Payroll Accruals: A Complete Guide 

If you’ve worked in accounting long enough, you know certain tasks quietly consume more time than they deserve. 

Reconciling messy bank feeds,
untangling client “miscellaneous” transactions,
and, of course, handling payroll accruals.

There’s a specific moment every accountant knows well:
You open a payroll journal entry expecting a clean, straightforward posting… and then you notice the pay period spans two different months. 

Suddenly, you're calculating daily rates, splitting wages, adjusting payroll taxes, and preparing reversals.
All while trying to close the books on time.

Payroll accruals are essential for accurate reporting, yet they often feel unnecessarily tedious. Let’s break them down through a clean, structured lens.

1. What Is Payroll Accrual? 

Payroll accrual is the accounting process of recognizing payroll-related expenses in the period employees actually worked, even if the payroll disbursement occurs in the following month.

For example:

• Pay period: July 28 – August 3
  
• Payroll paid: August 5
  
  

Employees worked part of that period in July, so those July days must be recognized as July expenses, not August. Without this adjustment, July’s financials would appear overstated or understated, depending on timing.

A payroll accrual typically includes:

• Wages
  
• Overtime
  
• Payroll taxes (employer portion)
  
• Applicable benefits or contributions
  
  

Then, once the payroll is recorded in the next month, the accrual is reversed so expenses aren’t duplicated.

It’s foundational accounting. It’s important.
But it’s also repetitive, requires precision, and often adds friction to the monthly close.

2. Why Do Payroll Accruals Matter? (And Why Skipping Them Isn’t an Option)

The value of payroll accruals comes down to one principle accountants know well: accurate period-based reporting.

When payroll is not accrued:

• The numbers in the books won’t be correct.
• Profit and expenses look off from month to month.
• It becomes hard to understand past trends or predict future results.
• Comparing one month to another gets confusing.
• Anyone reviewing the reports won’t get the full picture
  
  

And for firms, this also impacts:

• Advisory insights
  
• KPIs
  
• Month-over-month performance
  
• Year-end cleanups
  
• Audit preparedness
  
  

Payroll isn’t optional.
Accurate timing of expenses isn’t optional.
And payroll accruals are what keep that timing aligned with economic reality.

3. Who Typically Handles Payroll Accruals? 

Payroll accruals touch multiple roles in finance.
The people who feel the weight of this task the most include:

Bookkeepers and Accountants

They’re the ones splitting payroll amounts, counting days, reconciling accounts, and preparing reversals.

Controllers and Reviewers

They’re the ones ensuring accruals are consistent, correctly calculated, and properly reversed.

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4. When Are Payroll Accruals Needed? (More Often Than Most People Realize)

Payroll accruals are required whenever payroll overlaps a reporting boundary.

Common situations include:

Payroll periods that cross month-end

This is the most common scenario.
Most payroll cycles do not align perfectly with the calendar month.

Weekly or biweekly payroll

These cycles guarantee overlaps throughout the year.

Off-cycle payroll runs

Bonuses, adjustments, or corrections often require accruals.

Delayed payroll posting

If payroll is processed or received late, accruals maintain timely reporting.

Multiple pay groups

Different teams with different pay frequencies create multiple sets of accruals.

In short: unless payroll magically lands exactly on the last day of the month (spoiler: it rarely does), accruals are required.

5. Where Do Payroll Accrual Errors Typically Occur? (The Reality of Manual Work)

Even meticulous accountants know manual payroll accruals are prone to errors.
Not because accountants lack skill, but because the process itself encourages slip-ups.

Here’s where mistakes often happen:

Incorrect day counting

A single miscount leads to incorrect proportions across the entire entry.

Math inaccuracies

Hand-calculating wages, employer taxes, and benefit burdens introduces small discrepancies that compound over time.

Posting to the wrong GL accounts

Mix-ups between liability and expense accounts can snowball later.

Missed reversals

One missed reversal distorts the following month’s payroll significantly.

