Cash vs. Accrual, Explained Without Making Your Eyes Glaze Over
At some point in setting up your books, you’ll run into a question that sounds far scarier than it is: do you keep your books on a cash basis or an accrual basis? People tend to nod, pick whichever word they heard last, and move on terrified. Let’s actually understand it, because for some of you — travel agents especially — it genuinely matters.
The whole difference comes down to one thing: when you count the money.
Cash basis: you count it when it actually moves.
Income counts when the money lands in your account. An expense counts when the money leaves. Simple, intuitive, and it matches what your bank account is doing in real time. Most small businesses start here, and for plenty of them it’s the right choice and stays the right choice.
Accrual basis: you count it when it’s earned or owed.
Income counts when you’ve earned it — even if the payment hasn’t arrived yet. An expense counts when you’ve incurred it — even if you haven’t paid it yet. It’s a little more involved, but it gives you a truer picture of how the business is actually performing over time, independent of payment timing.
Here’s why this isn’t just accountant trivia, and here’s where travel agencies should lean in:
Remember that commission timing problem — agents booking a trip in spring and not getting paid until the client travels months later? On a pure cash basis, all that work they did during wave season shows up as nothing until the payment finally lands. Your books can look empty during your busiest stretch and suddenly flush months later, which makes it genuinely hard to see how you’re really doing. Accrual-style thinking — recognizing that the commission was earned when the work happened — paints a much more honest picture of a business with that kind of timing gap.
That doesn’t automatically mean every travel agency should run full accrual books. It means the choice deserves an actual thought rather than a coin flip, because the two methods can tell noticeably different stories about the same business.
A few practical notes:
Most very small businesses start on cash basis because it’s simpler and matches how they intuitively think about money.
The method you choose affects your reports and can affect your taxes, which is a conversation to have with your CPA — that part is their lane, not mine.
QuickBooks Online can actually show you reports both ways once your books are set up properly, which is one more quiet argument for having real books instead of a bank app.
My job isn’t to make this decision for you or to drown you in accounting theory. It’s to make sure you understand the choice well enough to make it on purpose — and to keep your books clean and consistent under whichever method fits, so your CPA is working from something solid.
If “cash or accrual” has been a question mark hovering over your setup, let’s take the mystery out of it. Getting your bookkeeping established correctly — method included — is part of how I onboard every client at Kimberly Hill Business Studio. No jargon. No judgment. Just business done right.
— Kimberly
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