This is essentially your cash flow statement. In other words, where the money has left your wallet. This records all payments that have been completed in your Spendesk account. The bank journal is easiest to understand. To do this, Spendesk includes two separate journals: the purchase journal and the bank journal. This is relatively easy on a cash basis - unlike corporate cards and expense reports, Spendesk users have always been able to see what’s spent in real time.īut proper spend management also requires visibility over committed spend - including where the payment isn’t complete yet. Spendesk’s goal is to give you more control and visibility over company spending. New information always keeps trickling in. Which is why so many businesses struggle to close the books on time each month. If you don’t know what’s been committed in real time, you can’t easily keep your purchase journal (or P&L statement) up to date. The main problem is a lack of real-time expense data. But even that assumes that other teams submit invoices on time. Once they receive it, they can accrue the payment even while waiting to push the payment. Invoices are a little easier, because the invoice itself is often handled by the finance team directly. Until your teams submit their claims - sometimes months after they were actually incurred - you have no idea what the company is liable to reimburse them. If you have shared credit cards, or even individual employees with their own cards, you don’t know what’s been spent until you get the statement at the end of the month. Unfortunately for many businesses, accrued expenses are almost impossible to track in real time. It’s not actually a matter of one versus the other. Which is why spend management best practice focuses on accrued expenditure, rather than cash.īut most companies should indeed have both a cash flow statement and accruals in their purchase ledger and expense accounts. Whether or not the cash has actually left your accounts is still relevant - you need to pay suppliers - but it’s more of an operational matter. Generally speaking the total amount of spending committed is the most accurate way to understand a company’s financial position. Even though this $10,000 is effectively gone - you have to make the repayment. You could have $10,000 outstanding on the card, but until you make a repayment, the bank account won’t reflect this. If a credit card payment isn’t due until the end of the month, your bank account won’t reflect the true amount spent until this payment has been made. Take traditional corporate credit cards, for example. The common alternative to accrual accounting is known as “cash basis accounting.” Following this method, the company’s cash flow statement reflects what has actually left the bank account. But first, let’s refine this distinction. We’ll see why this is so important for proper spend management shortly. From a financial perspective, this money is as good as spent, and can’t be allocated elsewhere. Companies identify a supplier and agree to pay for goods and services, but typically don’t pay until after the good or service is delivered.Įven though no cash has been transferred, the company is still liable to pay. This is important in the accounts payable process, particularly when paying by invoice. Once the expense has been incurred (the company has committed to making a payment), it goes in the books to give a more accurate reflection of the company’s financial position. An accrued expense (or accrued liability) is an accounting technique that adds committed expenses to a company’s books before they’ve been paid.
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