Q. What is a media accrual?
It is the journal entry that matches the cost of a
media buy against the media billing for that buy, before receiving the vendor invoice for the media buy. If the "Automatically post
WIP accrual JEs for media" option is enabled in Preferences, media accrual
entries are created automatically when a media A/R invoice is posted.
Q. Why would I use media accruals?
Media accrual journal entries are used to match the cost and revenue amounts of billed media buys in the same accounting period. According to the GAAP principle of "Matching", it's important for your income statement to reflect the true profit in an accounting period. If you bill clients for media in June but don't enter the media payable until July, your income statement will show an overstated profit in June - but an understated profit in July. The problem here is that the media's cost isn't being counted during the same month as the media's billing. Clients & Profits can make automatic accrual entries to account for the expected cost of the media when it is billed to the client. Your income statement will accurately show the month's media profitability in the period of the media billing.
Q. Do I have to use media accruals?
No, it's an optional feature.
Q. Why wouldn't I use the automatic media
If your agency doesn't handle a lot of media, then the media
accruals aren't that meaningful. Also, if you always enter
your media payables in the same month as you bill for them,
then media accruals are redundant. You also don't need automatic
WIP accruals if you don't bill for your media buys in advance.
Q. What happens to my financial statements
if I don't use automatic media accruals?
If automatic WIP accruals are disabled, your media billings and costs will be treated just like any other billing and job cost. Your financial statements won't show the expected cost of the media you billed in the period of the billing (they won't be "matched"). If you want to match the billings and costs, it will need to be done manually. See the Work in Progress FAQ's which discusses manual WIP adjustments to account for pre-billing a client before costs are incurred.
Q. Why aren't all job costs accrued like
Media is a unique situation where when an order is billed, there is a known cost that has been incurred (the cost of the order that has already been sent to the media vendor) that can easily be accrued against the media billing. Production job costs don't always have the same situation. Often, agencies don't bill their production costs until they are incurred, so it's the opposite situation, where billings may need to be accrued against the costs. Or, an agency may estimate bill their job in advance before incurring their costs. In this case, the revenue has yet to be earned, so to accrue costs against it wouldn't be good practice until a PO is issued for a cost. For production costs, it's recommended to make manual matching journal entires. Please refer to the Work in Progress FAQ's for more information on this topic.
Q. What happens when I activate automatic
When you enable the "Automatically post WIP accrual JEs for media" option
in Accounting Preferences, from that point forward journal entries will be automatically created
when media A/R invoices are posted that accrue the cost of the order against the media billing in the period of the billing. As well, since the accrual is posted against a generic media cost account, when the media A/P invoice is posted against the order, it moves amounts out of the generic account account into the real media cost account in the period of the A/P invoice (this has no impact on income, rather just reclassfies the cost in the period of the A/P invoice). As well, when posting the A/P invoice is reclassifies the liability from the media WIP liability account to the media invoice's A/P account. This is also done in the period of the A/P invoice.
Q. How do I "turn on" automatic accruals?
Choose Preferences > Accounting. Check the "Automatically post WIP accrual JEs for media" option. Before you can start the automatic WIP accruals, you'll need to add two new G/L accounts: a "Media WIP" liability account and an "Accrued Media Costs" job cost account. Once you've added those two accounts, you'll need to enter their account numbers in Preferences. (Choose Preferences > G/L Accounts.)
Q. How do I start using Media Accruals?
You want to properly transition into using the feature. First, any media orders that have already been billed prior to turning on the feature, make sure you enter the vendor A/P invoices for these orders as you've always done, as Job Cost A/P invoices. However, new billed orders will accrue the cost against the billing, so when the vendor invoice is entered against these orders they need to be add as Media Accrual A/P invoices. These A/P invoices work just like Job Cost A/P invoices, except they make a reversing to the original accrual entry in the period of the A/P invoice.
For a more detailed discussion of the exact accounting done during the media accrual and reversal process, see the best practice guide on auditing media accruals.
Q. Can I change my mind about automatic
media accruals later?
Yes, but you'll have to manually adjust the accrued media cost and liability accounts on your financial statements to give them a zero balance. They'll need to be reversed into the periods of the media billings that created these balances. You may need the help of your CPA to do this.
Q. What kind of accounts are needed for tracking
media WIP accruals in Preferences?
