Carlson Thought Leadership in Finance & Technology

How to Reduce Surprise Expenses with Sage Intacct

August 30, 2017 / by Joe Giorgio

Does your accounting department have trouble with surprise expenses? Do these expenses arise at year end, when you have the least amount of time and budget to manage them? Most organizations that have approval processes in place for large purchases, including those that require Purchase Orders, encounter this perennial problem. Timing issues aside, perhaps there are several people approving Purchase Requests for the same budget center or maybe the manager is overwhelmed with such a high volume of requests that she or he cannot remember all of the approved requests that have yet to be completely processed.

Many finance teams spend days or weeks creating and maintaining the annual budget for their department managers only to have surprise expenses show up at quarter or year end and blow out their budget. The best way to avoid this is to not only use Purchase Orders but also to track a Purchase Order similarly to how you would track an actual expense. In other words, you should book the transaction with all the dimensional coding for each Purchase Order.

Sage Intacct provides a very powerful feature called User-defined Books that allows you to book entries and create reports either with or without those entries. You can even have the commitment balances separated into another column on one report. An example of an easy-to-create report is displayed below:

Committed purchases

Better yet, the Intacct Purchasing module can be configured to have certain Transaction Definitions automatically create entries on User-defined Books as well as reverse them once you receive the invoice. Carlson’s recommendation on best practices would be to set up a separate Transaction Definition to reverse your entry for the recording of the commitment. This allows you to automatically liquidate the commitment when you need to cancel all or part of an order. Furthermore, you should keep all the liquidations (and reversals) on one journal; thereby, making for a much easier reconciliation process.

Tracking Commitments in Sage Intacct is the easiest way to make sure you have a complete picture of your expenses. This will not only help you stay within budget but should facilitate improved cash forecasting.

In order to track commitments/encumbrances with Sage Intacct, you must have the following:

  1. User-defined books turned on and one must be created,
  2. Purchasing Transaction Definition to post to the custom book to record the commitment,
  3. Purchasing Transaction Definition set to post the liquidation/reversal to of the commitment; and,
  4. Reports that show the accrual book as well as the commitment book.

While Sage Intacct can't eliminate surprise expenses, it certainly can help you better manage and reconcile them. If your organization has issues with managing expenses and reconciliations, please contact us or request a demo and we will show you first-hand how Sage Intacct can help!

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