What are some best practices surrounding the role of accounts payable and the accrual process?

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Accounts payable can play a crucial role with month- and year-end accruals. It depends on how your finance organization is structured. Some large companies have separate groups that focus only on calculating and tracking accrued expense amounts in the general ledger. In this case, AP may be focused only on making sure invoices are entered into the system by a certain cutoff date and any invoices received after the cutoff date but before the end of the period are provided to the finance team calculating the accruals.

In smaller organizations, AP will take the lead role in determining the value of the accruals, reversing the prior period accruals and entering the current period-end accruals. In this case, any journal entries that are done by AP are reviewed and approved by someone outside of AP (usually the controller) before they can be entered into the general ledger system. Creating detailed schedules of your accruals is an important business practice. Accrual accounts should be assigned to personnel who are held accountable for reconciling the accrual account (and what is contained in it) at the end of each period. The controller or an equivalent manager in the finance/accounting organization should be able to go through each balance sheet account and clearly understand how the ending value in the account was derived.

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