💵 Accrued Expenses Projection Method
When forecasting expenses, there is often a difference between the timing of expense recognition and the actual cash outflow.
Accurately modeling both is essential for maintaining realistic projections of profitability and cash flow.
1️⃣ Overview
The Accrued Expenses projection method automates the process of recognizing an expense on the Income Statement while recording a liability on the Balance Sheet, then paying it according to a defined schedule.
This is the simplest and most accurate way to forecast expense accruals and their cash flow impact within PlanGuru.
Example:
You have a $400 expense that is incurred monthly, but paid quarterly beginning in March.
2️⃣ When to Use This Method
Use this projection method when:
-
Expenses are recognized before payment (e.g., insurance, payroll taxes, utilities).
-
You want to reflect liabilities on the Balance Sheet until payment occurs.
-
You need cash flow to match real-world payment timing.
3️⃣ How to Set Up an Accrued Expense
Step 1 – Add a New Liability Account
Go to your Balance Sheet and add a new account under the Current Liabilities section.
Step 2 – Define the Account Type
When prompted, set the Account Type to Other Current Liabilities.
This allows the account to be linked to expenses that have delayed payments.
Step 3 – Apply the Accrued Expenses Forecast Method
Then select the Accrued Expenses projection method.
Step 4 – Set the Payment Interval
Under the “Credit Prepaid” or Payment Interval setting, choose how often payments will occur.
In this example, select Quarterly.
Step 5 – Define First Payment Month
Choose the first month when the liability will be paid.
For this example, select March.
Step 6 – Link the Expense Account
Select which Expense or Non-Financial account will accrue to this liability.
PlanGuru will automatically record monthly expense recognition and apply payments based on your schedule.
4️⃣ Results
Once configured:
-
The expense will appear each month on the Income Statement.
-
The liability balance will accumulate on the Balance Sheet.
-
The liability will reduce when payments occur (e.g., quarterly starting in March).
This ensures that both profitability and cash flow are represented accurately in your forecasts.