Accrual Accounting VS. Cash Basis Accounting
Jun 29, 2020
Huge mistake restaurants make when it comes to their accounting is looking at the finances on a Cash basis instead of an Accrual basis. Using the Accrual method provides more accurate financial data for your restaurant.
What’s the difference between Cash Basis Accounting and Accrual Accounting?
It is actually quite simple…
You want to always look at your expenses and of course, your revenue. With Cash accounting, you record these expenses and earnings when they are actually paid, not when the services are made.
But….that means if your refrigerator isn’t keeping cool and you bring in a repair company and don’t pay the invoice until the following month…the expense won’t be reflected in the proper time period. This makes it impossible to see the proper balance of profits and losses during any given time period…..so you are not getting an accurate look at your finances when using the Cash basis.
The accrual method just provides more accurate financial data. With this method, you record all sales, whether collected or not, the day it happened and for almost all restaurants, this scenario happens daily.
Good record keeping of “money in” and “money out” is the first step toward the profitable management of your restaurant. If you need assistance with keeping track of your expenses and revenue, give us a call (603)494-5823 and we can see how we can help you or schedule a 15-minute phone call
Ready to transform your restaurant's finances? Whether you need Monthly Bookkeeping, a Catch-up Bookkeeping service, or want to embark on our DIY Bookkeeping Course, we've got you covered. Have questions or need more information? Don't hesitate to reach out. Let's talk about how we can support your business. Schedule your FREE 15-Minute Call today and let's get started on your path to stress-free bookkeeping!
