Stop Losing Money: How Accruals Setup in CMiC Can Make or Break Your Bottom Line

Setting up accruals in your #CMiC environment is critical for accurate financial management. In the construction industry, accruals refer to the expenses that have been incurred but not yet paid, and the revenue that has been earned but not yet received. These expenses and revenues must be recorded in the company's financial records at the time they are incurred or earned, rather than when they are paid or received.

For example, if a construction company has completed work on a project but has not yet received payment, it must still record the revenue from that project in its financial records. Similarly, if the company has received an invoice for materials or labor but has not yet paid it, it must still record the expense in its financial records.

Accruals are important in the construction industry because many projects can take months or even years to complete. Without proper accrual accounting, a company may not have an accurate picture of its financial performance or be able to properly manage its cash flow. This can lead to financial difficulties and can make it difficult for the company to secure financing or bid on new projects.

Without proper accrual setup, your company can face various issues including:

1. Over or underestimation of expenses: Inaccurate accruals can lead to over or underestimation of expenses, which can impact financial reporting and budgeting decisions.
2. Mismanagement of cash flow: Incorrect accruals can also result in mismanagement of cash flow, as it may lead to the payment of incorrect amounts to vendors, employees, or other stakeholders.
3. Legal and compliance issues: Inaccurate accruals can also result in legal and compliance issues, as companies may be at risk of breaching contracts or regulatory requirements.
4. Negative impact on employee morale: Inaccurate accruals can lead to delays or errors in employee payments, which can negatively impact employee morale and satisfaction.

it is important for companies to ensure their accruals are set up correctly in CMiC to avoid any potential financial or legal issues. To help ensure your accruals are set up correctly, here are some essential steps to follow:

1. Determine the types of accruals needed based on your company's operations and financial reporting requirements.
2. Set up the accrual codes and descriptions in CMiC to align with the company's accrual types.
3. Determine the calculation methods and frequency for each accrual type.
4. Define the accounting periods and dates for the accruals to be recognized.
5. Set up the accrual GL accounts in CMiC to post the accruals to the appropriate financial statements.
6. Test the accrual setup and calculations to confirm accuracy and identify any issues or discrepancies.
7. Monitor and maintain the accrual setup regularly to ensure consistency and compliance.

By following these steps and incorporating best practices, such as establishing a centralized accrual management system and implementing automated accrual processing, you can improve financial transparency, accuracy, and efficiency. If there is any uncertainty or concern about the accuracy of the accruals, it may be necessary to consult with a CMiC consulting firm to address the issue and ensure that all calculations are accurate and up to date.

At ProTek Partners, LLC Construction Technology Services (CTS) Division, we have the expertise and experience to help businesses set up and optimize their accruals in CMiC.

Contact us to learn how we can help ensure your accruals are set up correctly and provide ongoing support to maximize the benefits of your CMiC system!

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