Accrual vs. Cash Basis Accounting: Why You Can’t Scale by Looking at Your Cash Balance | Know Your Worth E22

February 27, 2024

If you’re DIYing your books, you likely don’t know when to use accrual vs. cash basis accounting. 

This is one of the red flags we see when new clients start working with us. 

Most sole proprietorships, single-member LLCs, and S-corps are using cash basis accounting because it’s simple — it’s the cash you’ve collected. 

But if you are ready to scale your business, you need to understand and use accrual accounting, which is going to allow you to know when (and how much) you can invest in additional expenses and how to maintain a cash-healthy business so you never find yourself unable to pay yourself or your bills. 

Tune into this episode to learn the differences between accrual vs. cash basis accounting, when to use each one, and how understanding accrual accounting is going to make it more sustainable for you to scale.

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01:31 — What is Accrual vs. Cash Basis Accounting?  

03:45 — When to use Accrual vs. Cash Basis Accounting

05:43 — How Looking at Accrual Accounting Can Help You Make Better Financial Decisions to Scale Your Business

12:22 — Mistakes to Lookout for When Using Accrual vs. Cash Basis Accounting

By the way: When you become a bookkeeping client at Know Your Worth, we not only create these types financial statements for you every month, but we also show you how to use them to make the decisions you need to in order to scale your business. 

You’ll confidently know what you can afford to invest in to grow your business, how to plan for low-income or high-expense months, and pay yourself consistently, even with inconsistent revenue. 

The investment starts at $400 per month. 

Book a call with us today →

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