The invoice that arrives on the 8th for work done on the 28th is the accrual problem

A landscaping crew works your property on March 28. The vendor invoices on April 4 and it reaches AP on April 8.

March closed on April 5. So that expense either got accrued into March by somebody who knew about it, or it landed in April, where it does not belong.

Multiply that by every vendor across every property and you have the reason property-level monthly financials swing in ways nobody can explain.

The accrual is not optional

Accrual accounting puts expense in the period the service was provided rather than the period you received the paper or paid the money.

Which means an invoice for March work is a March expense whether or not you have the invoice when you close March. If you do not have it, you accrue an estimate and reverse the accrual when the real invoice arrives.

Two failures come from getting this wrong.

Understated expense in the period, which overstates NOI for the month. An owner reading that report sees a good month that was not one.

Double counting, when an accrual is booked and the real invoice posts without the accrual reversing. This is the more embarrassing error because it looks like a real expense spike the following month.

The population you have to estimate

Not everything needs an accrual. The set that does has three characteristics.

Services performed inside the period, with the invoice not yet received. Landscaping, pest control, pool service, and any repair completed near month end.

Utilities, always, because utility billing cycles almost never align to calendar months. A gas bill covering March 12 to April 11 has to be split, and most operators accrue an estimate rather than splitting it.

Capital work in progress, where a contractor has completed a portion and has not billed for it. This is the largest single accrual by dollar value at most properties doing renovation work.

Recurring contracted services are the easiest of these, because the amount is known. A $1,400 monthly landscaping contract accrues at $1,400 with no estimation at all, and a surprising number of operations do not accrue them because nobody made a list.

Purchase orders make the accrual list mechanical

The cleanest source of an accrual list is an encumbrance.

A purchase order that has been approved, where goods were received or work was completed, and where no invoice has matched, is a known unrecorded liability with a known amount. That is exactly what an accrual is.

So a budget view showing budgeted, encumbered, actual, and available by property and account is also an accrual worksheet. The encumbered-without-actual portion is your accrual, per property, per account, with no estimation.

BillRoute's budget view carries those four columns and updates as POs move through their lifecycle, with goods receipt as a distinct step. The reason that matters at close is that receipt-without-invoice is the definition of the thing you need to accrue, and it is a query rather than an interview.

Where PO coverage is thin, accruals get worse

The honest limitation of that approach: it only covers spend that went through a PO.

At most property management companies a large share of maintenance spend does not. A technician buys a part, a vendor does an emergency repair on a phone call, and no PO existed. That spend is real, it happened in the period, and nothing in the system knows about it until the invoice arrives.

Two partial answers. Recurring contracted services can be accrued from a standing list regardless of PO, since the amount is known. And a link to completed work orders gives you a second source of "work happened, no invoice yet" for the non-PO population.

Being straight: BillRoute does not hold your work orders. That link is to a maintenance system, which for our own portfolio is GetDone, and constructing it is integration work rather than a feature you switch on.

Reversal discipline is where the double counting happens

An accrual is a two-step transaction and the second step gets missed.

Book the estimate in March, reverse it in April, post the real invoice in April. Net effect: correct expense in March, correct expense in April.

Skip the reversal and April carries both the reversal-that-did-not-happen and the real invoice, which reads as a spike.

The controls that prevent it: accruals booked to a dedicated accrued liability account rather than directly against expense, so the balance in that account at any moment is your outstanding accrual and a nonzero balance carrying month to month is visible. And auto-reversing entries where your ERP supports them, which removes the human step entirely.

Reviewing the accrued liability account balance as a close step is a two-minute check that catches this. It belongs on the checklist and it usually is not.

Faster AP shrinks the population you have to estimate

Everything above gets smaller as AP gets faster.

If invoices reach a posted state in two days rather than twelve, the population needing an accrual shrinks, because most invoices for period work have arrived and posted before you close.

That is the least discussed benefit of AP cycle time. It is not only labor savings. It is that your financials stop depending on somebody's estimate of what has not been billed yet.

ResProp saves 40 hours a month on AP with BillRoute, and the close-quality effect is separate from the hours: fewer invoices in the accrual population means fewer estimates and fewer reversals to track.

Check the accrued liability balance

Pull the accrued expense account balance at each of the last six month ends, per property.

If it does not go back to near zero, or if it drifts upward, you have accruals that were never reversed sitting in there, and each one has a matching double count somewhere.

What did the trend look like?