Petpooja Payroll’s new Loan & Arrears module merges employee loans, salary advances, and arrears into a single section with a per-employee ledger (Khata), automatic deduction logic, and a complete transaction trail. It replaces the old separate Loans and Advances sections with one unified screen where admins can issue loans, track partial payment arrears, choose between installment or full deduction, and finalise payouts via Bank Transfer, UPI, Cash, or Cheque.
A 2024 International Accounting Bulletin survey found that 31% of businesses still rely on spreadsheets for payroll, rising to 44% among businesses with fewer than 20 employees. The error rate among these small businesses? 84%.
Consider how that plays out in practice: an admin notes a ₹15,000 salary advance in a spreadsheet, deducts ₹5,000 from each of the next three payrolls, and everything works until someone forgets to update the sheet after month two. The employee gets a short salary. The admin gets a call at 10 PM. Nobody can trace where the numbers went wrong.
Key Takeaways
- Petpooja Payroll now merges Loans and Advances into one unified module called Loan & Arrears, with a centralised ledger (Khata) per employee.
- Partial salary payments create automatic arrear entries that carry forward to the next payroll cycle.
- Admins can choose installment-based or full outstanding deduction, and pay via Bank Transfer, UPI, Cash, or Cheque.
- Every transaction is logged and exportable as CSV or PDF for audit and compliance.
What Is the Loan & Arrears Module in Petpooja Payroll?
Until this update, Petpooja Payroll had separate sections for Loans and Advances. They worked, but managing them in two different places meant more clicks, more confusion, and a higher chance of missing something during payroll processing.
The new Loan & Arrears module combines both into a single section. At its core sits what the system calls a Khata (ledger) for each employee. This Khata tracks four things in one view:
- Loans issued to the employee
- Arrears owed to the employee from partial payments
- Deductions applied during payroll
- Payments made against outstanding balances
The balance logic is straightforward. A positive balance means the company needs to recover money from the employee (that’s a loan). A negative balance means the company owes money to the employee (that’s an arrear). One screen, one number, one source of truth.
Petpooja Payroll’s Loan & Arrears module merges employee loans, advances, and salary arrears into a single centralised ledger called Khata. Each employee’s Khata tracks loans issued, arrears from partial payments, deductions applied, and payment history. A positive balance represents a loan to recover; a negative balance represents arrears owed to the employee.
Across 30,000+ Payroll clients, the most common complaint we heard was about loan tracking falling out of sync by the second or third installment. This module was built to solve that specific problem.
How Does Loan Creation and Tracking Work?
Creating a new employee loan takes about 30 seconds. Here is the step-by-step process:
- Go to Loan & Arrears from the left menu
- Click Add
- Fill in the required fields:
- Employee name
- Reason for the loan
- Loan amount
- Monthly installment amount
- Transaction date
That is all. The system adds the loan to the employee’s Khata and starts deducting the installment amount from the very next payroll cycle.
What if an employee takes multiple loans?
Each new loan gets added to the total outstanding amount. For payroll deduction, the system picks the installment value from the most recently issued loan. For example, consider a warehouse supervisor in Pimpri who took a ₹20,000 loan in January 2026 with a ₹5,000 monthly installment. In March, he takes another ₹10,000 loan with a ₹3,000 installment. His outstanding balance becomes ₹30,000 (minus whatever was already deducted), and the monthly deduction switches to ₹3,000.
Admins can override this at any time. Go to Loan & Arrears, click the three-dot menu under Action, select Update Installment, and choose between two deduction types:
- Installment Amount: Deduct a fixed amount each month
- Full Outstanding Amount: Deduct the entire remaining balance in the next payroll cycle
This flexibility matters. A diagnostic lab chain in Pune might prefer installment-based recovery for junior technicians but full deduction for senior staff who took small emergency advances.
When an employee holds multiple active loans in Petpooja Payroll, all amounts are added to one outstanding balance. The system uses the installment amount from the most recently issued loan for monthly payroll deductions. Admins can override this to deduct either a fixed installment or the full outstanding amount in one cycle.
