As a startup founder, you need the right financial data in order to make decisions that put you in a position for growth. The right financial information will help you understand your investments, build a financial forecast, and plan for future funding raises. In order to get this information and really understand how you’re performing, you need accounting that looks forward––aka accrual accounting.
Accrual accounting is the most accurate, useful, flexible, and shrewd accounting method. So why do so many businesses neglect to use it?
One reason is that for non-finance people, the term “accrual accounting” is perhaps the most boring combination of two words in the English language, and explanations of what it is and how it works tend to be equally tedious. With that in mind, I’m going to explain accrual accounting through a decidedly not dull example.