Employee Loans and Advances
Managing staff loans and salary advances is a routine part of running a business in Nepal — whether it is a Dashain advance, a personal loan for an employee, or a travel float. Udyot ERP’s Employee Loans module lets you record the disbursement, calculate an EMI repayment schedule with interest, and recover instalments automatically through monthly payroll until the balance is fully cleared. Every rupee flows through the General Ledger, so your books stay accurate without manual journal entries each month.
How Employee Loans Work in Udyot ERP
When you disburse a loan, Udyot records the outflow as a debit to the Staff Loans and Advances ledger and a credit to your Bank or Cash account. Each month when payroll runs, the EMI is split into a principal component and an interest component. The principal reduces the loan balance (Credit: Staff Loans and Advances), while the interest is recognised as income (Credit: Interest Income on Staff Loans). The employee’s payslip shows the EMI as a deduction line.
Once the final EMI is paid, the loan balance reaches zero and Udyot stops deducting from payroll automatically.
Disbursing a Staff Loan
- Go to HR → Loans → New Loan.
- Select the Employee from the dropdown.
- Choose the Loan type — for example, personal.
- Enter the Principal amount in NPR (e.g. 1,20,000).
- Enter the Interest rate as a percentage per annum (e.g. 12%). Leave it at 0 for an interest-free advance.
- Enter the Tenure in months (e.g. 12 months).
- Set the Disbursement date in Bikram Sambat format (e.g. 2082-04-15).
- Click Save. Udyot generates a loan number (e.g. LOAN-0001) and a full EMI repayment schedule showing the principal and interest split for each instalment.
After saving, the disbursement is reflected in the GL: Staff Loans and Advances is debited and your Bank or Cash account is credited.
Viewing the EMI Repayment Schedule
Open the loan record from HR → Loans to see the repayment schedule table. Each row shows:
- The instalment number and due date (in BS)
- The EMI amount (principal + interest)
- The principal component for that month
- The interest component for that month
- The outstanding balance after payment
The sum of all principal components equals the original loan amount exactly — there is no rounding shortfall on the final EMI.
Automatic EMI Recovery Through Payroll
You do not need to do anything extra each month. When you process a pay run (see Salary Structures and Payroll Processing), Udyot automatically includes the active EMI as a deduction for each employee who has an outstanding loan. The deduction appears on the payslip under the deductions block.
The GL impact when payroll is posted:
| Side | Ledger | Amount |
|---|---|---|
| Credit | Staff Loans and Advances | Principal portion of EMI |
| Credit | Interest Income on Staff Loans | Interest portion of EMI |
| Debit | Salary Payable | Total EMI (reduces net salary payable) |
The payroll Journal voucher is balanced, and the loan’s outstanding balance in the Loans register is updated automatically.
Checking Outstanding Loan Balances
To see all loans and their status, go to HR → Reports → Loan Outstanding. The report shows each loan with the original principal, total amount repaid, current outstanding balance, and EMI. You can filter by loan status (active, closed, or all).
Employees can also check their own loan balance and repayment schedule by logging into the Employee Self-Service Portal and navigating to My Loans.
Interest-Free Advances
For petty cash floats or travel advances where no interest is charged, simply set the Interest rate to 0% when creating the loan. The repayment schedule will show zero interest each month, and only the principal is deducted from payroll. The GL treatment is the same — Staff Loans and Advances is debited at disbursement and credited as each instalment is recovered.
Nepal-Specific Notes
Interest income collected from staff loans is taxable business income. Make sure your Interest Income on Staff Loans ledger is correctly mapped under Other Income in your Chart of Accounts so it is captured in your Profit and Loss statement.
Loan disbursements and recoveries do not attract VAT or TDS under normal circumstances. However, if your company deducts TDS on payments to non-employees, ensure you are using the correct ledger. For TDS on salary-related deductions, refer to TDS on Salaries.
Bikram Sambat dates are used throughout the Loans module — for disbursement dates, due dates, and the repayment schedule. The system converts automatically between BS and AD wherever needed.