22: Accrual vs. Cash Basis Accounting: Why You Can’t Scale by Looking at Your Cash Balance

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. 01:31 — What is Accrual vs. Cash Basis Accounting?  03:45 — When to use Accrual vs. Cash Basis Accounting05:43 — How Looking at Accrual Accounting Can Help You Make Better Financial Decisions to Scale Your Business12:22 — Mistakes to Lookout for When Using Accrual vs. Cash Basis Accounting📈 UNDERSTANDING YOUR PROFIT AND LOSS GUIDEGet the Profit and Loss Guide ❓TAX PLANNING QUESTIONS TO ASK YOUR ACCOUNTANTGet the Tax Planning Questions Guide 🛍 75+ TAX WRITE OFFS Get the Tax Write Offs ✅ BOOKKEEPING CHECKLISTGet the Book Keeping Checklist 💵 BOOKKEEPING AND FINANCIAL ANALYSIS SERVICES FOR BUSINESS OWNERSApply for Bookkeeping or Financial Analysis Services 👋 CONNECT WITH SYDNEY & KRISTEN Website: https://knowyourworthpgh.com/Instagram: https://www.instagram.com/knowyourworth_pgh/ YouTube: https://www.youtube.com/channel/UC3wzOVSDSC-xsmLg8JJ8MJg/