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  • Katie Paolino

What is an Accrual?



Your team’s goal each month is to get the Income Statement to be a true reflection of how the hotel performed that month so that you can evaluate that performance and make quick decisions on how to improve for the following months.

One of the biggest tools for accomplishing this is with end of month accruals!

An end of month accrual is an accounting entry used to record an expense you had for the month when you haven’t actually received the invoice or paid for it yet.

For instance, even if you haven’t received the franchise bill for the month yet - you know it’s coming. So you don’t want to run an Income Statement that doesn’t list that key expense.

And there will be other services that the team knows the hotel used during the month that haven’t been recorded yet. You want to make sure to record all of those so you know how the hotel really did!

If you have no process for making end of month accruals, your monthly Income Statement won’t be a true reflection of the hotel’s operations for the month.

Your accountant is going to know the detail of how to make those accounting entries, but its important that the operations team understands the concept so they can let the accountant know what to accrue! The 2 things you’ll need to implement to setup a process for end of month accruals are these:

  1. Make sure the managers that are intimately aware of the operations of their department each month have access to the Income Statement. They won’t be able to tell you what’s missing if they can’t see what’s been recorded.

  2. Setup a schedule for receiving their feedback. Give them a timeline for letting the accountant know what needs to be accrued each month.


In our office, we ask managers to fill out an accrual template for all of their changes at the end of the month. It includes their full chart of accounts so they can easily find the account numbers of items that need to be accrued. They can send us that template before preliminary financials are sent out OR they can send those changes to their staff accountant after reviewing the preliminary financials.

Managers don’t always love implementing this process. They may not want to add more deadlines to their busy schedule or take the time to fill out a template.


But once they get in the rhythm of it, it is so empowering to have an Income Statement that is a true reflection of how they did! They love being trusted with the numbers and having something concrete to look at and measure against. It’s hard to make positive changes if you don’t ever actually know how you did!

So your tip for the week is to make end of month accruals for anything that happened during the month that you haven’t paid for yet! This will help you use your Income Statement to evaluate the exact operations of the hotel each month!


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