Clinical trial accruals (CRO accruals)

Contract research organizations, clinical sites, central labs, and investigators bill on their own schedules, often months after the work happens. Under accrual accounting the expense belongs in the period the patient visit occurred or the site was activated, not the period the invoice arrived. The accrual is the difference between what has been incurred under each contract and what has been billed.

A defensible accrual is built from activity data: patients enrolled and their visit schedules, sites activated, monitoring visits completed, and pass-through costs, each priced from the contract budget. Start-up fees paid in advance sit in prepaids and are released as the trial progresses. The model is reconciled to vendor invoices every month, and the reconciliation is what an auditor tests.

Companies that accrue from invoices alone tend to understate expense in the early months of a trial and then catch up in a lump. Boards notice the lump; auditors notice the method. Both are avoidable with a contract inventory and a monthly activity-based accrual.