SAP Payment Summary Reconciliation Process

As we are approaching the end of financial year, it is the perfect time to start preparing your PAYG Payment Summaries for the 2016 financial year. Depending on the frequency of payment, this preparation can be done before 30 June 2016. As they are due for distribution to employees by the 14th July 2016 and the Australian Taxation office by 14th August 2016, it is advantageous to start the process sooner rather than later.
 
In my role at KALTech, I have noticed that the Payroll team often find this time of the year very stressful. They have to perform their regular tasks of processing the payroll, balancing posting and additionally now have to produce payment summaries, overwrite YTD figures, add FBT payment and review employee’s records in preparation for the new financial year, just to name a few additional responsibilities at this time of the year. It’s easy to see why the payroll teams stress so much at this time of the year.
 
To help alleviate this, I’ve listed some practical steps for a smooth and stress free end of financial year(EOFY). These suggestions are based on my experience in the SAP Payroll Consulting area.
 

1. Pay by Pay Reconciliation Process

These processes are performed on the same day as the payroll bank transfer occurs and any discrepancies need to be investigated.

  • 1.1 Individual payroll results verses Payment Summary listing figures

  • 1.2 Tax on Payment Summary Listing verses Group Tax Remittance

  • 1.3 Payroll Tax Gross to Payment Summary Listing Gross
    •  
      This process is the final pay-by-pay reconciliation. It reconciles the payroll taxable earnings to the gross amounts recorded on the payment summaries. The spread sheet is sent to the Finance team once the Payroll Officer has completed their data input. The Finance contact should then include the payroll taxable earnings and the differences are investigated.
       
      The calculation used for this reconciliation is:
                   Payroll Tax Earnings
        Less      Payroll Tax Earnings not on Payments Summaries
        Less      On Payment Summaries Not Payroll Taxable
        Equals   Gross Amounts on Payment Summaries
       

      2. End of Financial Year Checklist

      This is a list of tasks which must be performed either just prior to or at the end of the financial year:

      • 2.1 Check that business addresses and contacts details are correct on payment summaries. This is a configuration task performed by the Payroll consultant.

      • 2.2 Apply any SAP OSS Notes or Patches affecting payment summaries.

      • 2.3 Check outstanding overpayments to ensure the accuracy of gross and tax figures and process any necessary adjustments to the payment summaries.

      • 2.4 Communicate with the Business owner the deadline for any late/adjustment or off-cycles payments.

      • 2.5 Process any overrides due to late/adjustment or off-cycles paid after the last payroll runs but before June 30.

      • 2.6 Load FBT figures as overrides on Payment Summaries. These figures are provided and signed off by Taxation (Person in-charge).

      • 2.7 Preparation of final Payroll Tax, Group Tax and Payment Summary Reconciliations.

      • 2.8 Run Payment Summary program to create Infotype 849 and 850 records. These amounts must equal the reconciliation figures. This Infotype is used to generate both the ATO Magnetic Media and the Printing File.

      • 2.9 Determine best approach for distributing terminated and current payment summaries.

      • 2.10 Send the file to the printers and approve proofs.

      • 2.11 Confirm delivery date post printing.

      • 2.12 Prepare any ATO letters i.e. adjustment to previous year payment summaries and Lump Sum E.

      • 2.13 Prepare Workplace Giving Letters.

      • 2.14 Prepare manual payment summaries, if necessary.

      • 2.15 General announcement to all employees.

      • 2.16 Check that the number of payment summaries printed is same as requested.

      • 2.17 Co-ordinate the distribution to all employees which may include communication to reception and all mailrooms. Terminated employee’s payment summaries can be sent to home address/postal address on record.

      • 2.18 Preparation of ATO Magnetic Media including completion of covering Payment Summary Report (download from ATO website).

      • 2.19 Forward Magnetic Media, letters and any ATO copies of manual payment summaries to ATO.

       

      3. Payment Summary Overrides

      These overrides adjust figures appearing on the payment summary when the change cannot be done via the payroll results. An example of this is off-cycle payments made between the last pay run and June 30.
       
      Using this process means that the actual payroll results do not match payment summary figures.
      As these adjustments are reconcilable items, it is important to keep them at a minimum. All adjustments should be made via the payroll were possible.
       

      4. Recommendations

      Below are some recommendations which could prepare the Payroll team in advance for the year end:
       

      • 4.1 Increase Payroll Team awareness of impact to payment summaries when processing data.

      • 4.2 Adjustment/ Advanced and Off-cycles payments to be kept at a minimal after the last payroll run for the financial year.

