Accrual Accounting: Why Accruing Revenues & Expenses Is Necessary for SaaS Businesses
I don’t think a SaaS founder should be their own accountant.
I’m not, and I wasn’t for all 5 of my companies.
Your job is to get really good at running a business and making money.
That’s it.
But to do that, there is ONE type of accounting that I believe you NEED to understand:
Don’t panic, you won’t need to calculate it yourself. That’s your accountant’s job.
But knowing the difference between Accrual Accounting and Cash Accounting is vital to making the best business decisions for your SaaS.
So let’s take a quick 10-minutes to go over what exactly it is and why it’s valuable to comprehend it.
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Once you understand Accrual Accounting, you’ll be able to:
- Measure incremental growth
- Clean up your cash flow
- Keep your finger on the pulse of subtle revenue changes
- Respond quickly to downtrends in your bottom line
- Reduce distortion in your metrics
I’ve read 2000+ balance sheets, P&Ls, cash flow statements, and I’ve taught dozens of SaaS founders how to interpret their figures.
Maybe I’m a freak because I love numbers so much.
But I’ve said it before and I’ll say it again:
Numbers don’t lie. Expectations do.
Fire up the video here and let’s get you up to scratch on Accrual Accounting. It’ll clean up your cash flow, help you track metrics accurately and see important business trends.
P.S. Prefer audio? Subscribe to the Growth Stacking Show directly on Apple Podcasts or Spotify and make sure to leave a rating and review if you find the show helpful.
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Dan Martell has advised more startups than his hometown has people and teaches startup founders like you how to scale. (Get access to all my latest business hacks.) He previously created, raised venture funding for and successfully exited three tech companies: Spheric, Flowtown and Clarity.fm. You should follow him on Twitter @danmartell for tweets that are actually awesome.
Originally published at https://www.danmartell.com on November 16, 2020.