What Are Arrears and How Does the System Handle Them?
Arrears are the balances that build up when an employee’s salary is partially paid. A 2025 survey by 1Finance across Mumbai, Delhi, Hyderabad, Bangalore, Pune, and Chennai found that 54% of Indian employees admitted to living paycheck-to-paycheck for more than three months. When staff are already stretched thin, even a short delay or partial payment creates real financial pressure, and the admin team ends up fielding calls they shouldn’t have to.
Here is how it works with a real example:
| Step | Amount |
|---|---|
| Monthly salary | ₹30,000 |
| Loan deduction | ₹5,000 |
| Net payable | ₹25,000 |
| Amount actually paid | ₹10,000 |
| Arrears created | ₹15,000 |
The ₹15,000 gap is recorded as an arrear entry in the employee’s Khata. During the next payroll cycle, the system does two things at once: it deducts any active loan installments and adds any pending arrears back to the payable amount.
What we see across our client base: Partial payments are especially common in construction firms and manufacturing units where cash flow is tied to project milestones. A garment manufacturer in Surat with 45 employees told us they used to track these manually in a notebook, and at least two or three entries went missing every quarter.
The system handles the adjustment without the admin touching anything. No formulas, no manual carry-forwards, no “I forgot to update last month’s sheet.”
How Does Payout Finalization Work with Loans and Arrears?
This is where the biggest workflow change happened. The loan column has been removed from the main payroll processing screen. Loans and arrears are now handled during payout finalization instead.
Here is the updated flow:
Step 1: Go to Payroll and click Process Payroll
Step 2: Finalize payroll as usual. You will be redirected to the Finalize Payroll Details screen.
Step 3: Two new fields appear on this screen:
- Paid Amount: How much was actually disbursed
- Paid On: The date of payment
Step 4: Click Pay to open the Payment Processing screen. This screen shows:
- Finalized Salary
- Loan/Arrears Amount
- To Pay Amount (after adjustments)
- Balance Amount
- Payment Method
Step 5: Choose the payment method for each employee. Four options are available:
| Payment Method | When to Use |
|---|---|
| Bank Transfer | Standard salary disbursement |
| UPI | Quick transfers, especially for smaller amounts |
| Cash | Common in retail shops and restaurant chains |
| Cheque | Formal documentation requirements |
Step 6: Click Mark as Paid. The payroll status updates to Paid, loan deductions are applied, arrears credits are added, and every entry is logged in Transaction Logs.
Why did Petpooja move loan handling to the finalization stage? Because loan deductions only matter at the point of actual payment, not during salary calculation. A textile showroom in Vastrapur might calculate payroll on the 28th but disburse salaries in two batches on the 1st and 5th. Applying loan deductions at calculation time created mismatches. Applying them at payment time reflects the actual cash flow.
How Do Transaction Logs Keep Everything Auditable?
Every loan issued, every arrear created, every deduction applied, and every payment made is recorded in a dedicated Transaction Logs screen.
To access it, go to Loan & Arrears and click View Logs at the top right.
The log screen supports four filters:
- Date range: Pull records for any custom period
- Branch: Filter by location (useful for multi-outlet businesses)
- Employee: Search for a specific person’s history
- Transaction type: Filter by Loan or Arrears separately
Filtered records can be exported in two formats: CSV for spreadsheet analysis or PDF for formal documentation. The Ernst & Young study reported by HROne found that 49% of Indian companies reported payroll errors in the past year, with the average cost per error running close to ₹50,000 when you factor in penalties, corrections, and the time spent fixing them. A searchable, exportable log eliminates the “we can’t find the entry” problem that causes most of these errors.
Each transaction log entry shows:
- Transaction date
- Amount (with colour coding for loans vs. arrears)
- A comment field that records exactly what triggered the entry, such as “Loan Paid on Payroll finalized by Admin date of 2026-03-11”
This level of detail matters during PF or ESIC audits, where inspectors often ask for month-wise breakdowns of employee earnings and deductions.
