Process

Spending Too Much Time on Accruals? Real-Time Data Can Help

By The Center Team on December, 3 2019
Photo_FoggyRoad

 

The True Cost of Accruals

When employees procrastinate on filing expense reports, the burden often falls on finance to follow up with reminders, chase down missing information, and finally make accruals to account for unsubmitted expenses, all of which takes significant time and lengthens the close process.

Furthermore, those accruals basically equate to double work, since the finance team first has to spend precious time estimating expenses (typically across several departments), only to adjust and reconcile everything next cycle.

Making accruals month after month leads to a number of potential problems:

  • Inaccurate month-end data
  • Frustrating cross-department communication
  • Ambiguity for budget owners
  • Busywork and burnout for the finance team
  • Wasted time and duplicated effort
“We have some very frequent travelers that have been using their personal cards [for work expenses]. We make a big accrual each month for non-corporate card spend that we don’t have visibility into.” FP&A Manager, 850-person healthcare tech company

Late and missing expense reports typically require the finance team to make an educated guess about outstanding expenses, often based on previous reports or averages. When reports are finally submitted the following week (or month, or quarter!), the actual amounts might differ from the estimate by a little—or a lot. Numbers then have to be updated in the general ledger (GL), and the cumulative impact can be significant, affecting departmental budget status or even company profitability.

The accrual process in a nutshell: You guess and report, only to correct and re-report. It’s manual and time-consuming. And while accrual-based accounting is usually preferable to cash-based accounting, spending time on accruals for late expense reports month after month is frustrating.

Finance teams, especially those at growing companies, tend to be overextended in the first place, and accruals certainly don’t help the situation. You can see the toll in operational metrics like forecast accuracy and how long it takes to close the books. A recent Center survey found that 58% of companies have a monthly close of five or more days. That’s essentially one business week every month—more time than most busy teams can afford.

Gathering the data, reconciling reports, and politely dropping by colleagues’ desks with deadline reminders adds up. That time could be—should be!—spent on more strategic priorities.

Real-Time Data to the Rescue

Advanced automation makes it possible to flip the script on accruals. Imagine a continuous stream of real-time expenses—even those that have been incurred but not submitted for approval yet—that feeds directly into your GL. No guesswork, no reversals, no chasing after receipts.

Real-time data eliminates the guess-and-correct cycle. Next-generation tools will automatically track purchases, suggest how to categorize them, and audit them against policy. Teams can shift their focus from chasing down receipts and revisiting last month’s numbers to more forward-looking initiatives and cross-team collaboration. Instead of playing catch up, you can actually get ahead.

How Center Can Help

The Center SpendOps Suite uses real-time data to automatically track spend and provide full visibility into all expenses, even the unsubmitted ones. You can close the books quickly, with minimal accruals. The intelligent SpendOps software detects any changes to those expenses after export, making it easy to adjust entries simply and swiftly. Learn more about how Center can help your finance team achieve more.

Recommended Articles

Get the latest industry news & updates delivered to your inbox.