What is Accrual Spend? - Accrual accounting recognizes expenses when they are incurred, regardless of when cash is exchanged.  For example, if your company signs an annual SaaS contract for $12,000, under accrual accounting, you recognize $1,000 in expense each month, even if the full payment was made upfront.

‍

What is Actual Spend? - Actual spend, on the other hand, records expenses when the cash actually leaves your accounts.  In the above scenario, if the entire $12,000 is paid in January, the actual spend would recognize this full amount in January, rather than distributing it across the year.
‍

Why Does This Distinction Matter?

• Financial Reporting: Accrual accounting provides a clearer view of ongoing financial obligations, while actual spend reflects immediate cash flow impact.
  
  
• Budgeting & Forecasting: Accrual-based tracking ensures predictable expense allocation, preventing sudden cash flow distortions.
  
  
• Compliance & Audits: Many companies follow Generally Accepted Accounting Principles (GAAP) or IFRS, which require accrual accounting for financial statements.
  
  
• Procurement Optimization: Understanding both accrual and actual spend helps finance teams optimize contract negotiations, payment schedules, and vendor renewals.
  ‍

‍
Configuring Accrual vs. Actual Spend in a Spend Management Platform
‍

• Define Spend Categories - Ensure that all SaaS expenses are categorized based on their payment structures (e.g., prepaid, monthly, or variable spend).  Each SaaS procurement or tool should be tied to a proper expense account to ensure financial accuracy. This helps in clear reporting, reduces misclassification, and improves audit readiness
  ‍
  
• ‍Enable Dual Tracking - Many spend management platforms allow you to track both accrual and actual spending. Configure rules to automatically recognize expenses based on contract terms.
  ‍
• ‍Automate Expense Recognition - Set up automated journal entries to reflect the correct expense recognition schedule.  For prepaid contracts, create an amortization schedule that spreads the cost over the contract period.  Keep your prepaid expenses and amortized expenses in separate GL accounts to maintain financial clarity and ease reconciliation.
  ‍
• ‍Sync with Accounting Systems - Integrate with ERP systems to ensure that expenses are recorded correctly based on the company’s accounting policies.  Platforms like NetSuite allow mapping of spend data to GL accounts, ensuring consistency.  Ensure all the amortized expenses have proper descriptions and vendor names filled to easily identify them in reports and audits.
  ‍
• ‍Generate Reports for Reconciliation - Ensure finance teams can view side-by-side reports for accrual vs. actual spend to track discrepancies and reconcile financial statements efficiently.
  ‍

Conclusion
‍

Accrual vs. actual spend is a fundamental concept in SaaS spend management that directly impacts financial accuracy and strategic decision-making.  By correctly configuring a spend management platform, companies can maintain financial clarity, improve budget forecasting, and streamline accounting integrations for more effective spend control.  Whether you are tracking software licenses, renewals, or multi-year contracts, having a robust system in place ensures your financial records remain precise and compliant. 

‍

Are you looking to enhance your SaaS spend management process? Consider leveraging Spendflo which seamlessly tracks and reconciles both accrual and actual spending for smarter financial decision-making.