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  • Employee wants paycheck cashed...

    I had an accounting situation come up that I could not solve. An employee asked if I could deposit his check into his girlfriend's account, because it would be the quickest way to get him the money (his girlfriend banks at the same bank I do). I wrote his paycheck as usual and took it to the bank, but as I expected they would not take the deposit because he is not named on the account. It occurred to me to simply withdraw the exact amount of money from my business and make a cash deposit, but I had to keep moving and simply dropped his check in the mail.

    So... as a matter of accounting, what happens when you want to convert an employee paycheck into cash? I'm pretty sure I need to actually write the check--that's how job costs and payroll liabilities are entered to my books. Is there some way to then credit the check to petty cash and withdraw it, or some other mechanism?
    Bailer Hill Construction, Inc. - Friday Harbor, WA
    Website - Facebook

  • #2
    Re: Employee wants paycheck cashed...

    Originally posted by David Meiland View Post

    So... as a matter of accounting, what happens when you want to convert an employee paycheck into cash? I'm pretty sure I need to actually write the check--that's how job costs and payroll liabilities are entered to my books. Is there some way to then credit the check to petty cash and withdraw it, or some other mechanism?
    I do not know the answer to your question but I would never pay an employee in cash. I want a canceled check as proof of payment as part of the paper trail.

    I am a stickler with employees and tell them no matter how much I like them; I am not their bank. No advances, no cashing checks - nada...
    “Racism is man's gravest threat to man - the maximum of hatred for a minimum of reason.”
    Abraham J. Heschel (Jewish theologian and philosopher, 1907-1972)

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    • #3
      Re: Employee wants paycheck cashed...

      You cash it personally. He endorses it / signs it over to you. You (both) go to the bank and you cash the check against your personal acct. The teller will make it all wash. You still have the payroll check in place no accounting problem.
      Steve

      "Get three coffins ready" - A Fistful of Dollars 1964

      http://youtu.be/KZ_7br_3y54

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      • #4
        Re: Employee wants paycheck cashed...

        When I write a check to a sub, sometimes they want/need the cash quickly. They go to the bank (in this case a Credit Union) and ask to cash the check. Once in a while I will get a call from the bank confirming that it is a valid transaction, but usually they just cash it. They have a maximum cash withdrawal of $3000 I think so that could cause a problem if the amount was over that.

        You could get him a Cashier's Check, which should be easier for him to cash.

        If this is likely to be a common occurrence, he should open a savings acount at the bank to make it easy to cash/deposit the check. Perhaps he has had previous banking problems that prevent him from opening an account?
        HERS Rater • BPI Building Analyst • BPI Envelope Professional
        Certified Green Building Professional • Certified Existing Home Advisor
        General Building Contractor • Asbestos Certification • Hazardous Substance Removal Certification • EPA Approved Lead-Safe Contractor • Locksmith
        PMP • ESEP • CISSP

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        • #5
          Re: Employee wants paycheck cashed...

          He has no problems like that, and no need for an account at this bank, this is really just an accounting procedure question. I have no idea how to cash a check for someone and keep it straight on the books.
          Bailer Hill Construction, Inc. - Friday Harbor, WA
          Website - Facebook

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          • #6
            Re: Employee wants paycheck cashed...

            Well, I would think he DOES need an account at this bank, at least if he wants to be able to quickly cash his paycheck. As Dave N. suggested, you are not a bank. I wouldn't think you'd have time to go deal with issues like this that most employees are expected to deal with themselves.

            That said, I've been known to help out an employee too when needed. But I wouldn't want to make a habit of it. Too many other things to do...
            HERS Rater • BPI Building Analyst • BPI Envelope Professional
            Certified Green Building Professional • Certified Existing Home Advisor
            General Building Contractor • Asbestos Certification • Hazardous Substance Removal Certification • EPA Approved Lead-Safe Contractor • Locksmith
            PMP • ESEP • CISSP

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            • #7
              Re: Employee wants paycheck cashed...

              Beach, you're off track. Do you have any comment on the accounting procedure for this?
              Bailer Hill Construction, Inc. - Friday Harbor, WA
              Website - Facebook

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              • #8
                Re: Employee wants paycheck cashed...

                David, I think Beach is spot on. Have you read The one minute manger meets the monkey?
                It is a simple matter of being patient. I do patience very well, except for the waiting part. That's the one aspect of patience that still bites me.

                I'm not saying I'm Superman. What I'm saying is no one has ever seen me and Superman in the same room together.

                ParkWest Homes LLC
                Working Man Online Store
                Living Healthy

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                • #9
                  Re: Employee wants paycheck cashed...

