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Cash-basis accounting tells you when money moved. True-performance (aka accrual-basis) accounting tells you when business actually happened. Under the cash basis, revenue shows up when the customer pays you. Expenses show up when you pay the bill. This might sound simple, but it can badly distort what’s really going on. Under the accrual basis, revenue shows up when you’ve earned it. Expenses show up when you’ve incurred them. That gives you a much more honest picture of whet

I’ve stated before in a previous blog post that quality accounting infrastructure is essential for properly managing a business. So how do you know if your infrastructure needs to be upgraded? Here are several signs: It’s reliant on spreadsheets These are low-cost alternatives to paying for accounting software, but there are trade-offs. Aside from having to build an effective and efficient spreadsheet from scratch, the opportunity for catastrophic error from accidentally dele

The value chain – the flow of goods and services that starts with raw inputs and ends with a purchase by the end user – is an essential puzzle that entrepreneurs need to solve to make sure they have a viable business model. When a piece of the puzzle emerges before or after you in this chain that promises to supply much of what you need to be viable, it can be seductive to snap up the opportunity. However, it’s important to tread carefully here. On the vendor side, there are

From what I’ve seen, most small business owners are quite familiar with the profit & loss statement and the balance sheet. What doesn’t get as much attention is the cash flow statement. Because not every cash transaction appears on the P&L, and not every P&L transaction involves cash, there will almost always be some degree of difference between what the P&L says is net profit and how much change in cash has truly occurred. The cash flow statement reconciles this difference.

Unless you’ve been living under a rock, you’ll have noticed the hype around AI has been going at a frenzied pace. To be candid, I worry sometimes about the future of my career and my role in the world. If I’m not riding the frontiers of AI in accounting, will I be made redundant? It’s times like these that I remind myself that while AI is indeed a transformational technology, I also shouldn’t go looking for an answer in search of a question. I do deploy AI in my practice wher

I often refer to “accounting infrastructure” and how important it is to have it in place in a growing and complex business. But what do I actually mean by it? While your main accounting general ledger software is part of it (Quickbooks, for example), accounting infrastructure is also: Software platforms that your business uses where accounting data flows from (examples are Shopify, Stripe, or industry-specific enterprise programs) Software that pulls from the general ledger f