{"id":15058,"date":"2026-09-22T06:14:39","date_gmt":"2026-09-22T10:14:39","guid":{"rendered":"https:\/\/www.sage.com\/en-ca\/blog\/?p=15058"},"modified":"2026-09-22T06:14:41","modified_gmt":"2026-09-22T10:14:41","slug":"what-is-cash-basis-accounting","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-ca\/blog\/what-is-cash-basis-accounting\/","title":{"rendered":"What is cash basis accounting and how does it work?"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--standard\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-ca\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tWhat is cash basis accounting and how does it work?\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\tCash basis accounting records income and expenses when money moves. Learn how it works, how it compares with accrual accounting, and what Canadian businesses need to know.\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<div class=\"col col-8 col-lg-4 entry-header__image\">\n\t\t\t<figure class=\"entry-header__thumbnail js-hero-section\">\n\t\t\t\t<img decoding=\"async\" width=\"1214\" height=\"810\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0794-1214x810.jpg\" class=\"entry-header__thumbnail-image\" alt=\"\" fetchpriority=\"high\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0794-1214x810.jpg 1214w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0794-768x512.jpg 768w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0794-1536x1025.jpg 1536w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0794.jpg 2000w\" sizes=\"(max-width: 1214px) 100vw, 1214px\" \/>\t\t\t<\/figure>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t<\/div>\n\t\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \">Published <time class=\"entry-date published\" datetime=\"2026-09-22T06:14:39-04:00\">September 22, 2026<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"What is cash basis accounting and how does it work?\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-ca\/blog\/what-is-cash-basis-accounting\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n\t<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-ca\/blog\/author\/lauraslingo\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2026\/03\/laura-slingo-headshot-350x350.jpg\" class=\"entry-author__image\" alt=\"Laura Slingo\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2026\/03\/laura-slingo-headshot-350x350.jpg 350w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2026\/03\/laura-slingo-headshot.jpg 400w\" sizes=\"auto, (max-width: 40px) 100vw, 40px\" \/>\t\t\t\t<span class=\"entry-author__name\">Laura Slingo<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting records revenue when payment is received and expenses when they\u2019re paid. Unlike accrual accounting, transactions aren\u2019t recorded when income is earned or an expense is incurred unless money has actually changed hands.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That can make a business\u2019s results look very different from the work it has actually done during a period.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Picture this: a contractor spends three months building out a client\u2019s office space, paying for materials and labour along the way, but the client doesn\u2019t pay the final invoice until the job wraps.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For those three months, the business can appear to be losing money. Then, when the final payment arrives, the numbers suddenly swing the other way.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The underlying business hasn\u2019t changed overnight\u2014the timing of the cash has.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That is exactly what cash basis accounting reflects. The cash basis of accounting follows when money is actually received or paid, rather than when the related work is completed or the cost is incurred.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Read on to learn how cash basis accounting works, how it compares with <a href=\"https:\/\/www.sage.com\/en-ca\/blog\/what-is-accrual-based-accounting\/\">accrual accounting<\/a>, what it means for your financial statements and taxes, and where its simplicity can become a limitation.<\/p>\n\n\n<section id=\"key-takeaways\" class=\"wp-block-sage-key-takeaways\"><div class=\"sage-key-takeaways__inner\"><h2 class=\"wp-block-heading has-h-3-font-size\">Key takeaways<\/h2>\n<ul class=\"wp-block-list\">\n<li>Cash basis accounting records revenue when payment is received and expenses when they\u2019re paid, rather than when they\u2019re earned or incurred.<\/li>\n\n\n\n<li>It\u2019s generally simpler than accrual accounting, but it leaves unpaid invoices and bills out of the picture.<\/li>\n\n\n\n<li>For Canadian income tax purposes, most business income must be reported using the accrual method. The Canada Revenue Agency (CRA) allows farmers, fishers, and self-employed commission agents to use either the cash or accrual method.<\/li>\n\n\n\n<li>Cash basis accounting can make one period look unusually strong or weak simply because of when money happens to move.<\/li>\n<\/ul>\n<\/div><\/section>\n\n\n<h2 id=\"h-here-s-what-we-ll-cover\" class=\"wp-block-heading\">Here\u2019s what we\u2019ll cover<\/h2>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-what-is-cash-basis-accounting\" data-level=\"2\">What is cash basis accounting?<\/a><\/li><li><a href=\"#h-how-does-cash-basis-accounting-work\" data-level=\"2\">How does cash basis accounting work?<\/a><\/li><li><a href=\"#h-who-can-use-cash-basis-accounting-in-canada\" data-level=\"2\">Who can use cash basis accounting in Canada?<\/a><\/li><li><a href=\"#h-cash-basis-versus-accrual-accounting-a-detailed-comparison\" data-level=\"2\">Cash basis versus accrual accounting: a detailed comparison<\/a><\/li><li><a href=\"#h-how-does-cash-basis-accounting-affect-financial-statements\" data-level=\"2\">How does cash basis accounting affect financial statements?