Definition
A payroll clearing novel is a zero-balance bank chronicle used by companies to sunshiny payroll checks for employees. A PCA is habitual with goodly companies that gain indefinite thousand Clerk checks cashed Everyone pament room. The PCA keeps cash seperate from the general gathering bank anecdote and helps protect the convention from having its Diurnal operating report compromised by outsiders.Payroll clearing accounts are a salubrious habitude for companies to cope their payroll development. Barn door companies can automate their payroll test operation using a PCA and frank place, allowing less date for checks to rainless from their bank chronicle. PCAs very protect the uprightness of a business's leading bank novel.
It as well helps prolong probity with the manage lay transaction that is morals with most companies.
Payroll Process
Once the payroll amounts admit been approved on paper, a transfer is unreal from the leading gathering bank statement to its PCA. This transaction usually occurs a few days to one week in advance of the upcoming pay date. If the company uses direct deposit, transfers will be made from the PCA to the employee bank accounts at a specified time on the pay date. If the company issues paper checks, these will clear against the PCA balance until it reaches zero and all checks have been cashed.
Account Review
Most times the PCA payroll process works in a seamless order for clearing payroll checks. Any exceptions will lead to an account review of the PCA and outstanding payroll checks. Direct deposit employers will receive an exception report from their bank regarding which employee paychecks were not deposited as a result of an error. For paper checks, it is somewhat harder for employers to find out which employees did not cash their checks. Printing off an online bank statement and reconciling the account is the best option for this scenario.
Advantages
PCA payroll clearing can have some strong advantages for businesses. The most important is that it prevents unwanted access to the main company bank account. If the PCA is compromised, it can be closed and another one set up with a different account number. Another good advantage is that it aids in the direct deposit process for large companies. Bank statements and reports can be generated from the PCA without a lot of unnecessary transactions from daily operations included.
Disadvantages
PCA payroll clearing may be unsuitable for small and midsize companies that have fewer employees. If the company issues payroll using live checks, tracking any remaining balance in the PCA can be time consuming. Some companies only keep the payroll balance in the PCA for a few days; employees attempting to cash checks after this date will be unable to do so. This creates more work for the accounting department by re-issuing checks for previous payroll periods.
