Liabilities and/or Employer Tax Expense into multiple accounts

    There may be additional payroll related expenses associated with this journal entry, e.g. 401k contribution, expense reimbursement, benefits. This can be added as a separate line item on the journal entry categorized to the appropriate expense account.

Step 2 - Funding Payroll

If you have your bank account connected to import transactions or upload statements in Wave, simply categorize the expense transaction for the amount you pay your employees, to the account "Payroll Liabilities". This transaction is to account for when you actually pay your employees, thereby reducing the liability account increased when you recorded the journal transaction.

Step 3 - Remitting Payroll Tax Payments

Similarly, categorize the expense transaction associated with your tax payments to the account "Payroll Liabilities". This transaction is to account for when you remit payroll taxes to the proper tax authorities. The timing of when this is owed may differ depending on your business and jurisdiction. 

Accounting for Contractor Payments

Adding a contractor

  1. Navigate to Purchases > Vendors and select Add a Vendor (note: only select a 1099-NEC/T4A contractor type if you are paying your contractors through Wave Payroll)
  2. Enter the vendor name and any relevant additional information
  3. Click Save

Creating a contractor bill

When you pay independent contractors, record it as a purchase from a vendor. 

  1. Navigate to Purchases > Bills, and select Create a bill
  2. Fill in the required details (vendor name, date of service, due date, bill number etc.)
  3. Select the relevant expense category for each item
  4. When your bill is complete, click Save

Paying a contractor

When you pay your contractors, record a payment on the bill you created

  1. Navigate to Purchases > Bills
  2. Locate the relevant bill and select the option Record a Payment beside it
  3. Fill in the relevant details: payment method, amount, date and payment account (i.e. the account that was used to pay the contractor)
  4. Click Save

When you record a payment on the bill, Wave will automatically create an expense transaction on the Transactions page to capture the contractor payment. If your bank account is also connected to import transactions, this same expense will import into Wave and result in a duplicate. To resolve this, simply merge the two duplicate transactions.