Whether you’re a solo trader, a growing startup, or managing a team … keeping your finances in check is essential – and that starts with understanding how you budget.
One of the most common questions we hear is: Should I use a cash budget or an accrual budget?
Let’s break it down simply.
What’s the difference?
| Feature | Cash Budget | Accrual Budget |
|---|---|---|
| Records income when | Cash is received | Income is earned (regardless of when it’s paid) |
| Records expenses when | Cash is paid | Expenses are incurred (even if not yet paid) |
| Best for | Day-to-day cash flow, managing liquidity | Long-term financial insight, business planning |
| Reporting accuracy | Can distort the picture if income is irregular | Provides a clearer view of financial performance |
| Example | $10K received in Jan = $10K income in Jan | $10K spread over 12 months = $833/month |
| Useful for | Cash forecasting, managing bills and wages | Profitability, trends, investor or compliance reporting |
So, which one should your business use?
Ideally, both.
Use a cash budget to manage what’s in the bank and keep operations running smoothly. Use an accrual budget for insight into how your business is really performing over time.
Combined, they give you the full picture: Short-term control + Long-term clarity = Financial confidence.
Knowing your numbers is one of the most empowering things you can do in business. When you understand your money, you can make better decisions – faster.
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