A common headache for our Client's accounting departments month end process is expense allocations. It's often time consuming and having to remember or keep track of the allocation methodology used each time. NetSuite has an Advance Financial tool that does just that automatically.
Why is expense allocation so important?
Expense allocation is important to determine the true profit and loss of a business unit, such as a department or subsidiary. For instance, rent or insurance that maybe billed to the company as a whole but we need to allocated that burden among subsidiaries to assess whether or not a subsidiary is profitable or not. It's great if a subsidiary's income is covering their cost of goods sold but if it's not covering its portion of administrative burden rate then management can make business decisions such as to keep the subsidiary or raise prices in order to become profitable. Accurate expense allocation helps a company play for real.
How can NetSuite Help?
NetSuite has an Advanced Financial feature for expense allocation. This is an Advanced Feature so if you do not see it available in Enable Features (Set Up --> Company --> Enable Features --> Accounting Tab --> Advanced Features section --> Expense Allocation checkbox) please contact your NetSuite Account Manager. Here are some functionalities of the Expense Allocation Feature.
- Fixed and Dynamic allocations.
- Fixed allocations - You can set up allocation methods that are fixed weights or percentages. For instance, a particular expense will always have the same percent allocation among the departments.
- Dynamic allocations - the portion allocated is based on a changing unit of measure. For instance, you can allocate based on head count which would periodically change.
- Batch Allocation. This functionality allows you to create a sequence of allocations. There may be a situation where one allocation is the source for a different allocation. For instance, an expense is first allocated by department and then within that department a subsequent allocation is done to allocate to locations.
- Intercompany Allocation. This is applicable to OneWorld accounts only. This allows for the allocation of expenses between subsidiaries.
- Reminders to allocate. You can set the reminder portal to let you know when it's time to trigger the allocation schedules.
Please refer to my Short n Suite videos for instructions on how to set up and allocate expenses:
- Expense Allocation Setup
- Expense Allocation Fixed and Dynamic
If you need any guidance or questions, please reach out to us at Concentrus. Our consultants are ready to assist.
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