Does your business need to do expense allocation? The NetSuite Expense Allocation feature allows businesses to effectively manage their expenses. Let’s take a look at how you can set up and use the Expense Allocation feature in NetSuite.
NetSuite Expense Allocation Overview
First, what exactly is an expense allocation? An expense allocation is a way of distributing and organizing incurred expenses. The key things to note here are that (1) the expense has already been incurred, and that (2) now your goal is to distribute that expense in some way within your organization.
As a result of the NetSuite Expense Allocation feature, businesses are able to ensure that their accounts, departments, classes, and locations accurately display the impact of expenses. To manage expense allocation, NetSuite uses allocation schedules. These schedules allow you to set up recurring expense allocation.
You can turn on this feature under the Advanced Features section of the Accounting tab in Enable Features.
Before You Create an Expense Allocation Schedule
Before you start creating a new expense allocation schedule, you’ll need to know some details about your allocation. First, you need to know which account (or accounts) the expense is currently hitting. This account is the source account.
You will also need to know what you want to do with the expenses that are hitting your source account. For example, you may want to distribute those expenses across specific departments, classes, or locations—without actually moving the expense out of its source account. Or perhaps you want to distribute the expense into one or more different accounts.
The final decision you need to make is how the expenses will be distributed. In other words, how much of each expense will be allocated to each destination account, department, class, or location?
To allocate expenses by set percentages, you would use a fixed allocation. Alternatively, you could use a dynamic allocation. A dynamic allocation allows you to tie the percentages of the allocation to values pulled from a statistical (in other words, nonmonetary) account.
Create a NetSuite Expense Allocation Schedule
After doing the prep work to understand what exactly you need the expense allocation to accomplish, you’re ready to create an expense allocation schedule. To do that, navigate to Transactions > Financial > Create Allocation Schedules. Let’s walk through the process of setting up an expense allocation schedule on this page.
Primary Information
First, you’ll need to fill out the Primary Information field group.
In this field group, name the allocation schedule and (if you use OneWorld) connect this allocation to one of your subsidiaries. If you use multiple accounting books, then you can also select the appropriate accounting book here.
The Frequency dropdown list provides options for how often this schedule will run, including everything from hourly to every two or three years. You can also choose to run this schedule only once. In the Next Date field, you can manually select the next day the schedule will run.
The Remind Forever and Number Remaining options allow you to decide the timeline for this schedule. If you want the schedule to run indefinitely based on the rules that you’ve set, then choose Remind Forever. But if you want the schedule to run only a set number of times, choose Number Remaining and enter in the text field how many times you want this schedule to run.
And finally, you can set the Allocation Mode dropdown field to either Fixed Allocation or Dynamic Allocation. If you choose Dynamic Allocation, then the Dynamic Allocation field group will become available.
Dynamic Allocation
If you’re using dynamic allocation for this schedule, then you’ll need to fill in just a couple extra fields.
First, you’ll need to select the statistical account that you will be using to calculate your dynamic allocation. When you choose a statistical account, the Unit Type and Unit of Measure fields will be automatically populated based on how the statistical account has been set up.
The Date Basis field has four options: Year to Date, Quarter to Date, Period to Date, and As of Date. Each of these options interacts with the date you entered in the Next Date field. For example, if you choose Quarter to Date, then the time period NetSuite looks at will be the entire quarter up to the day before the day listed in the Next Date field.
Choosing the best option in the Date Basis field is important because NetSuite needs to know the timeframe it should look at for the statistical account in order for a dynamic allocation to be successful. Then, NetSuite is able to calculate the sum of all the statistical journal entries within your selected timeframe.
Source Tab
The last two things we need to look at on this page are the Source tab and the Destination tab.
On the Source tab, you will choose the source account (or accounts) for this allocation. At the top of the tab, you have the option of choosing a credit holding account as the source in the Credit Account field. Otherwise, you’ll choose an account down in the list.
What if you don’t want all the expenses hitting a specific account to be allocated? You’ll notice that you can further narrow down your source account in this sublist by choosing specific names, departments, classes, or locations. This way, only expenses with your set criteria will be allocated.
Destination Tab
The final step is to complete the Destination tab.
Under the Destination tab, you can choose the account (or accounts) where this expense will be allocated. If you just want to spread out an expense across multiple departments, classes, or locations within your source account, then you’ll select the checkbox Use Source/Credit Account(s).
You also need to record how much of the expenses will be allocated into each destination account and/or classification. You could select the button Even Spread to evenly distribute expenses. Alternatively, you can manually enter specific amounts in the weight column. For these amounts to count as percentages, you’ll select the checkbox Values Are Percentages.
So, for example, if you need to distribute expenses across three different departments, you could choose to allocate 25% of the expenses to two of the departments and 50% of the expenses to the third department.
If you are using dynamic allocation, the Balance column would display the breakdown of the statistical account. Then, the values in the Balance column would be used to determine the percentages that would go into the Weight column for each account, department, class, or location.
Using an Expense Allocation Schedule
So you’ve created an expense allocation schedule. Now what?
To actually run the allocation schedule, go to the list of allocation schedules (Transactions > Financial > Create Allocation Schedules > List).
Here, you’ll see all the allocation schedules set up in your account. You can select Enter next to a schedule to prompt it to run. Running the schedule will create a journal entry that reflects the criteria you set in the allocation schedule.
Alternatively, while on the Allocation Schedules page you could select View next to one of the schedules. Then, on the record for that allocation schedule, select the button Create Journal Entry at the top.
And if you want to make things really simple, then you could just add an Allocation Schedules Due reminder to your Reminders portlet on the Home dashboard. Selecting the link in this reminder will take you to the list of allocation schedules that are ready to be run.
Conclusion
With the NetSuite Expense Allocation feature, you are able to directly manage the flow and organization of your company’s expenses.
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