Accrual Accounting
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General Information
Accrual accounting is a principle in bookkeeping, where expenses are recognized during the period the underlying resource is consumed, and income is recorded in the period it is earned, even if the actual cash flow occurs in a different period.
In BRP, accruals are managed by recording sales as a liability and subsequently recognizing revenue in the accrual journal.
Subscriptions: Revenue is evenly distributed per day across the billing interval.
Events: Revenue is evenly distributed per day between the start and end dates of the event.
Services: Revenue is assigned to the start date of the service if it is sold in the month before the start date. If the service starts in the same month it is billed or earlier, no accruals are made.
Items: Revenue is assigned to the booking's start date if sold in the month prior to the start date. If the start date is within the same month it is billed or earlier, no accruals are made.
Value Cards: No accruals are applied, as the revenue is recognized when a clip or amount is used. Since the revenue is accounted for in the correct period, no accruals should be made for value cards.
Configuration
BRP Configuration → Finance → Accounts
Begin by creating your liability account, which tracks the amount owed to the customer. Note: The “Dimensions” settings should only be checked if your organization utilizes this functionality.
Set up your shadow account to manage accrued VAT-free revenue. Ensure the settings are configured correctly. Only select "Dimensions" if your organization uses this feature.
It is recommended to use a separate account for each VAT group.
Next, set up your standard revenue account. Ensure the settings are properly configured. Only check "Dimensions" if this feature is utilized by your organization.
Once you have created all the accounts, it's time to look at the subscription product.
BRP Configuration → Products → Products
On the "Accounting" tab of the subscription product, select the standard revenue account under “Account”.
Select the liability account under “Deferred revenue account”.
Monthly Routine
After the end of each month, it's time to move a portion of the cash subscription's value to your revenue account. For example, it will be 1/12 of the value if it's a one-year subscription. You can do this by creating a deferred revenue journal.
Go to Backoffice > Finance > Deferred revenue journals.
Click on the "Create Journal" button. BRP will suggest the last day of the previous month, which should be accurate and generally doesn't need to be changed.
Click "OK" and choose to print/preview the report.
That's it – the process is complete. You can now hand this over to your accountant or financial manager.
Automation
There is an option to automate this on a monthly basis using a scheduled activity. Contact us to get started.
Deferred revenue results
A question you might ask is: What will the outcome of the accrual look like for the upcoming year? In other words, what revenues will I have in the coming months due to the accruals.
Go to the menu Backoffice > Finance > Deferred revenue results.
Select a start date and click "Search". Future accruals will be displayed in the list.
You can view the affected accounts, planned dates, and the current amounts.
Select the “View by facility” checkbox to view the result by facility.
To ensure correct liabilities for existing subscriptions, BRP must be contacted for a mass update of the database. This method requires the subscriptions to be sold in BRP and does not work for imported subscriptions. Accrued liabilities prior to BRP should be handled manually using the previous method until they are cleared.
Reconciliation
Go to Backoffice > Finance > Deferred revenue per date.
Select the desired reconciliation date, typically the last day of the previous month → Click Search.
If there is a discrepancy with the accounting, it is usually because there are accrual transactions that have not yet been posted or due to setup differences. If you suspect that there are unposted transactions, you can create an additional accrual journal to include them, as described above.
When implementing the accrual function, a manual adjustment of the posted liability is often required to align the accounting with BRP. After BRP assists with recalculating the accruals, a reconciliation between BRP and the accounting system is performed at the following month-end. At this stage, the advance payment account 2970 is typically missing amounts. If the accounting shows 10,000 and BRP shows 100,000, an adjustment of 90,000 is needed. This can be done with a manual journal entry.
Limitations
The system does not account for deviations (e.g., freezes), so the revenue is evenly spread over the billing interval.
Changes in subscription types are not considered.