USA Suggested Best Practices for handling Month End Close and late expense reports


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Hi There!

We have 5 sales people who all travel and we are currently using SAP Concur for expense management which is a big help. We currently provide 45 days to submit an expense report from when the expense was submitted. We're trying to balance the fact that a sales rep is not concerned with closing the month and a reasonable time to submit expense reports. However as we've grown, we see this dollar amount growing and impacting our month end close out and reconciliations.

We are looking for guidance on how to handle the month-end close when several expense reports are out pending. What are some common polices for handling this issue? For example, what month would you post the expenses to if an employee submits an expense report for July, but the expenses were incurred during May? And when would you close out the Month of May?

Thanks,

Brett
 
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kirby

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Well, accrual accounting has been around for a long long time, and now might just be the time your company bites the bullet and applies it.

But first let's go back to that 45 day policy.
So, if the expense report is not turned in by day 45 then what? You don't pay? I doubt that. If you pay anyway then there really is no policy. In any event, it is such a long period of time that by itself it practically ensures the data from a salesperson expense from month 1 will not be known until way past the close of month 1. So the point here is: don't worry about this 45 day business because we will use the method below.

Back to the accrual point: so you essentially have no choice but to accrue those expenses into the current month based on the best estimates you can make. This is where your experience and skill kick in. For example see if there is an "average" amount of salesforce expenses each month. Also, take into account if your salesforce historically spends more at certain times, say end of the year.

And to your question: If you estimate the not-yet-received salespersons' expenses and record that as an accrual for May then you can close May. When the actuals come in you can theoretically adjust in the precise month they are received. In practical terms, you don't do this in detail cause you would go nuts. You would really just reverse your May accrual in June then make a new June accrual.

And for the audited financials, the auditors will search for any sales force expenses that should have gone in the current year and see if your December accrual covered that. If not, no big deal, they will just adjust and accrue more.

Good Luck
 
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kirby

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And I just re-read you post and noticed you have all of 5 salespeople. So just get approval to call them at month-end and get a guess of expenses from them. Then accrue that.
 

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