Cash vs Accrual Accounting: Which One’s Right for Your Business?
- Leigh Glover
- Jan 15
- 1 min read
Updated: Feb 12
Deciding between cash and accrual accounting might sound tricky, but it doesn’t have to be! Here’s the lowdown in plain English.
The Basics
If your business turns over less than $10 million, you get to choose:
Cash Accounting: Record income and expenses when money actually changes hands. Easy and great for tracking how much cash you have right now.
Accrual Accounting: Record income when earned and expenses when incurred, even if the cash hasn’t moved. Perfect for seeing the bigger picture of your business’s finances.
A Quick Example
Finished a job in January but got paid in February?
Cash Accounting: Record it in February.
Accrual Accounting: Record it in January.
Pros and Cons
Cash Accounting:
Simple to use.
Focuses on what’s in your pocket.
Not great for seeing the full financial picture.
Accrual Accounting:
Gives a clearer picture of your business’s performance.
More complex and might mess with cash flow if payments are delayed.
What’s Best for You?
Small and need simplicity? Cash accounting might be your best mate. Bigger business or want deeper insights? Accrual accounting’s the go.
Need Help?
At Clarity Accounts & Bookkeeping, we’re here to make sense of it all for Aussie businesses. Visit us at Clarity Accounts & Bookkeeping for a chat—we’ve got your back!