                  Gentlemen, please take a moment to examine your apparent unwillingness to treat this an an ACCOUNTING QUESTION and not a business management or employment policy question. As far as I can tell, none of you (and me too) have an accounting answer, and while the banter about how he should open an account and I am not a bank might be entertaining, it's not "spot on". Seems like we have a stumper, although Joe has not weighed in.
                  Bailer Hill Construction, Inc. - Friday Harbor, WA
                  Website - Facebook

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                  • #10
                    Re: Employee wants paycheck cashed...

                    Originally posted by David Meiland View Post

                    So... as a matter of accounting, what happens when you want to convert an employee paycheck into cash?
                    I use QB, so I would write a numberless check and assign it under typical payroll expense account with the usual deductions. Simple.
                    Richie Poor

                    See no evil, hear no evil, speak no evil, value engineer your unit prices.

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                    • #11
                      Re: Employee wants paycheck cashed...

                      David,

                      Sorry for the delay in replying but my internet has been down since 8pm last night.

                      You obviously already know that paying employees in cash can raise a red flag with the IRS because they are concerned about the potential for evading employment taxes. That being said, it’s perfectly legal and common practice in some business sectors.

                      The main thing to remember is you must provide a statement of deductions and obtain their signature confirming that they have been paid.

                      Now for the accounting – You could use the petty cash account directly while in your payroll system but for consistency I’d recommend that you draw from your normal payroll or operating account. In this case, create a paycheck in the normal way and have the employee endorse it over to you. If you keep petty cash on hand, go ahead and pay them to the penny (so that you can easily reconcile later) and deposit their payroll check back into the payroll/operating account at your bank. If you don’t keep cash on hand, you’ll need to go to the bank and literally cash the endorsed check for your employee. Don’t be tempted to void the check or Quickbooks won’t compute the employment taxes correctly.

                      By doing this, you are basically cashing the employee's paychecks for them. This procedure will leave a paper trail and keep everything squeaky clean if you’re ever audited.
                      Joe Adams
                      Deep Creek Builders, Inc.
                      Houston, Texas

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                      • #12
                        Re: Employee wants paycheck cashed...

                        OK, so the employee needs to be there to endorse the check. Then, I cash it at the bank and deposit cash to his girlfriend's account.

                        For what it's worth, the guy in question doesn't live locally, and I don't have checks ready before he leaves town at the end of the week, which is Thursday for him. So, on Friday, I generate his check along with others after it's too late for him to sign it or for me to hand it to him. I suppose if this is an issue in the future, I will simply have him endorse a blank check that I can then use to print his paycheck. Hmmm, that sounds kinda shady.

                        Also, it is common for me to have employees who bank where I do. I often just deposit their checks for them, I have their account numbers in my contact manager. Next week, I hand them the pay stub and a deposit receipt. That's what passes for direct deposit in my company.
                        Bailer Hill Construction, Inc. - Friday Harbor, WA
                        Website - Facebook

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                        • #13
                          Re: Employee wants paycheck cashed...

                          Originally posted by Joe Adams View Post

                          Now for the accounting – You could use the petty cash account directly while in your payroll system but for consistency I’d recommend that you draw from your normal payroll or operating account. In this case, create a paycheck in the normal way and have the employee endorse it over to you. If you keep petty cash on hand, go ahead and pay them to the penny (so that you can easily reconcile later) and deposit their payroll check back into the payroll/operating account at your bank. If you don’t keep cash on hand, you’ll need to go to the bank and literally cash the endorsed check for your employee. Don’t be tempted to void the check or Quickbooks won’t compute the employment taxes correctly.
                          Fairly certain I said basically the same thing in 25 words or less. Joe, how did you change your screen name?
                          Richie Poor

                          See no evil, hear no evil, speak no evil, value engineer your unit prices.

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                          • #14
                            Re: Employee wants paycheck cashed...

                            Originally posted by Overbuilders View Post
                            Fairly certain I said basically the same thing in 25 words or less
                            You said you'd write a numberless check... nothing about how it becomes cash for the employee. I don't understand why it's numberless, are you then paying in unmarked bills?
                            Bailer Hill Construction, Inc. - Friday Harbor, WA
                            Website - Facebook

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                            • #15
                              Re: Employee wants paycheck cashed...

                              Originally posted by David Meiland View Post

                              You said you'd write a numberless check... nothing about how it becomes cash for the employee. I don't understand why it's numberless, are you then paying in unmarked bills?
                              There's the difference in my post and Joe's. I wouldn't actually print the check, just record it, saving a check, then hand over the cash. But I do see the value of an endorsed paper trail. So I change my mind.
                              Richie Poor

                              See no evil, hear no evil, speak no evil, value engineer your unit prices.

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