Vendor Accrual Management

Who should be in charge of vendor accruals - FP&A, GL or AP?

When I first started corporate accounting 15 years ago, GL was mainly responsible for collecting and recording accruals. With the emergence of the FP&A function and the amazing partnerships being formed with Controllerships, we’re now seeing more of a mix. In fact, many of our Gappify Alan GL Accrual Management customers today are actually FP&A buyers!

Naturally for those looking to “punt” (or take control of) accrual responsibilities, the fun question I frequently get asked is: Who should own the vendor accrual process, FP&A, GL or even AP? Without getting deep into the weeds, my answer is that it depends on the type of vendor accrual being collected.

Type #1:

Vendor Confirms = Collected by AP, booked by GL

When requesting unbilled expense estimates, AP is in the best position to coordinate since they already have relationships with vendors. The last thing you want is for your vendors to regularly get questions from Jane in AP, Joe in GL, and Jen in FP&A. Further, AP can use the confirm process as an opportunity to pester those service vendors who take 6-months to invoice. Of course, for SOD’s sake, after the expense estimates are aggregated by AP they should be passed on to GL for JE recording.

Type #2:

Business Partner Confirms = Collected by FP&A, booked by GL.

Since FP&A already has recurring cadences with internal business partners, consider gaining efficiencies by combining BvA review meetings/inquiries with collecting unbilled expense estimates (since unbilled obviously impacts the “A” in “BvA”). Once collected, I do recommend asking GL to review and post as they are better trained and equipped to check these amounts against potential late invoices, duplicate entries, etc.

Type #3:

Internal Accounting Estimates = Collected & booked by GL.

Best practice for accruals is to always exhaust confirm efforts first (specifically, start with vendors, then move to business partners afterwards). If confirms are not feasible or available, I suggest that GL coordinate all other accruals for the sake of centralization. Typically GL will already have a list of recurring accrual JEs to book, so instead of having AP calculate Accrual Type A and FP&A calculate Accrual Type B, consider running all manually-calculated accruals to GL. The GL team can always pull in AP and/or FP&A as needed.

In conclusion...

Needless to say, each organization is different, so the suggestions above may not work or be applicable to everyone. Hopefully this blog at least serves as a strong starting point for your team to properly decide which group to assign accruals. Lastly as a *cough* shameless plug, remember that Gappify Alan’s Accrual Management solution can help automate many of the steps described above. Please visit gappify.com/accruals for more details. 🙂

Jotham Ty
Founder & CEO
Gappify, Inc.

About Gappify

Gappify is a cloud-based provider of process automation for mid-market and enterprise accounting teams. Our digital worker, Alan integrates into NetSuite and SAP to initiate and complete various routine tasks. Thanks to Alan, companies are able to leverage highly-skilled accountants to focus on more value-add work.

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