Who Should Use This Module?
Any business that gives salary advances, employee loans, or deals with split payments will benefit. According to the ADP “Future of Pay in India 2025” report, 46% of Indian organisations are expanding financial wellbeing programmes, and 30% are introducing flexible pay models including salary-linked financial support. The demand is there. The question is whether your current system can handle it without errors.
Manufacturing and warehouse operations in cities like Bhiwandi or Hosur often run with 50 to 200 blue-collar workers who frequently request advances before festivals or family events. Tracking these in registers is a compliance risk waiting to happen.
Quick commerce and delivery operations such as Zepto pay riders on a per-shift or weekly basis. Partial payments and short cycles make arrears management a constant headache without a system.
Hospital and clinic chains with rotating nursing staff across branches need branch-level filtering to track who owes what and where.
Retail showrooms and franchise businesses running two or three outlets and one central payroll team can now see every employee’s financial position from one dashboard, filtered by branch.
India has 7.47 crore-plus MSMEs employing 32.82 crore people, according to the Economic Survey 2025-26. Even if a small fraction of these businesses manage employee loans informally, the scale of potential errors and disputes runs into crores of rupees annually.
If you are still tracking employee loans in a spreadsheet or a physical register, the switch from Excel to payroll software is worth considering before the next payroll cycle.
How to Set Up and Start Using Loan & Arrears
If you are already on Petpooja Payroll, the Loan & Arrears module is available in your dashboard. No separate activation needed.
Here is a quick setup checklist:
- Log in to your Petpooja Payroll dashboard
- Find Loan & Arrears in the left-side navigation menu
- Add your first loan: Click Add, fill in the employee details, amount, installment, and date
- Process payroll: The next time you run payroll, loan deductions will appear during payout finalization
- Review Transaction Logs: After your first payroll cycle, check View Logs to see every entry recorded
For businesses with existing loan records in Excel, the migration is manual but straightforward. Enter each active loan with the current outstanding balance and remaining installment amount. The system picks it up from the next payroll run.
Petpooja Payroll costs ₹8,000 per year as a flat rate, not charged per employee. That covers attendance, payroll processing, leave management, the Loan & Arrears module, and all other features bundled together.
Conclusion
The Loan & Arrears module is built for a specific problem: the gap between issuing an employee loan and actually recovering it correctly across multiple payroll cycles. By merging loans and advances into a single section with a per-employee Khata, automatic arrears tracking, and a clear payout finalization flow, it removes the manual steps where most errors happen.
- One ledger per employee replaces scattered registers and spreadsheets
- Partial payments create arrears that carry forward without manual entries
- Transaction logs with CSV and PDF export cover audit and compliance needs
- Four payment methods (Bank Transfer, UPI, Cash, Cheque) match how Indian SMEs actually pay staff
If your team processes payroll for even 15 to 20 employees, a dedicated module like this pays for itself within the first quarter by preventing even one ₹50,000 error.
Frequently Asked Questions
Yes. Petpooja Payroll’s Loan & Arrears module uses a single centralised ledger (called Khata) for each employee. It shows all loans issued, arrears from partial payments, deductions applied, and payment history in one screen. The payroll system covers hardware and software together at a flat annual cost, so there are no extra charges for this module.
The unpaid amount becomes an arrear entry. For example, if ₹25,000 is payable but only ₹10,000 is disbursed, the remaining ₹15,000 is recorded as arrears. This amount gets added back to the employee’s next payroll cycle without any manual input from the admin.
All active loan amounts are added to the total outstanding balance. For monthly payroll deduction, the system uses the installment amount from the most recently issued loan. Admins can override this by updating the installment or choosing to deduct the full outstanding balance in one cycle.
The Transaction Logs screen lets you filter by date range, branch, employee, and transaction type (Loan or Arrears). Results can be exported as CSV or PDF. This is particularly useful during PF or ESIC audits where inspectors ask for month-wise deduction records. The 9 common payroll mistakes Indian SMEs make often start with missing documentation, which this export solves.
