`Cash vs. accrual` is one of those decisions that sounds like a tax question. It can become one — but the bookkeeping version of the question is simpler. It is about when activity shows up on the P&L.
Cash and accrual are not better or worse than each other in the abstract. They are different views of the same business activity.
Cash bookkeeping in one paragraph
Cash bookkeeping records a transaction when money actually moves. You send an invoice in March, the customer pays in May — revenue shows up in May. You receive a vendor bill in April, you pay it in June — expense shows up in June.
It is the easier method to understand and the one most solo and very small businesses use day to day.
Accrual bookkeeping in one paragraph
Accrual bookkeeping records activity when it is earned or owed, regardless of when money moves. You send the invoice in March — revenue shows up in March. You receive the bill in April — expense shows up in April. The cash side gets tracked separately on the balance sheet as accounts receivable and accounts payable.
It paints a more accurate picture of profitability over time, especially when there are real gaps between when work happens and when money changes hands.
When cash is enough
For many solo businesses and small service businesses, cash bookkeeping is enough. The activity and the cash side mostly happen at the same time. The mental overhead of accrual would not change the picture meaningfully.
Cash also has the upside of matching the bank account most closely. The P&L for the month feels like it ties to what showed up in checking — because it does.
When accrual is worth the effort
Accrual is worth the extra structure when there is a meaningful gap between work and payment. If you do agency work that invoices net-30, or you carry inventory, or you have customer subscriptions billed quarterly, cash will distort the monthly picture.
Accrual is also closer to what investors, lenders, and many CPAs prefer to see for businesses past a certain scale.
- Long invoicing cycles between work done and customer payment.
- Inventory businesses where purchases and sales are separated in time.
- Subscription or prepayment models where revenue is earned over time.
- Any business that wants the P&L to reflect activity instead of cash timing.
Where Bonnie fits
Bonnie is designed for small-business bookkeeping, with the cash and activity sides of each transaction tracked clearly through the bank feed and the source documents. For most solo and small businesses, this is the cash view people already think in.
If your books need to be on accrual for tax or reporting reasons, that decision lives with your CPA — but the underlying records Bonnie maintains support either presentation.
Picking a method
- Start with cash unless there is a clear reason to use accrual.
- Pick accrual if there is a meaningful gap between activity and payment.
- Talk to your CPA before changing methods — switching mid-year is messy.
- Be consistent month over month so reports are comparable.
- Use the balance sheet (not just the P&L) to track accounts receivable and accounts payable on accrual.
- Re-evaluate the choice as the business changes shape, not every year as a default.
The right answer to cash vs. accrual is the one that lets you understand the business. For most owners, that is cash. For some, accrual is worth the structure. Either is fine — what is not fine is mixing them inconsistently.