      • 4.3 A report to be created which reads each individual payroll result to produce a total. This will reduce the time taken to merge this data into Excel.

      • 4.4 Currently, each program variant is manually updated with any new wage types created. There is a risk that the maintenance of this variant is not done causing reconciliation to be incorrect.

      • 4.5 To lower the risk and increase efficiency, a wage type catalogue should be created. With this catalogue as a basis, a new processing class should be created grouping the wage types together. Reporting could then be performed based on the processing class rather than individual wage types. When new wage types are created or copied, the processing class would be added therefore updating the variant automatically.

      • 4.6 The Payroll Tax Reconciliation should be undertaken by the Finance Team using the pay results.

       
      To conclude, the key is to “Plan ahead and not to wait until the last minute”. If you are not completely confident with your SAP payment summary process, then the best way forward is to invest in training with a SAP solution provider, like KALTech who will provide you with all the required support.
       
      KALTech has excellent support experience, especially around the Payment Summary process. We have proven methodologies that guarantee the best results for our customers.
       
      Talk to us and Experience the KALTech Difference!
       
      Sweety Shah
      KALTech SAP/SuccessFactors Consultant

This entry was posted on May 12th, 2016.

KALTech’s Utilities Solution to a CATS challenge

The requirement:
The client, a big player in the utilities space had chosen SAP CATS (Cross Application Timesheets) as their time sheeting tool of choice. They wanted to allocate as much of their labour cost as possible to capital expenditure (capex) projects. Simply put, they wanted all the salary and allowance cost to be allocated to the projects (work orders) that the employees had performed work on.
The timesheet was to consist of 3 major components: Normal time (ordinary hours), Overtime (hours in excess of normal hours) and allowances.
 
In addition to this, each category of employees could have different charge out rates associated with them. For example the normal time rate associated with employee category X could be $100 whereas another category Y could be $130.
 
And if this wasn’t complicated enough, all of this labour cost allocation needed to happen as soon as the timesheet entries were approved.
 
The issues faced and solution provided:
Surely SAP Payroll would rescue us from this rather complex requirement……
Normal time, overtime as well as allowances are calculated via payroll and are usually allocated to the employee’s master cost centre. But this would mean waiting up to a fortnight for the payroll to run for the costs to flow through. Also this would mean that the costs would not be allocated to the project/s that the employee had worked on. So of course that option was shot down as quickly as a duck during hunting season.
 
With no other way out of this jam we decided to turn to activity types (our saviour). We cleverly set up activity types with the required rates and had them default to each timesheet line item. The activity types associated with each line item would provide a rate multiplier (price) to the number of hours entered. So if an employee belonging to category A and associated with an activity type X (with rate $100) worked 4 hours on a project, the project would be charged $400. To make this possible each employee would be associated with an activity type in Infotype 0315 Timesheet defaults. The activity type rates would be set up using transaction code KP26. Too easy. But an impromptu KALTech brainstorming session soon made us realise that we had only catered for normal time and not for overtime and allowances.
 
Using standard Infotype 0315 allows you to default only a single activity type for any given employee. But we needed two more types of activity types, one each for overtime and allowances to be defaulted as well. In other words, we needed to find a way to allocate activity types for normal time, overtime and allowances (wage types) to each employee’s timesheet record. In the absence of a standard SAP solution, this would have to be achieved using a custom table, a few CATS user exits and Infotype 0315. With this custom solution, every time an employee entered a line into CATS, the user exit would read Infotype 0315 and the custom table to identify and auto-populate the relevant activity type into the CATS database. This would enable us to attach separate activity types for normal time, overtime and allowances to each employee record during data entry. The auto-populated and hidden activity type field would also ensure that the employee did not select an incorrect activity type.
 
Here’s how we at KALTech designed the solution…
 
sanchit1
 
Each employee is associated with a normal time activity type in Infotype 0315.
 
Each normal time activity type is associated with an overtime activity type in the custom table.
 
sanchit2
 
Each timesheet allowance is associated with a corresponding allowance activity type in the custom table.
 
sanchit3
 
During timesheet entry in CATS, notice that the following activity types get automatically defaulted
• Normal time activity type – based on the employees Infotype 0315 master data record.
• Overtime activity type for the overtime attendance code – based on the normal time activity type in the custom table.
• Allowance activity type based on the allowance entry – based on the allowance code in the custom table.
 
sanchit4
 
Want to know more?
 
Contact us at KALTech!
 
Sanchit
KALTech SAP/Successfactors Consultant

This entry was posted on July 23rd, 2015.