Term
Uninvoiced supplies
A liability for goods or services a company received by the end of the period but has not yet been invoiced for. It is booked at an estimated amount so the cost lands in the right period and is cleared once the invoice arrives.
Updated
What it means
Uninvoiced supplies are liabilities for goods or services the company received by the end of the accounting period but for which it has no supplier invoice at the balance sheet date. Typical examples are December energy, services delivered at year end or goods received into stock whose invoice arrives in January.
Under the accrual principle the cost belongs to the period in which it arose, regardless of the invoice date. An estimate is therefore booked at the balance sheet date as an estimated accrual. When the invoice arrives, the estimate is cleared and any difference is expensed in the current period.
Uninvoiced supplies are part of borrowed funds on the balance sheet. Leaving them out overstates profit and equity and understates liabilities, which can change how a bank or investor views the company.
How it works in practice
When closing the books we go through the list of regular suppliers with the client and ask what was delivered but not yet invoiced. For goods, goods received notes without a matching invoice help; for services, contracts and monthly retainers.
We estimate the amount from the contract, price list, previous invoices or a quote. It need not be exact to the cent but should be reasonably supported. At an audit the estimate is compared with the actual January invoices, and large differences raise questions.
For VAT the accrual has no effect; the deduction is claimed only from the invoice. For income tax the cost of the accrual is deductible in the current period if the conditions are met. With monthly closes we recommend accruing during the year as well so that monthly results are comparable.
What to watch out for
The most common mistake is booking the accrual and forgetting to clear it when the invoice comes in. The cost is then recorded twice and the old accrual lingers on the balance sheet. For every January invoice relating to the previous year, check whether an accrual was made for it.
The second risk is using accruals to smooth results, for example overstating them in a good year. Such practices contradict the true and fair view, and the tax office may not accept them at an audit.
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