Small business guide
The two methods differ on one thing: timing. Cash accounting records money when it moves. Accrual accounting records it when it is earned or owed.
✓ Checking what you qualify for does not affect your credit score.
Under cash accounting, you record income when you are paid and expenses when you pay them. Under accrual accounting, you record income when you earn it and expenses when you incur them, whether or not money has moved.
An illustration with round numbers. In March you finish a $10,000 job and invoice the client, who pays in April. You buy $3,000 of materials in March and pay the supplier in April.
| Cash method | Accrual method | |
|---|---|---|
| Income recorded | April ($10,000 received) | March ($10,000 earned) |
| Expense recorded | April ($3,000 paid) | March ($3,000 incurred) |
| March profit shown | $0 income, $0 expense | $7,000 |
| April profit shown | $7,000 | $0 |
Same business, same job. Accrual shows March as profitable. Cash shows April. That is why the method changes how a month looks.
Simple, mirrors your bank account, and is common for very small businesses with little inventory and few open invoices.
Shows true performance when you invoice on terms, carry inventory or owe suppliers. It is often required for larger businesses.
Which method you may use for tax depends on your business structure and size, so confirm with an accountant before choosing or changing.
A profitable accrual month can still be a cash-poor one if clients pay late. Watching both views helps you plan. When invoices are slow, options like funding while waiting on receivables bridge the gap.
Clean books make a funding review faster, because the numbers a funder reads in your bank statements match what you can explain. We fund from $25,000 to $5,000,000, decisions move fast, and funding can arrive in as little as 24 hours for qualified businesses. We read about three months of business bank statements, consider owners with a FICO score of 500 or above, and sole proprietors can apply.
See bookkeeping habits that make funding easier and the financial statements funders want, then start your application. It takes about five minutes and begins with a soft credit pull.
Often yes, but a change in accounting method can have tax consequences. Ask an accountant first.
Cash is simpler because it follows your bank account.
Not directly. You also need a cash flow statement, which shows actual cash movement.
Funders mostly read bank statements, which are cash-based. Either method works if the books are consistent.
It is wise to consult one, since the right method depends on your structure and size.
Same-day decision. Applying takes a few minutes and will not affect your credit score.
