When it comes to operating your own business, there are so many decisions you have to make, and each one will have an impact on the future of the business. You need to decide whether to hire a staff, what type of business entity would work best and how to manage the finances.
The financial management of your business is the backbone that holds everything together. Without a strong system for tracking income and expenditures in place, your business will face adversity. There are different methods to choose from, like the accrual method or the cash accounting method.
In the showdown of accrual vs cash accounting, you can see the ins and outs, and the pros and cons of each method.
- Cash basis accounting is best for small businesses and sole proprietors
- Accrual basis accounting allows businesses to easily manage their finances as revenue flows in
- Any incorporated business, except for an S Corp, is required to use the accrual method