Cash basis records money when it moves. Accrual basis records revenue when you earn it and costs when you incur them. For a company selling annual contracts, the difference can be the entire story.
Signs it is time
- You bill annually or quarterly in advance
- You are raising, or plan to within a year
- Your gross margin changes wildly from month to month
How we make the switch
We restate the last twelve months on an accrual basis, build the deferred revenue schedule from your billing system and keep the cash view as a separate report, because runway is still a cash question.
