How to accrue for unbilled utilities in service charge accounts

To accrue for unbilled utilities, list every supply, find the date each one was last billed to, and estimate the cost of what was used between that date and the period end, from a meter reading where you have one or from the last bill’s daily cost where you don’t. Post the estimate as an accrual at month end or year end, reverse it on the first day of the next period, and post the real bill in full when it arrives.

The rest of this guide covers each step for a block or estate, with a worked example. For where utility bill errors start, see how managing agents process utility bills.

Why do service charge accounts need utility accruals?

The accountancy guidance for residential service charge accounts, TECH 03/11, recommends preparing them on the accruals basis (paragraph 2.2), although some leases require a cash basis. On the accruals basis the accounts carry the cost of what was used in the year, whether or not the supplier has billed it.

In England, the RICS Service Charge Residential Management Code (4th edition, March 2026, section 5.10) says year-end accounts should reflect all financial activity for the accounting period. Utility bills are often missing at the year end, because they arrive quarterly or late, or stop after a change of supplier or a disputed reading.

Which supplies need an accrual?

Start with a register of every supply you manage. For each one, hold:

• The building, schedule and heading it is charged to.

• The supplier, account number and meter (the MPAN for electricity, the MPRN for gas).

• The date the last bill ran to, and whether that bill used an actual or an estimated read.

• The last meter reading you or the supplier took, with its date.

Any supply last billed to a date before the period end needs an accrual for the gap. So does a supply with no bill at all, such as a new supply or one that changed supplier during the year.

How do you estimate what has not been billed?

Use the best evidence you have, in this order:

1. A meter reading at or near the period end. Take the units used since the last billed read, then apply the contract unit rate and the standing charge for the days unbilled.

2. The last bill’s daily cost. Divide the last bill’s net charges by the days it covered, then multiply by the days unbilled.

3. The same months last year, adjusted for any change in rates. Communal lighting and heating plant follow the seasons, so last winter can be a fairer guide to this winter than an autumn bill.

Accrue the cost at the VAT rate that applies to the dates you are estimating. Where the client cannot recover the VAT, it is part of the cost to the service charge. Electricity for qualifying use in Great Britain is zero rated from 1 October 2026 to 31 March 2027 (Revenue and Customs Brief 10 (2026)), so an accrual that crosses either date needs the right rate on each side. Our guide to a bill that spans the VAT rate change shows how the split works.

A worked example

The numbers here are invented and round. A block’s service charge year ends on 31 December 2026. Its landlord electricity supply was last billed to 31 October 2026, so 61 days are unbilled at the year end. The supply is for the common parts of a residential block in England.

From a meter reading

• A reading on 31 December shows 2,900 kWh used since the last billed read.

• At a contract unit rate of 24p per kWh, that is £696.00.

• The standing charge is 60p a day, so 61 days is £36.60.

• Accrual: £732.60 net. The dates fall inside the zero rate window, so the VAT is nil.

From the last bill

• The last bill was £1,125 net for the 92 days from 1 August to 31 October.

• £1,125 × 61 ÷ 92 is £745.92.

• Accrual: £745.92 net, again with nil VAT.

Both are reasonable. The reading is better evidence, so use it when you have it, and note the method on the accrual.

How do you reverse the accrual when the bill arrives?

Post the accrual at 31 December to the utilities heading on the block’s schedule. Reverse it on 1 January, so the new year starts with a credit of £732.60 on that heading. When the bill arrives, post it in full in the period you receive it.

Say the bill arrives in February and covers 1 November to 31 January at £1,140 net. The new year carries £1,140 less the £732.60 reversal, which is £407.40: January’s electricity plus any difference between the estimate and the real cost of November and December. If that difference is large, find out why before the accounts are signed off.

Do month-end accruals work the same way?

Yes, with the same method. At month end you may choose to accrue only the larger supplies. At the year end every supply on the register needs checking, because those figures go into the service charge accounts.

What about estimated bills?

A bill based on an estimated read is still a bill, so post it, record that the read was estimated, and start the accrual from the date it ran to. If the supplier’s correction lands in the next year, the difference falls there too.

What if a utility bill arrives very late?

Under section 20B of the Landlord and Tenant Act 1985, leaseholders in England and Wales are not liable for costs incurred more than 18 months before they are demanded, unless they were told in writing within that time that the costs had been incurred and would be charged. TECH 03/11 (paragraph 2.5) reminds landlords and agents of the limit. A large catch-up bill after a long gap is worth raising with the client and their advisers early.

Checklist for utility accruals

1. Keep a register of every supply with its building, schedule, heading, meter and last billed date.

2. At the period end, list every supply billed to a date before it, and every supply with no bill yet.

3. Estimate from a meter reading, then the last bill’s daily cost, then the same months last year.

4. Apply the VAT rate for the dates you are estimating.

5. Post the accruals, and note the method used for each one.

6. Reverse every accrual on the first day of the next period.

7. Post the real bill in full when it arrives, and look into large differences.

For the checks to run on each bill as it arrives, see our utility invoice validation checks.

Where Dataforge Invoices fits

Dataforge Invoices is AP software for UK block and estate managing agents. It reads electricity, gas and water bills with supplier-specific layouts, takes the current charges, and reads supply address, meter, period and consumption, with Climate Change Levy and VAT checked. Spend and consumption are reported by site, meter and commodity from the bills you process, with CSV exports. The accrual, and the judgement behind the estimate, stay with your team. See utility bill processing for property managers.

If your accounts are in MRI Qube, Dataforge Invoices posts approved invoices to MRI Qube through an API integration, and Qube’s own reference is returned. Qube stays the system of record. See invoice processing for MRI Qube.

Sources: ICAEW TECH 03/11 paragraphs 2.2 and 2.5; RICS Service Charge Residential Management Code, 4th edition section 5.10; Landlord and Tenant Act 1985, section 20B; Revenue and Customs Brief 10 (2026). Checked 16 October 2026.