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    QuickBooks dashboard showing employee advance entry for small business accounting

    Table of Contents

    Introduction

    Providing employee advances can be a necessary part of managing your business. QuickBooks allows you to record and track these advances efficiently. This guide provides a step-by-step process to create an employee advance in QuickBooks Desktop and QuickBooks Online.

    Creating an Employee Advance in QuickBooks Desktop

    Step 1: Set Up an Employee Advance Account

    1. Open QuickBooks Desktop: Launch QuickBooks and log in with your credentials.
    2. Go to Chart of Accounts: Navigate to Lists > Chart of Accounts.
    3. Create a New Account: Click Account > New.
    4. Select Account Type: Choose Other Current Asset and click Continue.
    5. Name the Account: Enter a name such as “Employee Advances” and click Save & Close.

    Step 2: Record the Advance Payment

  • Open Write Checks: Go to Banking > Write Checks.
  • Select Bank Account: Choose the bank account from which the advance will be paid.
  • Enter Employee Name: In the Pay to the Order of field, enter the employee’s name.
  • Enter Amount: Enter the advance amount.
  • Select Account: In the Expenses tab, select the “Employee Advances” account.
  • Save and Close: Click Save & Close to record the advance payment.

    • Step 3: Deduct the Advance from Payroll

  • Open Payroll Setup: Go to Employees > Employee Center.
  • Select Employee: Choose the employee who received the advance.
  • Edit Payroll Info: Click on Payroll Info and then Additions, Deductions and Company Contributions.
  • Add Deduction: Click Add and select New Deduction.
  • Name the Deduction: Enter a name such as “Advance Repayment”.
  • Select Account: Choose the “Employee Advances” account.
  • Enter Amount: Enter the amount to be deducted from each paycheck.
  • Save and Close: Click OK and then Save & Close.

    • Creating an Employee Advance in QuickBooks Online

    Step 1: Set Up an Employee Advance Account

  • Open QuickBooks Online: Log in to QuickBooks Online with your credentials.
  • Go to Chart of Accounts: Navigate to Accounting > Chart of Accounts.
  • Create a New Account: Click New.
  • Select Account Type: Choose Other Current Assets.
  • Name the Account: Enter a name such as “Employee Advances” and click Save and Close.

    • Step 2: Record the Advance Payment

  • Open Expense: Go to + New > Expense.
  • Select Bank Account: Choose the bank account from which the advance will be paid.
  • Enter Employee Name: In the Payee field, enter the employee’s name.
  • Enter Amount: Enter the advance amount.
  • Select Account: In the Category field, select the “Employee Advances” account.
  • Save and Close: Click Save and Close to record the advance payment.

    • Step 3: Deduct the Advance from Payroll

  • Open Payroll Setup: Go to Payroll > Employees.
  • Select Employee: Choose the employee who received the advance.
  • Edit Employee Info: Click Edit next to Pay.
  • Add Deduction: In the Deductions section, click Add a New Deduction.
  • Name the Deduction: Enter a name such as “Advance Repayment”.
  • Select Account: Choose the “Employee Advances” account.
  • Enter Amount: Enter the amount to be deducted from each paycheck.
  • Save and Close: Click Save and Close to finalize the deduction setup.

    • Best Practices for Managing Employee Advances

    • Clear Policies: Establish clear policies for employee advances, including repayment terms and conditions.
    • Accurate Records: Maintain accurate records of all advances and repayments.
    • Regular Monitoring: Regularly monitor advance accounts to ensure timely repayments.
    • Employee Communication: Communicate advance and repayment details clearly with employees to avoid misunderstandings.

    Conclusion

    Creating and managing employee advances in QuickBooks is straightforward when following the proper steps. By setting up the appropriate accounts and accurately recording transactions, you can ensure that advances are tracked and repaid efficiently. Implementing best practices will help maintain clear records and effective communication with your employees.

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