What is provisioning?
In accounting, provisioning is the technique used to prepare for future expenses.
These expenses are recorded in your accounts like any other transaction, except that they do not correspond to transactions that have already taken place, but to transactions that will, or may, take place in the future.
In personal accounting, provisioning is generally used to plan, in your bank accounts, for household running costs, leisure or home improvements that require significant amounts:
- Taxes paid quarterly or annually (for example property tax that is not spread monthly).
- Energy costs that are not spread monthly (for example filling the heating-oil tank in autumn).
- Holidays.
- Major renovations.
- School fees paid quarterly (canteen, etc.).
- Or, more generally, any savings you wish to keep in your bank account.
What are the benefits of provisioning?
Once all your provision entries are set up, and combined with your scheduled monthly transactions, provisioning lets you know very precisely your disposable income — the amount left for day-to-day spending before your next incoming money.
Provision entries are usually created or updated when you receive a significant amount of money, for example once a month after your salary. With this habit, at the start of the month you have:
- Your monthly transactions (rent, loan, phone, water and electricity subscriptions, etc.) added automatically through scheduled transactions — indeed, these automatic transactions can be seen as monthly provision entries.
- Your provision entries for major future expenses.
The balance you are left with is therefore your disposable income: what you can spend during the month without risking going overdrawn, while still having set money aside for essential future expenses.
Moreover, because provision entries are transactions like any other but are not taken into account during bank reconciliation, they do not interfere with checking your personal accounts.
How do I create provision entries?
To create provision entries, see our help page How to create provision entries.