In my experience, many small business owners gloss over their balance sheets, but this is a mistake. When you switch to accrual accounting, you’ll see accounts receivable and accounts payable categories on your balance sheet, as well as accrued or prepaid expenses and deferred revenue, which often have a major impact on your bottom line. Regularly Review Big-Picture Financial ReportsĪs a business owner, you should regularly review your big-picture financial reports, particularly your balance sheet. If you run a business where you’re making prepayments on items or services, have customers prepaying you for items or services or make payments to vendors 30 or 90 days post-purchase, then accrual accounting is especially beneficial-it can give you a clear picture of where you actually stand financially and help you avoid overspending. While I believe that all businesses can benefit from accrual accounting at some point, I highly recommend that certain types of companies implement it sooner rather than later.
