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About Accrual Plans

Accrual plans represent accounts into which money is accrued, then paid out at a particular time. The ability to define these accounts as separate records in the program enables you to manage the accrual and payment of amounts on a plan by plan basis. You can also generate various reports and statistics for separate accrual plans.

Accrual Plans

For each accrual plan, you must set up a card containing information about the accrual plan. There are three types of accrual plan:

• Sales Rebates/Promotions
• Purchase Rebates/Promotions
• Sales Commissions

You can define accrual plans for various sales and purchase marketing programs. For example, you can set up a rebate program where you accrue a certain dollar amount for every sale made over a particular period of time, then pay the accrued amounts back to the customer when the program has ended.

You can also set up accrual plans to calculate and track sales commissions. Commissions amounts are accrued based on sales activity, then paid to a specified source, such as a salesperson. Because you can have multiple accrual plans, it is easy to maintain separate commission programs. For example, if you have ten different salespeople, you can set up a separate sales commission plan for each one.

Accruals

Accruals are amounts that are accumulated over time. Accruals can be generated from transactions with customers or vendors. Accruals are also generated for specific items or groups of items. There are many different ways in which accruals are calculated, such as a flat dollar amount per item unit, or a percentage of the transaction line's total price. These settings are all defined for each accrual plan you set up.

Over time, accrual amounts are posted to an accrual plan. For example, if you set up a sales rebate plan for Customer A that indicates a 5% accrual of Item B's price, every time Item B is posted on a sales order for Customer A, the program will accrue 5% of the sales line's price, and post this amount to the accrual plan's ledger.

Payments

Amounts that have been accrued to an accrual plan can be distributed to one or more defined payment accounts. The payment account can be the same account as the accrual's original source. Using the previous example, we could pay the accrued sales rebate amounts back to Customer A.

You can also post payments to a completely different payment account. When setting up a sales commission, for example, you will typically accrue amounts from sales orders, then pay these amounts to a salesperson.

Accrual Schedules

An accrual plan can be set up to accrue and pay predetermined amounts according to a defined schedule. This is in contrast to accrual plans that calculate accruals based on actual sales and purchase transactions.

Deduction Payments

Rather than wait to receive an accrual payment, a customer may choose to pay less than the full amount of an open invoice, then indicate that you should apply the impending accrual payment to the remaining invoice amount. For example, a customer is due an accrual payment of $100. When the customer sends payment for an open invoice, it is $100 less than the full invoice amount. The customer wants to use the $100 accrual payment to pay the remainder of the invoice. This is called taking a deduction.

Deductions can be created during the cash receipt process when a customer payment is applied to less than the full amount of an open invoice. It is possible to assign a deduction to an accrual plan. When the cash receipt is posted, the deduction amount is posted as a payment to the assigned accrual plan.

An accrual plan's payment settings determine whether deductions can be posted as payments.