What is accrual automation? A guide for finance teams

Accrual automation uses software to identify expenses incurred during an accounting period, calculate the amount to recognize, prepare or post related journal entries, and schedule reversals when needed. It pulls from records such as purchase orders (POs), goods receipts, contracts, invoices, and expense data, so finance teams don't have to build estimates by hand in spreadsheets.

The goal of accrual automation is to record expenses in the period they were incurred, even if the invoice or payment comes later.

This gives controllers a clearer view of liabilities and expenses at period end. It also reduces close-related issues caused by missed commitments, inconsistent assumptions, and manual data entry. Depending on the system and the company's controls, a reviewer may approve entries before they reach the enterprise resource planning (ERP) system.

Why manual accruals break down

Manual accrual processes depend on finance finding incomplete transactions before the books close. That can be difficult when purchasing, receiving, expenses, and accounting happen in separate systems.

Common failure points include the following:

• Open POs without invoices. Finance can see that a purchase was approved but may not know whether the goods or services were received, how much was delivered, or which period the expense falls in. Teams often estimate from the remaining PO balance, which may overstate or understate the accrual.
• Unsubmitted travel and expense (T&E) activity. Employees might incur expenses before period end but submit reports afterward. Unless finance receives travel data or employee confirmations in time, those costs can be missed. 
• Disconnected source systems. Accrual support may be spread across procurement software, email, contract repositories, receiving records, and the ERP. Accountants must reconcile identifiers and resolve differences before they can calculate an entry.
• Compressed review time. When data collection consumes the close calendar, controllers have less time to review unusual balances and investigate variances.

The hard part of manual accruals is getting timely, reliable evidence that an expense was incurred and determining how much of it belongs in the period.

How accrual automation works

A typical automated accrual workflow follows six steps:

1. Source data ingestion. The system collects open POs, receipts, service confirmations, contracts, recurring commitments, expense data, and invoices that have not yet posted.
2. Rule application. Configured accounting rules determine which items qualify, the relevant accounting period, materiality thresholds, and the calculation method. Rules may also exclude canceled POs, duplicate records, and unfulfilled commitments.
3. Estimate generation. The system calculates a proposed accrual using the best available evidence. A goods accrual may use the quantity received and the PO price. A contract-based accrual may use the service period, contracted amount, and portion already invoiced.
4. Review and approval. The proposed entry is routed to the controller, accounting owner, or AP lead. Reviewers can inspect the underlying PO, receipt, contract, or other support, then approve, adjust, or reject the entry.
5. ERP posting. Once approved, the entry is sent to the ERP with the appropriate legal entity, general ledger account, cost center, department, and other accounting dimensions. Some systems post automatically, while others export a journal file for controlled upload.
6. Reversal and true-up. The system schedules the reversal according to company policy. When the invoice posts, finance compares the actual amount with the estimate and records any difference.

It’s worth noting that automation does not remove accounting judgment. It gives reviewers a more consistent calculation method and a traceable path from the journal entry to its supporting records.

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Who uses accrual automation?

Accounts payable (AP) teams

AP teams own much of the PO-to-invoice lifecycle. At period end, they need to identify goods and services received but not invoiced, invoices received but not posted, and exceptions that could affect the close. Accrual automation can highlight these transactions without requiring AP to chase every requester, receiver, or supplier.

Controllers and chief financial officers (CFOs)

Controllers own the accuracy and timing of the close. CFOs depend on the resulting financial statements and forecasts. Accrual automation gives both teams earlier visibility into committed spend, reducing reliance on unsupported estimates and allowing reviewers to focus on exceptions and material judgments.

Common types of expense accruals

The expenses for an automated process depend on the available data and the platform's scope. Common categories include the following:

• Travel and expense accruals cover costs employees incurred but have not yet submitted or that have not yet posted from a card or expense platform.
• Goods received but not invoiced accruals cover items received before period end when the supplier invoice has not yet arrived or been processed. These are often called GRNI accruals or receipt accruals.
• Contract-based accruals cover services delivered under a contract but not yet invoiced. Examples include software, consulting, legal services, maintenance, and other recurring or milestone-based work.
• Payroll and benefits accruals cover wages, bonuses, payroll taxes, and benefits earned during the period but paid later. These often sit outside procurement and AP systems, so they usually require payroll or human resources data.
• Other recurring operating accruals can include utilities, interest, taxes, and professional fees when the expense has been incurred but the final bill is not yet available.

