What is the quickest way to audit a payroll register?

Managing payroll accurately is critical for small businesses. Mistakes can lead to compliance issues, financial discrepancies, and unhappy employees, impacting morale and retention.

To help avoid this, it’s crucial to audit your payroll register and ensure that every payment, tax deduction, and benefit is accurate. But what’s the quickest way to do this without it becoming a time-consuming chore?

In this guide, we’ll walk you through an efficient, step-by-step process for auditing your payroll register, and explain how to use one effectively.

What is a payroll register?

A payroll register is a comprehensive report detailing all payroll information for your company within a specific pay period. It includes:

• Employee names and IDs

• Gross wages

• Tax withholdings

• Benefit deductions

• Net pay

Unlike other payroll documents, a payroll register does not include detailed breakdowns for individual employees — those are typically found on pay stubs or tax forms. Instead, this register offers an overview that simplifies audits, tax reporting, and payroll management.

Why should you audit your payroll register?

Auditing a payroll register is more than just a box-ticking exercise; it’s a safeguard for your business’s financial health, regulatory compliance, and employee satisfaction. After all, payroll mistakes can cost your business in a number of ways, including a loss of money and trust.

Regularly auditing your payroll register ensures:

Fewer mistakes

Errors in payroll can happen for various reasons, from manual data entry mistakes to miscalculated tax deductions. Left unchecked, these mistakes can lead to:

• Employees being overpaid or underpaid.

• Incorrect tax filings, which could result in penalties.

• Financial discrepancies that impact your business’s cash flow and budgeting.

By auditing your payroll register, you can identify and correct errors before they snowball into larger issues.

Compliance

Payroll regulations can vary widely depending on your location, the size of your business, and your industry. Auditing helps you stay compliant with:

• Local, state, and federal tax laws.

• Labor laws, including minimum wage and overtime regulations.

• Benefits administration rules, such as retirement contributions and health insurance deductions.

Failing to comply with these requirements can lead to fines, lawsuits, or damage to your business’s reputation.

Employee trust

As mentioned, payroll errors can erode employee trust and morale. Imagine how an employee might feel if their paycheck is consistently wrong or late. Auditing ensures that:

• Every employee receives the correct amount on time.

• Deductions for benefits and taxes are clear and accurate.

• Overtime and bonuses are correctly calculated and paid.

Fraud prevention

Payroll is one of the largest expenses for most businesses, making it a potential target for fraud or mismanagement. Regular audits of your payroll register can help uncover:

• Ghost employees (fake entries in your payroll system).

• Unauthorized overtime or bonus payments.

• Duplicated or inflated reimbursements.

Spotting these issues early saves your business from financial loss and protects your reputation.

Improved cost control

Payroll audits can also uncover inefficiencies that cost your business money, such as:

• Overpayments due to rounding errors or outdated employee data.

• Incorrect benefits deductions that don’t align with employee plans.

• Missed opportunities for tax credits or reimbursements.

By identifying and addressing these issues, you can reduce payroll costs and reinvest those savings back into your business.

Streamlined tax reporting

A clean and accurate payroll register simplifies tax season. When you audit regularly, your records are always up to date, reducing the stress and time required to:

• File quarterly and annual tax returns.

• Prepare W-2s or 1099s for employees and contractors.

• Respond to any tax authority inquiries or audits.

With an accurate payroll register, you’re always prepared, no matter the tax deadlines.

More strategic decision-making

Your payroll register isn’t just an operational tool — it’s a strategic asset. A thorough audit provides insights into:

• Labor costs and how they compare to your revenue.

• Trends in overtime, bonuses, or employee turnover.

• Opportunities to optimize payroll processes.

These insights can inform decisions about hiring, budgeting, and investing in new tools or processes to improve efficiency.

How can you audit your payroll register quickly?

Here’s how to audit your payroll register efficiently:

1. Organize your payroll data

Before diving into the audit, make sure your records are up to date and well-organized. This includes:

• Ensuring all employee information (names, IDs, tax statuses, etc.) matches official records.

• Verifying any recent changes, such as promotions, pay raises, or changes in benefits.

Using payroll software — like Remote Payroll — that consolidates this information into a central dashboard can save you hours of manual cross-checking.

2. Compare pay period details

Start by verifying that the gross pay totals on the payroll register align with your pay structure. Specifically, you should:

• Cross-check hours worked for hourly employees against timesheets.

• Confirm that salaries for your exempt employees match employment contracts.

• Review overtime calculations and ensure they comply with labor laws.

Going forward, you can also use your historical payroll register reports as a benchmark to spot any unusual spikes or drops in pay amounts.

3. Review tax and benefit deductions

Taxes and benefits can be tricky to calculate, but they are crucial for compliance. Ensure that you check:

• Tax withholdings. Ensure deductions for federal, state, and local taxes align with the most recent tax brackets, and double-check tax IDs for accuracy.

• Benefits contributions. Verify that deductions for health insurance, retirement savings, and other benefits match your employees’ enrollment selections.

With Remote Payroll, this information is quick and easy to collect.

4. Reconcile net pay totals

Net pay is the amount your employees actually receive, and it’s where errors can cause the most friction. For each employee:

• Subtract total deductions (such as taxes, benefits, and garnishments) from their gross pay.

• Cross-check the calculated net pay with the actual amount deposited into the employees’ accounts.

If discrepancies arise, identify whether the issue is in the deductions or gross pay calculations.

5. Spot-check individual records

Rather than auditing every single record, focus on random spot-checking a selection of employee records to ensure they align with the payroll register. Where possible, choose a mix of:

• Full-time, part-time, and freelance employees.

• Records with high deductions or bonuses.

• Newly hired or recently promoted employees.

This targeted approach saves time while ensuring a representative audit of your payroll.

6. Look for any unusual patterns

Payroll anomalies can be a sign of errors — or potentially even fraud. Use your payroll register report to identify:

• Duplicate payments or checks.

• Unapproved overtime or bonuses.

• Missing employees (who may have been accidentally excluded).

7. Document and address any issues

Finally, document any errors you uncover and take immediate corrective action. This could involve:

• Updating your payroll records for accuracy.

• Communicating corrections to affected employees.

• Adjusting future pay periods to reflect corrected totals.

Clear documentation also ensures that you’re prepared for any audits conducted by tax authorities or regulators.

Simplifying your payroll register audit

This might sound like a lot of work, but auditing a payroll register doesn’t have to be a manual or stressful process. With the right tools, you can complete audits quickly and accurately.

The fastest way to audit your payroll register is to use payroll software like Remote, with built-in reporting and auditing tools. Our payroll platform simplifies the entire process by consolidating all your payroll data into one system, making it easy to generate, audit, and reconcile reports.

This allows you and your team to focus on other tasks, while having the peace of mind that everything is being handled compliantly and accurately.

To learn more about Remote Payroll, speak to one of our friendly experts today!

What are payroll errors costing you?

From disengagement to retention, see how payroll mistakes can really impact your business. Based on interviews with 2,500+ professionals and 1,300+ HR decision-makers worldwide.

Get your free report now