I have recently been experimenting with a lot of social media platforms with varying degrees of success. This article talks thru the issues and experiences of several business owners. having reading this article I’ll definitely be changing my approach. Good read, not too long either.
Small business accounting – Cash vs Accrual – Does it matter? Yes it Does.
It is not uncommon for us to receive financial information from business owners where for instance the tax returns are done on a cash basis and the financials are done on accrual basis. Often they are technically both correct but just looking at the numbers you’d think they were 2 different businesses.
Accrual accounting, done coreectly, usually presents a more accurate picture of the business. Accrual accounting simply attempts to match the revenue to the expenses when they are incurred or earned. Cash accounting simply accounts for the revenue or expenses when you recieve the cash or pay the bills.
In reality, cash accounting is almost never pure nor is accrual accounting.
Some (many) small business owners don’t understand the difference nor the effect on their financials. One way to sort out the difference is really easy. In QuickBooks and most other small business accounting packages there is a check box for reports. You can decide if you want accrual or cash. I suggest you run both on the same day and look at the differences. You might be surprised at what you learn.
Drop me a note below if you want me to take a shot at any other small business accounting or financing issues. Also, look at Expense to profit Cash Conversion Process for more info on working capital and cash management. Other Articles about Running a Small Business:
If you plan to be in business you’d better have a Business Plan. If you plan to start a small business this tool can be the difference between success and losing everything. If you think this Business Plan tool is expensive wait til you see how expensive it is to NOT have a well thought out and written business plan.
If you are considering starting or buying a business it’s a good idea to have the best tools. It may cost you a few bucks but it could be a cost that saves you many, many thousands of dollars.
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As you can see the layouts are clean and easy to understand.
If you are going to get into business you need a plan that is logical, well thought out and proven. Trust me, if you go to your banker with a professional business plan your odds of getting financing improve dramatically. A plan like the one Business Plan Pro produces will be a requirement for any SBA loans that you apply for or pursue.