As businesses grow, the gap between money earned, money owed, and money actually received becomes harder to track. That’s where accruals come in.
In this article, we’ll be explaining what accruals mean for modern businesses, why they’re essential for growth, and how automation platforms like Miden help businesses stay in control of their finances.
What are Accurals?
In simple terms, accruals record money owed or earned, even before the transactions take place. Accrual expenses are committed costs to a seller that must be paid, even though the bill or invoice hasn’t been received.
Imagine you run a coffee shop, and a customer buys a cup on credit, promising to pay you back in three days.
You’ve already served the coffee, which means you’ve earned that money, even though you haven’t actually received it yet.
That’s revenue recorded when it’s earned.
Now, let’s flip it.
You’ve hired staff to help run your shop and promised to pay their salaries in three days.
You haven’t paid them yet, but you owe them for the work they’ve done.
That’s an expense recorded when it’s incurred.
However, accruals are recorded in a company’s books as current liabilities, reflecting money the business owes but hasn’t yet paid. They’re also factored into your cash position at the end of each accounting period.
Why Accruals Matter for Growing Businesses
Under the International Financial Reporting Standards (IFRS), public interest entities, such as listed companies, banks, insurance firms, etc., are required to use IFRS in their financial statement.
These financial statements are prepared using the accrual accounting method. The same goes for US businesses with $25 million or more in revenue.
Here’s how accruals grow modern businesses in Africa and beyond:
1. Better Cash Flow Visibility:
Accurals help companies understand what’s coming in and going out to prevent any sudden or unaccounted money loss or delayed payments. With automated accruals, you can easily budget, forecast, and strategically plan for the company’s finances.
2. Accurate Financials:
While revenues and expenses are recorded when earned or owed, with accruals, your financial statement will always reflect the accurate and current state of your business. This also means cleaner data, fewer mismatches, and smarter financial decisions.
3. Operational Control:
Accruals help businesses to stay ahead of key obligations such as payroll, vendor payments, and customer refunds. This will also help you stay ahead of payment expenses and revenues of your company’s finances.
4. Long-term Contract Management:
For businesses that manage long-term contracts, accruals keep revenues and expenses in line with the company’s cash balance. This thereby helps track each project’s financial progress in line with its contractual obligations.
5. Credit Balance Tracking:
If you run a business that offers credit services or products, accruals help you to accurately track your receivables and payables. This helps you record your cash flow and assess the liquidity needed to support operations.
For me, the power of accruals lies in precision; matching revenue and expenses in real time. That's what we've built into Miden's Accruals: a tool that helps businesses stay proactive, not reactive.
The Challenges of Managing Accruals Manually
Managing accruals manually can result in the following in your business:
- Spreadsheets or reports that don’t match, thereby leading to an inaccurate financial balance.
- Human errors from manual entries, such as incorrect dates, overlooked expenses, etc.
- Unwarranted, long, and stressful month-end closings filled with the finance teams confirming transactions, cross-checking records, and reconciling discrepancies.
How Modern Businesses Automate Accruals with Miden
Miden’s accruals services automate every money-in and money-out flow, layering in real-time fraud checks, liquidity forecasting, and automated reconciliation. This helps the finance teams to trust their data from the first cent to the final close.
Purpose-built for modern businesses, it transforms complex pay-in and pay-out operations into a single, API-driven workflow that improves cash visibility, accelerates positioning, and dramatically shortens month-end timelines.
Miden automates the following product services:
- Customer Refund Processing: Miden helps businesses automate customers’ refunds, whether one-time or recurring, to ensure accurate financial reporting and transactions.
- Payout Gateway Integration (NIP, RTGS, SWIFT, Mobile Money): This allows modern businesses to pay vendors, partners, and users through one unified API. This removes the need to manage multiple banking relationships or integrations. across different channels.
- Scheduled/Recurring Disbursements (Standing Orders): With Miden’s scheduled and recurring disbursement feature, businesses can help businesses to handle recurring payments such as payroll, vendor retainers, or subscription payouts.
- Disbursement Authorization Workflow (Maker-Checker Controls): Miden’s maker-checker workflow ensures that every disbursement is properly reviewed and approved before it goes out.
Conclusion
Accruals give modern finance teams the visibility and foresight to understand their true financial position, not just what’s in the bank, but what’s coming in and going out.
Miden helps smart businesses automate every step, eliminate errors, and bring real-time accuracy to the way money is recorded, tracked, and reconciled.
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