How Do You Keep Track of Vendor Accruals?
You thought you had your project all wrapped up when, SURPRISE, vendor invoices just keep coming in. Whoops, things didn’t go as well as you thought. The costs on your project keep soaring, and you have to keep updating your project reports to your superiors. How does this happen? This happens because vendors rarely invoice you at the time they completed the work, or delivered the materials. The problem is, if you wait until vendors invoice you to show the cost on your project, then you’re in for a lot of surprises. Here’s a common scenario: Every day your Site Supervisor is asked to approve or sign-off on the work done that day by the various subcontractors on your project – or materials delivered by suppliers. All those approved daily field tickets make their way back to the subcontractor’s Accounts Receivable group; and they then batch them up for invoicing. You of course have a copy too, and it likely sits as a scanned document on a shared drive somewhere. However, this receipt-of-work-done typically isn’t used as a means to record the associated cost on your project. Most often, a project’s actual costs are driven by updates from accounting, or manually input into spreadsheets by a project manager when the vendor invoice is received. The problem with this model, is that you might not receive that invoice for weeks if not months after the work was completed – so during that time, there’s a discrepancy between what’s showing on your project for actual cost, and what you are in fact liable to pay. This scenario can fill you with surprises since you’re really at the mercy of your vendors’ invoicing cycles. Not all vendors are