It’s that time again – monthly close – and you need to record supplier expense accruals. This is important for meeting audit requirements, budgeting, and planning. In your ERP or spend management tool, you likely have a list of vendors, invoices, contracts, purchase orders, and purchase requisitions. This data would provide insights into what a materially correct expense estimate should be. More than likely, there are data input issues or certain types of spend, such as legal and professional services, that result in additional analysis.
Accounts payable teams have the best of intentions, but many things might go wrong when it comes to inputting and ensuring complete supplier and transaction data for month-end expense accruals.
Some of these include:
- Invoices in draft status for a variety of reasons:
- No purchase order or PO, and a "No Pay" policy results in invoices staying in draft status until POs are approved.
- After-the-fact POs when business stakeholders buy things before going through the proper PO process. Even though there is no PO, valid expenses have been incurred.
- Prepaid expenses that need to be accrued over the service period. Think of matching the PO service period to the invoice service period, then comparing that to the month-end being accrued for.
- POs that don’t line up to work-in-progress statements sent by suppliers.
- Invoices the supplier forgot to send until several months later.
There is no central place to tie the accrual back to where the estimate was derived unless someone manually stores the emails. This requires the business to follow along with the tedious process.
Because of this cumbersome process, many companies reach out to their suppliers, in addition to analyzing the current transaction data. This could be really decentralized - especially if business stakeholders are responsible for doing the outreach.
For example, Nick from marketing sends outreach from his mailbox, and Elaine from legal sends out hers from her mailbox. They both give accounting or finance an estimate. But there is no central place to tie the accrual back to where the estimate was derived unless someone manually stores the emails, which would then make the business follow along with the tedious process.
You could have the accounting or finance team complete the outreach from a central mailbox so that there is one place to store all of the external communications. Even then, someone needs to send out emails, follow up for no replies, then sort through the inbox and make sense of the responses from suppliers. Further, it would be very doubtful that leadership would read through a full email inbox to get the answer when they ask, “How are my expense estimates being created, and what trends or anomalies are seen?”
Even if the suppliers are responsive, you need to reconcile between invoices input into the system and invoices sent through the inbox. This results in a manual and inconsistent process with little visibility for leadership.
Even if the suppliers are responsive, you need to reconcile between invoices input into the system and invoices sent through the inbox. This results in a manual and inconsistent process with little visibility for leadership.
To help solve these tedious and cumbersome processes, Auditoria.AI has introduced a solution to capture supplier expense accruals. The first goal of Auditoria.AI is to centralize all of the accrual information into one place. This provides visibility into month-end accruals and a consistent process that could be traced back to system transaction data, email data, and preparer and reviewer notes.
The next goal of the AI-enabled intelligent application is to automate anything that could be automated – sending emails, creating manual entries, tracking reviews, compiling audit documentation, and so on. If it is repetitious and mundane, it would be a good candidate for automation.
Auditoria's Advanced Accruals for Suppliers connects to one centralized mailbox managed by a SmartBot to keep internal stakeholders in the loop while reaching out to external suppliers, and obtaining information when needed. There is no need for the accounting team members to manually send emails, follow up on outreach communications, or comb through your inbox at month's end.
Teams that use Auditoria to manage their supplier expense accruals focus instead on higher-level activities, such as strategic analysis and interactions with key suppliers with more variability and higher spend.
The AP team sets simple suppliers to automatically accrue straight-line if they know exactly what the monthly accrual is, and to flag complex suppliers to focus management review. Auditoria.AI also flags something that might require human attention, such as an email estimate that does not make sense or an unexpected change in spending month over month. All the analysis is in one place and is easily shared with auditors or reviewed in future months.
With Auditoria.AI SmartBots handling the back-and-forth of collecting supplier accrual information and creating journal entries, you may check one more tedious task off your list of monthly close activities.