WELCOME TO ISSUE NO #057

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📆 Today’s Rundown

Hey 👋, hope you had a great week! I bet you missed me, but I was off with my kids for a long overdue vacation.

In the last issue, we discussed why tracking EBITDA matters, and that was last topic Cash Flow & Expenses section. Now, we are moving with the first topic from Headcount content.

Let’s talk about ⬇️

Accrued Payroll

Accrued payroll probably isn't your favorite topic. Actually, it's probably not even in your top 100. (And that's fair!)

But here’s why you should care:

Getting accrued payroll wrong can lead to inaccurate financial statements, unhappy employees, and compliance nightmares. None of these sound fun, right?

But don't panic—I’ve got you covered. Today, we’ll demystify accrued payroll in simple English, so you can master it once and for all. Ready? Let’s dive in! 👇

TL;DR

🎯 What exactly is "accrued payroll"?

📌 Why SaaS founders should care about accrued payroll

🧐 Here’s how to get it right—in 5 simple steps

⚠️ Common Challenges (And How to Avoid Them)

🔑 Quick tips to master accrued payroll today

🎯 First Things First: What exactly is "accrued payroll"?

Simply put, accrued payroll refers to salaries, wages, bonuses, and other compensation that your team has already earned—but hasn’t been paid yet.

Here’s a practical example:

Say your team gets paid on the 5th of every month, but your accounting period ends on the 30th. Between the 30th and payday (the 5th), your employees have earned their money, but you haven't actually paid them yet.

Why? Because this aligns payroll expenses to the revenue generated in that period, ensuring accuracy and compliance with GAAP and the Financial Accounting Standards Board’s matching principle.

📌 Why SaaS founders should care about accrued payroll

For subscription-based SaaS businesses, cash flow can get tricky fast:

• You’ve got recurring revenue coming in at predictable intervals.

• Meanwhile, payroll cycles often don’t neatly align with billing cycles.

Accrued payroll helps you properly match expenses (your team’s efforts) with revenues (subscriptions collected) in your financial statements.

Without proper accrual accounting, you risk distorting your financials—making it tough to evaluate critical metrics like revenue per employee, burn rate, or profitability trends.

Getting accrued payroll right helps you:

• Clearly understand actual profitability.

• Improve budgeting accuracy.

• Maintain compliance (auditors absolutely love that!).

Let's break it down further: Types of accrued payroll

Accrued payroll isn’t just "salaries and wages." It actually includes multiple categories you should know about:

• Accrued salaries and hourly wages: Salaried or hourly earnings not yet paid at month-end.

• Accrued bonuses & commissions: Incentive pay based on individual or team performance, pending payment.

• Accrued vacation & sick pay: Value of earned but unused PTO (this can get complicated if not tracked properly!).

• Accrued employee benefits: Health insurance, retirement contributions, and other benefits earned but unpaid.

Recognizing and accurately tracking these expenses is crucial, especially if you plan on fundraising, expanding internationally, or simply maintaining healthy financial discipline.

Need clarity on your financial strategy or cash flow optimization?

I'm Aleksandar, fractional CFO at Fiscallion, where we help founders like you achieve financial clarity, streamline reporting, and build investor-ready forecasts.

Ready to level up your finances?

🧐 Here’s how to get it right—in 5 simple steps

Calculating accrued payroll doesn’t have to be a painful process. Here’s your exact step-by-step playbook:

1. Identify the pay period clearly

• Weekly, bi-weekly, semi-monthly, monthly—be precise.

• Gather accurate time logs, PTO records, and attendance for hourly employees.

2. Calculate gross pay carefully

• Hourly employees: Multiply total hours by hourly rate (don’t forget overtime!).

• Salaried employees: Divide annual salaries by the number of pay periods, and prorate partial periods clearly.

3. Add in bonuses & commissions (don’t skip!)

• Double-check performance bonuses, sales commissions, and any other incentive-based pay accrued within the period.

• Factor in employee deductions: taxes, insurance premiums, retirement contributions.

4. Determine net pay accurately

• Net pay = Gross pay – deductions.

• If accounting periods end mid-pay-cycle, prorate carefully to reflect days/hours accurately within that period.

5. Record precise journal entries

• At month-end, debit your "Salaries Expense" account.

• Credit your "Accrued Salaries Payable" liability account.

• Keep detailed records and clearly document your calculations (your accountant will thank you!).

Here’s a practical SaaS example:

Now your books match reality, perfectly aligning costs with revenue. No nasty surprises. ✅

⚠️ Common Challenges (And How to Avoid Them)

Let's face it: payroll accounting can be messy. Here’s how to avoid common headaches:

• Complex regulations: Payroll rules differ by region and can get tricky with remote or international employees.
  Tip: Consult an HR/payroll expert for regions you’re unfamiliar with. Avoid nasty compliance surprises.

• Accuracy challenges: Manual Excel calculations often lead to mistakes, especially when factoring overtime, sick days, or bonus structures.
  Tip: Switch to automated payroll software ASAP. Automation = fewer errors.

• Employee trust: Nothing erodes team trust faster than payroll mistakes. Employees rely on timely, accurate paychecks—every time.

👉 Tip: Maintain transparent payroll communication and have clear policies accessible to everyone.

🔑 Quick tips to master accrued payroll today

• Automate where possible: Payroll software should sync seamlessly with your accounting system—saving you hours of manual entry and reducing errors.

• Be proactive, not reactive: Reconcile payroll monthly—not quarterly—so you can spot issues early.

• Educate your team: Ensure your finance team fully understands accrued payroll practices—clarity prevents costly mistakes.

🎉 The bottom line

Accrued payroll might never top your list of favorite subjects (mine either!). But properly understanding and managing it ensures:

• Accurate financial records.

• Compliance with accounting standards.

• Better cash flow management.

• Happier employees.

I’d say that's worth a few minutes of learning, right?

Still have questions or need help setting this up right in your SaaS business?

Hit reply—I’m here to help!

Cheers to payroll clarity (and fewer headaches),

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