Loyalty Register glossary
Accrual
The process of members earning points or other loyalty currency, and the matching accounting entry that records what the program now owes.
Accrual is the earning side of a loyalty program: the process by which members collect points, miles, stars or credits for purchases and other qualifying actions. The word also has an accounting meaning that goes with it. Each time a member accrues points, the business records an obligation to provide rewards later, so accrual is both a member experience and a financial event.
Updated · By Loyalty Register Editorial TeamRelated terms
How does accrual work for members?
The program sets rules that turn actions into points. The most common rule is points per dollar spent. Sephora Beauty Insider members, for example, earn 1 point per dollar spent on Sephora merchandise across its stores, website and several delivery partners. Other rules award points per visit, per night, per mile flown, or for actions such as writing a review or referring a friend.
Accrual rules also cover the details members care about: which channels and products qualify, whether taxes and shipping count, when points post to the account, and what happens to points when an item is returned. Points that post immediately feel more rewarding than points that appear days later, which is one reason programs move toward real-time accrual.
What is the accounting side of accrual?
Points are a promise of a future reward, so the business recognizes a cost or defers revenue as they are earned, rather than when they are redeemed. Starbucks, for example, defers revenue for the Stars members earn toward free products and records a corresponding liability. The total of these entries, adjusted for points expected never to be redeemed, is the points liability.
That makes accrual rules a budget decision. A higher earn rate, a bonus promotion or a new partner that awards points all increase what the program owes.
Why isn’t a high accrual rate the same as high value?
Because points are only worth what they can buy. A program that awards 5 points per dollar is not more generous than one that awards 1, if each of its points buys a fifth as much. Members and finance teams should read accrual together with the value of a point at redemption. Changing one without the other changes the real return to members, even if the headline number stays the same.
What should you watch?
Check that accrual is consistent across channels and clearly explained. Reconcile points issued with transactions regularly, because errors in posting, returns and duplicate accounts add up. Watch the ratio of points accrued to points redeemed: if members earn far faster than they redeem, the liability grows and many members may feel rewards are out of reach. Review promotional accrual separately from base accrual, so you can see how much of the program’s cost comes from campaigns.