1. About
Managing the timing of your expenses can give you a clearer picture of your financial health so it reflects the true nature of your business. With Finaloop’s Spread feature, you can take full control of when expenses show up in your P&L or Balance Sheet by matching them to when you actually benefited from the expense you paid for.
This article is very relevant if you are a business using accrual accounting, and:
You have expenses where the payment date and the date the expense is actually relevant for your business are not the same, or
You want to spread the recognition of the expense over a period of time.
Don’t worry, in this article we’ll explain more about why you may want to use this and how to manage it in Finaloop.
2. When to track accrued or prepaid expenses?
You can use our Spread feature to track any accrued or prepaid expenses in your account. This can be done any time you want to record an expense on a different date than the expense was actually paid, specifically if you want to:
1. Accelerate or defer the date an expense is recorded in your books
Record an expense in your books before it was actually paid (also known as an accrued expense)
Record an expense in your books after the date it was paid (also known as a prepaid expense)
2. Spread an expense over a period of time
Spread or amortize an expense equally over a chosen period of time.
Here are some of the main examples that our customers use this feature for:
Accrued advertising expenses - You paid May expenses for Facebook Advertising on June 3 and instead you want this recorded on May 31.
Prepaid expenses - You pay a deposit to a caterer on February 20 for a business event that takes place on March 15.
Annual fees - You make a payment for an annual subscription or annual rent on January 1 that covers 12 months of services and you want to spread, or amortize, this expense over all 12 months.
3. Spreading transactions with a single category
Here is how to spread a transaction with a single category:
(You can also check out our step-by-step walkthrough here)
Go to the Transactions screen.
Find the transaction you want to spread, and click on the category in light blue.
Select the Actions dropdown, then click Spread over time.
Important note: Since different categories may have different impacts in your books, if you change the transaction category, the spread will be removed, and you’ll need to re-enter it. So, it’s best to confirm the category is final before spreading the transaction.
Once you click on Spread over time, you’ll see three tabs:
Specific date – Recognize the transaction on a date of your choice.
Spread over time – Spread the expense evenly across a time range.
Custom Spread – Combine both methods to suit your needs.
Let’s break it down:
Specific date
Attribute the transaction to a specific date by picking the relevant date using the date picker. The date can be before or after the date of the actual payment.
For example, if you received a service on Jan 1 but paid on Feb 1, you can recognize the expense on Jan 1 when the service was provided (this is an accrued expense).
Similarly, if you paid on Feb 1 but the service is used on March 1, you can move the recognition to March 1 (prepaid expense).
You’ll see the impact of this change in the timeline on the right side of the screen.
Spread over time
Select the Spread over time tab.
Set a start and end date to evenly distribute the expense over that period.
For instance, if you want to spread an expense between Jan 1 and March 1, set those dates. The expense will be split equally over those days, and you can see the impact in the timeline.
Custom Spread
Use this tab if you want to mix and match the first two options to create a custom expense recognition schedule.
Click Spread equally to spread the expense equally over the different dates and periods selected.
You can choose to spread the full transaction amount to specific dates or periods or you can leave the remaining prepaid expense balance to be recorded as a prepaid expense and allocated to a specific date in the future.
Come back to the transaction at any time to allocate the remaining amount to a specific date or time period.
Once you’re done, click Save.
For example, in the image below you can see a transaction prepaid to UPS for $1,219.92 on 01/30/2024. On 02/15/2024, $219.92 of this prepaid balance was used up, leaving a remaining prepaid expense balance of $1,000 to be used in the future.
You’ll see a Spread category shown next to the transaction category on the Transactions page.
4. Spreading transactions with multiple categories
If you’ve split a transaction into multiple categories, you can apply the spread to each category individually or to all categories at once.
Here is how to spread a transaction with a multiple categories:
(You can also check out our step-by-step walkthrough here)
Go to the Transactions screen.
Find the split transaction you want to spread, and click on the Split in light blue.
Select the Spread button.
Here you have the same 3 options explained above: Specific date, Spread over time, Custom spread.
You can spread each category separately by selecting the category from the dropdown or, if you want to apply the same spread to all categories, toggle Spread all categories.
You can review the changes on the side of the screen before saving.
Click Save.
Once you’ve changed the date, you can always view, edit, or delete the spread later by clicking the Spread button on the Transactions page.
As always, if you have any questions, just contact us at [email protected] for some support.