Choosing Between Cash and Accrual Accounting. What’s Best for Your Business?

Cash and accrual accounting are two different ways to track income and expenses, but which is right for you? Let’s break down what they mean and how to choose the best fit for your business.

💰 Cash Basis Accounting

How it works:You record income when you receive payment and expenses when you pay them.

Pros:

✔️ Simple and easy to track

✔️ Clear view of cash in the bank

✔️ Great for small businesses and sole proprietors

Cons:

❌ Doesn’t always show the full financial picture

❌ May not reflect what you’ve earned vs. what you’ve collected

📅 Accrual Basis Accounting

How it works:You record income when it’s earned and expenses when they’re incurred—even if cash hasn’t moved yet.

Pros:

✔️ More accurate long-term financial picture

✔️ Matches income to expenses

✔️ Preferred by investors, banks, and growing businesses

Cons:

❌ More complex to manage

❌ Can be confusing without proper systems

🧠 How to Choose:

• New or small biz? Cash basis may work great.

• Applying for funding or scaling up? Accrual might be your best bet.

• Not sure? A bookkeeper can guide you through the decision.

Understanding the difference between cash and accrual is one of the most empowering things you can do as a business owner. If you're feeling unsure, reach out, I'm happy to walk you through it!