Prepaid expenses relate to period-end accounting but are not accrued expenses. A prepaid expense records cash paid before the company consumes the benefit, while an accrued expense records a cost incurred before payment or invoicing. Automation may support both processes, but the accounting treatment and source data differ.

What business outcomes can AP teams expect?

Accrual automation gives AP teams more time to investigate exceptions instead of assembling schedules and tracking down supporting records. Zip’s accounting benchmarks show a 66% faster time to month-end close and 41% higher team productivity. Zip customers also code three times more invoices per month.

These improvements go beyond invoice processing. When POs, receipts, invoices, and approvals share a connected record, AP can identify uninvoiced obligations earlier and deliver a supported accrual package to accounting sooner. 

Betterment, for example, uses accrual exports to surface open commitments, including invoices received but not yet processed. Its AP team no longer has to chase down coding details because that information is established earlier in the purchasing process.

Broader finance research points to similar gains. McKinsey found that professionals in finance functions with robust AI adoption spend 20% to 30% less time crunching data. While that figure is not specific to accruals, it shows how automation can redirect finance capacity toward review, analysis, and business support.

How accrual automation fits into intake-to-pay

Accrual automation is more reliable when it starts upstream. In a connected intake-to-pay process, the system already has the request, approval, supplier, contract, PO, receipt, invoice status, and accounting dimensions. That context helps finance determine what was authorized, what was delivered, what remains uninvoiced, and which period should recognize the expense.

This changes accruals from a month-end reconstruction exercise into a byproduct of the purchasing process. Instead of asking budget owners to rebuild purchase history, accounting can review the detailed record created as the transaction moved through intake, approval, purchasing, and AP.

Zip connects these stages through procurement orchestration. Its accounting solution captures structured data from the initial request and uses the request, approval, contract, and PO as context for downstream accounting. Zip also supports accrual exports that surface open commitments, including invoices received but not yet processed. Approved transactions can sync with ERP systems including NetSuite, Oracle Fusion, SAP S/4HANA, Sage Intacct, and Workday Financial Management.

Learn more about intake-to-pay, AP automation software, the procure-to-pay process, and procurement compliance. And book a demo to see how Zip can connect procurement and AP data for a more continuous month-end close. 

Frequently asked questions

What is the difference between accrual accounting and accrual automation?

Accrual accounting is the accounting method that recognizes revenue and expenses when they are earned or incurred rather than when cash changes hands. Accrual automation is the technology and process used to identify, calculate, review, post, reverse, and reconcile accrual entries.

What types of expenses require accruals?

Expenses generally require accruals when the company has received the economic benefit or incurred the obligation by period end, but the invoice or payment has not been recorded yet. Some common examples include received goods, professional services, payroll, and unsubmitted employee expenses. Company policy and applicable accounting standards determine what is recorded.

How does accrual automation connect to ERP systems?

Accrual automation software sends approved journal entries or files to the ERP with the required entity, account, cost center, department, and other dimensions. It may also receive PO, invoice, receipt, and posting data from the ERP. The integration can be real-time, scheduled, or file-based, depending on the systems and control requirements.

What is the difference between accruals and prepaid expenses?

An accrued expense is recognized before the company receives an invoice or makes payment because the cost has already been incurred. A prepaid expense is recorded as an asset when the company pays before receiving the full benefit, then expensed over the applicable periods.

How does accrual automation reduce close time?

It reduces close time by continuously collecting source data, applying standard rules, generating proposed entries, routing approvals, and scheduling reversals. Finance spends less time requesting updates and reconciling spreadsheets, allowing reviewers to focus on exceptions and material judgments.

Does accrual automation eliminate manual review?

No. Companies can automate data collection, calculations, routing, posting, and reversals while retaining approval thresholds. Material, unusual, or poorly supported entries should still receive appropriate accounting review.