Most AP automation tools don’t handle accruals
Almost every AP automation tool will process your invoices. It reads them, sends them to whoever needs to approve them, and pays them. Most of them stop there and leave accruals to you, so at month-end your team is still going through vendor history and open POs in Excel to figure out what you owe that hasn’t been invoiced yet.
If you’re evaluating AP automation, these are the nine questions we’d ask every vendor. The answers will tell you whether the tool can calculate, build, post, and reverse your accruals in NetSuite, or whether you’re going to keep doing that part in a spreadsheet.
What are month-end accruals?
Month-end accruals, also called accrued expenses, are journal entries that record expenses your business has incurred but hasn’t been billed for yet. They keep each expense in the period it belongs to, and when the actual invoice comes in, the accrual is reversed so the expense isn’t counted twice.
On the AP side, most of what you accrue is either recurring spend, like the vendors that bill you about the same amount every month, or contract spend, which is work that’s been approved on a purchase order but hasn’t been invoiced yet. The questions below cover both.
How month-end accruals work in NetSuite today
In NetSuite on its own, someone estimates the amount, enters a journal entry, and sets a Reversal Date. If you check Defer Entry, NetSuite creates the reversing journal entry on that date, as the exact opposite of the original and linked back to it. So the reversal is handled, but someone still has to come up with the estimate, and the reversal posts on whatever date you entered, whether or not the invoice has come in by then.
Part one: Where do the accrual estimates come from?
The first three questions are about how the estimate gets built, because that’s the part most teams are doing by hand today.
- Where does the estimate come from?
A good answer: It comes from data that’s already in NetSuite, like the vendor’s recent bills, open purchase orders, and invoices that are still waiting for approval.
Red flag: “You can import a spreadsheet and create a journal entry.” That means you’re still coming up with the numbers yourself, and the tool is just posting what you give it. - How do you estimate recurring spend?
A good answer: It takes a rolling average of what the vendor has billed you recently and recalculates it every month, so if a vendor’s charges have gone up, the next accrual reflects that.
Red flag: They take last month’s number and use it again instead of recalculating it from the vendor’s recent bills, so the estimate stops matching what you’re paying. - How do you handle contract spend?
A good answer: It uses the amounts and terms from approved purchase orders only, and it spreads the accrual across the dates on the PO.
Red flag: They accrue the full PO amount in one month, or they pull in POs that nobody has approved yet.
Part two: Will it catch every bill, and can you review the numbers first?
The next three are about cut-off and control, meaning whether anything gets missed and whether you see the numbers before they post.
- What about bills already in NetSuite but not yet approved?
A good answer: Bills that are still waiting on approval get included automatically, so you don’t have to push everything through approvals before you run the accrual.
Red flag: You have to get every bill approved before you can run the accrual, which means your cut-off depends on how fast your approvers clear their queue. - What about spend that isn’t steady, like milestone or seasonal billing?
A good answer: You can change that line by hand during the review, because an average won’t work for something like a milestone payment.
Red flag: Every line is a formula, and if you want to change one you have to export the whole thing, fix it, and load it back in. - Can we review every accrual before it posts?
A good answer: Every accrual goes into one worksheet, you can change any line you want, and nothing posts until someone signs off on it.
Red flag: Entries post straight to the general ledger (GL) with no review step, so you only find problems after they’ve posted.
Part three: What happens after you approve?
The last three are about posting and reversal, which is where a lot of tools leave the rest to you.
- Does it post standard NetSuite journal entries?
A good answer: Yes, the accrual journal entries post with the GL account, department, class, location, and subsidiary already set, and it handles multiple subsidiaries and currencies.
Red flag: The entry posts to a clearing account, or someone has to go back and fill in department, class, and location afterward. - Who approves the entry, and do they need a NetSuite license?
A good answer: It routes through your existing approval matrix, and approvers can approve from email without needing their own NetSuite license.
Red flag: Every approver needs their own NetSuite login, or approvals happen outside NetSuite and there’s no record of who approved what. - What happens when the real invoice arrives?
A good answer: The accrual reverses automatically when the invoice is processed, so the expense isn’t counted twice and nobody has to remember to do it.
Red flag: You’re the one who has to set the reversal date and keep track of it, so if the invoice comes in late, you’re cleaning that up by hand.
How Charted Accrual Automation answers all nine questions
Charted Accrual Automation runs entirely inside NetSuite. For recurring spend, it takes a rolling three-month average of what each vendor has billed you. For contract spend, it only uses purchase orders that have been approved. It also picks up bills that are still waiting on approval, so those don’t get missed. Everything goes into one review worksheet where your team can check and adjust each line, and nothing posts until a reviewer signs off. The journal entries follow your existing approval matrix, approvers can approve from email without needing a NetSuite license, and when the actual invoice comes in, the accrual reverses automatically. It also handles multiple subsidiaries and currencies. At Uplight, month-end accruals used to take two hours; now they take 20 minutes.
If you want to see how it works with your own data, book a demo and ask us the nine questions. There’s more detail on the Accrual Automation page and in the Uplight story.
Frequently asked questions
How do you automate accruals for month end?
To automate accruals, the tool has to build the estimate from data that’s already in NetSuite, like recent vendor bills and approved purchase orders, post the journal entries through your normal approvals, and reverse them when the real invoice comes in. Accrual management software built for NetSuite, like Charted Accrual Automation, does all of that inside NetSuite, from the forecasting through the reversal.
How do you reverse an accrual in NetSuite?
In NetSuite on its own, you set a Reversal Date on the journal entry and check Defer Entry, and NetSuite creates the reversing entry on that date. It posts on the date you entered whether or not the invoice has come in, so someone still has to keep an eye on the timing.
What’s the difference between an accrual and a prepaid expense?
An accrual is for goods or services you’ve already received but haven’t been billed for yet, so you’re recording the expense before you pay. A prepaid expense is the opposite, where you’ve paid ahead of time for something you haven’t received yet, so you record it as an asset and expense it over time.
How do you estimate an accrual when the invoice hasn’t arrived?
The best place to start is the data you already have in NetSuite. For recurring vendors, look at what they’ve billed you over the last few months; for contract spend, use the approved purchase order; and for bills that are already in NetSuite but not approved yet, use the actual amount. For anything that isn’t steady, like milestone or seasonal billing, it’s worth adjusting the number by hand before it posts. We covered what the manual version costs in the hidden costs of manual accruals.
Can accrual automation handle multiple subsidiaries?
Any tool you’re considering should be able to run accruals across all of your entities and currencies at once, with the subsidiary, GL account, department, class, and location already set on each entry, so ask the vendor to show you that in the demo. If you’re interested in what this changes for the AP team more broadly, we wrote about that in accrual automation and the role of AP.
