Friday Feature – Unencumbering Payroll Encumbrances

Last week, we talked about payroll encumbrances. The flip side to encumbering is unencumbering. That happens when you have spent the money and now you don’t want that money “set aside” any longer. Some districts want the encumbrance journal entry to be cancelled, just get rid of it. Others want the encumbrance to be reversed so they have a detailed audit trail of what was encumbered and what was actually spent.

Escape Online gives you all the options you to automatically unencumber payroll encumbrances during payroll processing.

The Payroll Encumbrance flag in the Organization record lets you determine how the unencumbrance of the payroll encumbrance occurs. You can set it to Cancel (the JE is cancelled each pay period and the detail is deleted), Reverse (the JE is reversed each pay period and the detail is kept) or None (don’t encumber in the first place).

Cancel Versus Reverse

Why do we give you a choice? Because there are costs/benefits to each of these options.

The Cancel option is what most of our customers use. The reason they choose this option is that they want their payroll encumbered, but once the money is spent, they are not that interested in those encumbrances. They have the pay detail and that is all they care about. Simple.

The Reverse option was introduced for those customers that want to run Fiscal reports for previous periods and have those encumbrances included. They are like my husband and I with the new house budget: they keep a VERY close eye on the money going in and out of their system.

But they pay a small price for this kind of detail. As you can imagine, school districts employ a lot of people and each one of those persons would be a line item in a payroll JE. That’s a lot of line items, for the original encumbrance, the payroll JE, and the reversal encumbrance, for each and every month. In other words, the price for this option is paid in the size of the database and the journal entries, which can make searching for journal entries a little slower. The customers who have chosen this option think the slight delay is worth the type of detailed analysis they can perform on a regular basis.

No matter whether your budget is big or small, keeping an eye on the flow of money is always worth the price of admission.