Managing Accruals in Fluid – Example Implementation

Accruals ensure project costs are recognised in the correct financial period, based on when work is delivered rather than when invoices are received. This supports accurate financial reporting and enables proper capitalisation of project expenditure.

This guide demonstrates one approach for implementing accruals management in Fluid, focusing on the technical process and month-end procedures.

An accrual is a temporary accounting entry that captures the estimated cost of delivered work that hasn't yet been invoiced. This applies to both:

• CapEx projects (capitalisable costs) – software implementations, infrastructure builds

• OpEx activities (operational costs) – consultancy services, maintenance contracts

Accruals prevent financial distortions caused by invoice timing mismatches and ensure your project financials accurately reflect delivery progress.

At each month-end, the Finance team or PMO is responsible for recognising the cost of work delivered but not yet invoiced. This ensures project financials reflect actual delivery progress, not the timing of supplier invoices.

The accrual process follows a consistent month-end rhythm.

1. Calculate the accrual (cumulative since last invoice)

   • Determine how much work has been delivered since the last recognised invoice or actual cost.

   • This could be based on elapsed time, percentage completion, or scheduled milestones.

   • Calculate the total accrued value to date from the last invoice point up to the current reporting month.

     • If no invoice has yet been received, calculate from the start of the contract or delivery period.

2. Post the accrual

   • Accruals are recorded using the Non-Resource Actuals bulk edit file.

   • Each accrual is added as a row, specifying:

     • Project and reporting month

     • Expense category and expense type

     • Financial reference and Invoice number (optional)

     • Amount

     • Cap % (0 for OpEx, 1 for fully capitalisable, or a partial value)

   • Accruals are typically uploaded as part of the month-end actuals processing.

3. Reverse the previous month’s accrual

   • Because each month’s accrual reflects the total value since the last invoice, the previous month’s accrual must be fully reversed.

   • This avoids double-counting and ensures that the net recognised amount reflects only the difference from the previous period.

   • This is done by including a negative entry in the same file, mirroring the details of the prior accrual.

4. Continue each month until invoiced

   • Repeat this process each month, updating the total accrued value since the last invoice or recognised cost.

   • When the invoice is received and ready to be processed:

     1. Reverse the last accrual by including a negative entry for the most recent accrual in the Non-Resource Actuals file.

     2. Post the actual invoice value in the same file, using a positive entry with the correct cost details.

   • This ensures that the accrual is cleared from the books and replaced by the confirmed cost from the invoice.

   📌 The reversal of the accrual and the posting of the actual invoice should happen in the same month-end submission, ensuring a clean transition with no duplication.

This cumulative approach ensures that the financials reflect the total cost of work delivered to date, while keeping monthly entries balanced and auditable.

This example assumes a project with a $270,000 invoice scheduled for 22 October 2024, covering the period from 24 July to 21 October 2024. The cost is accrued daily at a rate of $3,000/day.

Accruals are cumulative and posted at each month-end. The prior month’s accrual is reversed in the same submission to ensure accurate period reporting.

This structure ensures the full $270,000 is recognised by the time the invoice is due, while maintaining accurate monthly cost reporting.