Cash and accrual methods record income and expenses at different points. Choose software that supports the method your accountant says to use, and confirm any inventory or entity rules with a tax professional.
Cash and accrual accounting change when income and expenses appear in reports. Treat the accounting method as a decision for your accountant, then verify that the software supports the workflow they specify.
Compare the reporting methods
| Question | Cash method | Accrual method |
|---|---|---|
| Income timing | Generally recorded when received | Generally recorded when earned |
| Expense timing | Generally recorded when paid | Generally recorded when incurred |
| Software features to confirm | Cash-basis reports and transaction dates | Accounts receivable, accounts payable and accrual reports |
| Main setup question | How does the product treat unpaid bills and invoices? | How does it match income and expenses to the right period? |
| Professional check | Ask whether the method fits the business’s facts | Ask about applicable tax and accounting requirements |
The IRS’s 2025 Publication 334 explains the general differences and notes that inventory and other rules can affect which methods apply. This chart is a software selection aid, not tax advice.
Before choosing a plan
- Ask your accountant which method and reports the business should use.
- Confirm the vendor supports those settings for your country and business type.
- Check whether the software can produce both management and tax-preparation reports.
- Ask how unpaid invoices, vendor bills, inventory and refunds appear.
- Compare bank reconciliation, accountant access and export options.
- Do not change accounting settings without discussing the effect on prior and future periods.
For a broader software checklist, read Accounting Software for Small Business: How to Choose. Compare customer records with Do You Need a CRM?, or browse finance.
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Common questions
What is the main difference between cash and accrual accounting?
In general, the cash method records income when received and expenses when paid; accrual accounting generally records income when earned and expenses when incurred.
Can accounting software switch methods?
Many products offer cash and accrual reports or settings, but the exact feature and effect on existing books vary. Ask your accountant before changing a method.
Can every small business choose cash accounting?
Tax rules can depend on business structure, inventory and other facts. Review current IRS guidance and consult a tax professional for your situation.