There are two accounts, and both are to be used only for the automatic media accrual process. Do not co-mingle these accounts with other G/L activity in Clients & Profits. The Media Accruals account is a liability account. The Media Cost account is a job cost account. As mentioned above, do not enter already existing G/L accounts used for other G/L activity as the media accrual liability or job cost accounts. Without these accounts, the automatic media WIP option can't be
Q. Is the automatic media accrual feature available in all editions of Clients & Profits?
No, it's only available in Clients & Profits Pro X and Clients & Profits X Enterprise Edition.
Q. What happens if the vendor's media
invoice has a different amount than the insertion order?
Regardless of the vendor's invoice amount, the amount that
is reversed is based on the insertion order. So even if the
vendor's media invoice is over or under the insertion order,
the reversing entry will be accurate. The difference between
the order amount (from the insertion order) and the actual
cost amount (from the vendor's invoice) is reflected in the
period of the A/P invoice, showing the true cost
of the media buy.
Q. How do I add a vendor's media invoice?
The User Guide has step-by-step instructions for adding media accrual
Q. What journal entries are created automatically
for media WIP accruals?
A detailed discussion of the exact accounting done during the media accrual process is found in the best practice guide on auditing media accruals.
Q. How can I identify media WIP accrual
Media accrual journal entries are given reference numbers
beginning with WIP# followed by the media A/R invoice number. All of
the media WIP entries for a particular media billing will have the same WIP# reference number. This makes auditing your media WIP entries easier.
Q. Can I edit the automatic WIP accrual
Although they can be appended like any other journal entry,
media WIP accrual entries shouldn't be changed. If needed,
an entry's description field can be edited to include a note
or comment, which would appear on audit trails and other
G/L reports. Only if there was a user error or system error that caused the WIP# entries to be incomplete or wrong should the WIP# reference number be manually adjusted.
Q. What reports can I print to audit the
media WIP accrual account balances?
A list of these reports is found in the best practice guide on auditing media accruals.
Q. Are automatic media accruals for print
and broadcast handled differently?
No, media WIP accrual entries are identical for all kinds
of media orders, including interactive and outdoor orders.
Q. What happens if I add a media A/P invoice
as a job cost invoice and not a media accrual?
The media invoice will be treated like any other job cost
invoice. Its cost amount will debit a job cost G/L account and credit your A/P liability account,
but won't affect your Media Accrual or Media Cost work in
progress accounts. If you billed this invoice's media in
advance, it means the media WIP accrual was not reversed
- which will make your media WIP balances on financial statements
inaccurate. Either unpost and delete the A/P invoice and readd it as a media accrual A/P invoice or manually reverse the WIP# accrual into the period of the A/P invoice associated with this billing of the order line items referenced on this A/P invoice.
Q. What happens if I include media on
a standard job progress/final billing?
Media WIP accruals are only created when media is billed on an A/R media
billing. Any billing amounts posted from a job billing, a progress/final
billing, a multi-job billing, etc., won't affect WIP. That's why media
should be billed on media invoices.
Q. Can I apply two or more A/P invoices
to the same order line number?
No, in fact, C&P prevents you from doing this when adding a media accrual A/P invoice to the same order line item. You'll receive an message saying you can't do this. If it were allowed, then the reversing entry for these order line items would happen a second time, throwing off your media WIP balances. Normally, media vendors send A/P invoices that mirror your orders, so this isn't a problem. However, this is something to be aware of in the rare situation where a vendor bills you differently from your order. For example, you have a quarter of buys on one line number and your vendor bills you monthly and sends you three A/P invoices for this one line number. Also, Canadian users may encounter this problem when handling their GST. See the GST best practice guide.
Q. I'm noticing too many reversal
entries on my G/L Reconciliation when I post my media
accrual A/P invoices. Why is it doing this?
C&P will not prompt you that an order line number has been used before if you enter the same order line number
more than once on the SAME media accrual invoice and this is the FIRST
invoice applied against this order line number. This could happen say if the vendor's invoice referenced some make good lines and the user entering the invoice accidentally applied the the orginal order and the make good correction to the original order line item (instead of applying the make good correction to the make good order line item). This will cause excessive
reversals when posting this invoice. It's a good idea to audit your media accrual regularly. See the best practice guide on this topic.