Copy-paste mistakes in spreadsheets

Formulas change, ranges shift, and suddenly the numbers don’t tie out.

Lack of proper schedules

Without a clear schedule, the trail for auditors and reviewers becomes hard to follow.

These issues slow down the close and create extra work, and none of them add meaningful value.
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6. How Does Xenett Automate Payroll Accruals? 

Now let’s talk about how Xenett transforms this task from time-consuming to almost fully hands-off.

Xenett’s Payroll Accrual Automation is designed with one goal:
Give accountants complete accuracy without requiring manual effort.

Here’s how the process works:

Step 1: You simply include the payroll period in the memo

That’s the trigger.
Write the dates in a natural format:

• “From July 28 to August 3”
  
• “ From 07/28/25 to 08/03/2025
  
  

Xenett identifies the range automatically.

No special formatting required.
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Step 2: Xenett determines the number of days per month

Behind the scenes, Xenett calculates:

• Total days in the period
  
• Days belonging to each month
  
• The percentage split
  
• The exact prorated amount
  
  

This eliminates manual counting or spreadsheet dependency.
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Step 3: Xenett creates the payroll accrual journal entry

The system posts the correct amounts into the mapped Payroll Accrual Liability account and offsets the relevant payroll expense accounts.

Step 4: Xenett generates the reversal entry automatically

No reminders.
No manual adjustments.

The reversal is posted on the first day of the following month, perfectly aligned with your workflow.

Step 5: Xenett builds a complete payroll accrual schedule

Every detail appears in a clean, structured schedule:

• Original payroll amounts
  
• Monthly breakdown
  
• Accrual amount
  
• Reversal amount
  
• Comparison of schedule vs GL (auto-matched)
  
  

Reviewing accruals becomes a two-minute task instead of a back-and-forth recalculation.
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Step 6: You choose which payroll accounts to include

Not all payroll components need to be accrued.

You may choose to include:

• Salary
  
• Wages
  
• Payroll taxes
  ‍
  

And exclude:

• Benefits
  
• Deductions
  
• Contributions
  
  

Xenett gives you full control.

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Step 7: Configure once! Let automation handle the rest

After mapping:

• The accrual liability account
  
• The payroll expense accounts
  
• The automation start date
  
  

You’re done.
Every future payroll entry with a valid memo runs through the automation seamlessly.

This is payroll accruals, but without the repetitive work, manual risk, or time consumption.

Internal Link 

If you’re also managing prepaid expenses manually each month, Xenett automates that as well.
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Our detailed guide walks through the process step-by-step:

Together, automated payroll accruals and prepaids can remove hours of recurring monthly work.

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7. How Does This Automation Improve Month-End Close? 

The impact isn’t just convenience! It fundamentally improves the quality and speed of your close.

✓ Faster close cycles

Accruals that once took 20–30 minutes per client now take only seconds.

✓ Improved accuracy

No more miscounts, misallocations, or missing reversals.

✓ Consistency across all files

Every accountant in the firm follows the exact same logic automatically.

✓ Reduced reliance on spreadsheets

Less room for manual error, more reliability in reports.

✓ Cleaner financials and easier review

Schedules are clear, automatic, and always tied out.

✓ Better allocation of team time

Accountants get time back for analysis rather than mechanics.

Month-end is stressful enough. Automating one of the most repetitive tasks creates breathing room for higher-value work. The work teams actually want to spend time on.

Final Thoughts: Payroll Accruals Don’t Have to Be Manual Work Anymore

Payroll accruals are important, but they don’t need to be burdensome.
Xenett transforms them from a monthly routine that steals time to an automated process that simply… happens.

Accurate.
Consistent.
Effortless.
Reversible.
Review-friendly.

With this automation in place, accountants can finally close the books without juggling spreadsheets, counting days, or rechecking calculations late into the evening.

A smoother close is not just possible. It’s now the default.