Why Every Business Needs to Look Ahead​

By AnnA Kovchina, CMA & Founder of Ak-counting.com

Imagine driving your business like you drive a car—without looking through the windshield. You might make it a few miles, but sooner or later, a curve, pothole, or red light will catch you off guard. That’s what running a business without financial forecasting is like. You can keep going on instinct, but eventually, the lack of forward visibility will cost you—sometimes dearly.

By AnnA Kovchina, CMA & Founder of Ak-counting.com

Businesses must choose between cash basis and accrual basis accounting methods. Cash basis accounting is straightforward, tracking revenues when cash is received and expenses when cash is paid. In contrast, accrual basis accounting offers a more precise representation of a company’s financial status by recording revenues when they are earned and expenses when they are incurred, regardless of actual cash transactions. Generally, you can choose any permitted accounting method when filing your first tax return. However, you must use the method consistently year to year, and it must clearly reflect your income. Many new small businesses initially choose the cash basis as it is easier and quicker, but as companies grow, they may need to convert to the accrual basis.