<\/a><\/li><li><a href=\"#h-examples-of-cash-basis-accounting\" data-level=\"2\">Examples of cash basis accounting<\/a><\/li><li><a href=\"#h-what-are-the-advantages-and-disadvantages-of-cash-basis-accounting\" data-level=\"2\">What are the advantages and disadvantages of cash basis accounting?<\/a><\/li><li><a href=\"#h-what-are-common-cash-basis-accounting-mistakes\" data-level=\"2\">What are common cash basis accounting mistakes?<\/a><\/li><li><a href=\"#h-how-does-cash-basis-accounting-work-for-tax-purposes-in-canada\" data-level=\"2\">How does cash basis accounting work for tax purposes in Canada?<\/a><\/li><li><a href=\"#h-how-to-simplify-your-cash-basis-accounting-workflow\" data-level=\"2\">How to simplify your cash basis accounting workflow<\/a><\/li><li><a href=\"#h-is-cash-basis-accounting-right-for-your-business\" data-level=\"2\">Is cash basis accounting right for your business?<\/a><\/li><li><a href=\"#h-faqs-about-cash-basis-accounting\" data-level=\"2\">FAQs about cash basis accounting<\/a><\/li><\/ul><\/div>\n\n\n\n<h2 id=\"h-what-is-cash-basis-accounting\" class=\"wp-block-heading\">What is cash basis accounting?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting is an accounting method that records revenue when payment is received and expenses when they\u2019re paid.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Say you complete a project in December but your customer doesn\u2019t pay until January. Under cash basis accounting, that revenue belongs to January because that\u2019s when the money arrives.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The same goes for expenses. A supplier bill doesn\u2019t hit the books when it lands in your inbox; it\u2019s recorded when you actually pay it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So, the cash basis meaning is simple: <strong>your books follow the money.<\/strong><\/p>\n\n\n\n<h2 id=\"h-how-does-cash-basis-accounting-work\" class=\"wp-block-heading\">How does cash basis accounting work?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting works by using payment as the trigger for recording a transaction.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you send an invoice today and your customer pays next month, you record the income next month. If a bill arrives this week but you pay it 30 days later, the expense is recorded 30 days later.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That makes the method easy to follow. But it also means your accounts can tell a very different story from the work happening behind the scenes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Accrual accounting takes the opposite approach. Revenue is recorded when it\u2019s earned and expenses when they\u2019re incurred, regardless of when payment happens.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Cash basis tells you what moved. Accrual tells you more about what happened.<\/strong><\/p>\n\n\n\n<h2 id=\"h-who-can-use-cash-basis-accounting-in-canada\" class=\"wp-block-heading\">Who can use cash basis accounting in Canada?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting can be useful for understanding money coming in and going out, but using it for internal bookkeeping is not the same as using it for Canadian income tax reporting.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For income tax purposes, farmers, fishers, and self-employed commission agents can use either the cash method or the accrual method. Other self-employment income must generally be reported using the accrual method, according to the <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/businesses\/topics\/sole-proprietorships-partnerships\/accounting-methods.html\" target=\"_blank\" rel=\"noreferrer noopener\">Canada Revenue Agency\u2019s guidance on accounting methods<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So, while cash basis accounting may sound like the simpler option, most Canadian businesses can\u2019t simply choose it for their tax return.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That distinction matters. A business might find cash-based information useful day to day while still needing accrual records to meet its tax or financial reporting requirements.<\/p>\n\n\n\n<h2 id=\"h-cash-basis-versus-accrual-accounting-a-detailed-comparison\" class=\"wp-block-heading\">Cash basis versus accrual accounting: a detailed comparison<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The main difference between cash basis and accrual accounting is timing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis waits for payment. Accrual accounting records the underlying business activity when it happens.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That one difference changes how you see revenue, expenses, unpaid invoices, bills, and ultimately the performance of the business.<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-first-column\"><table class=\"has-fixed-layout\"><thead><tr><th>Accounting treatment<\/th><th>Cash basis accounting<\/th><th>Accrual basis accounting<\/th><\/tr><\/thead><tbody><tr><td><strong>Revenue recognized<\/strong><\/td><td>When payment is received.<\/td><td>When revenue is earned, even if payment hasn\u2019t arrived yet.<\/td><\/tr><tr><td><strong>Expenses recognized<\/strong><\/td><td>When they\u2019re paid.<\/td><td>When expenses are incurred, even if payment happens later.<\/td><\/tr><tr><td><strong>Accounts receivable and payable<\/strong><\/td><td>Generally not recorded until payment takes place.<\/td><td>Recorded when the underlying revenue or expense is recognized.<\/td><\/tr><tr><td><strong>Complexity<\/strong><\/td><td>Simpler to maintain.<\/td><td>Usually requires more detailed tracking and adjustments.<\/td><\/tr><tr><td><strong>View of financial performance<\/strong><\/td><td>Can swing significantly depending on payment timing.<\/td><td>Better matches revenue and related expenses to the periods in which they arise.<\/td><\/tr><tr><td><strong>Financial reporting<\/strong><\/td><td>Doesn\u2019t provide the accrual-based recognition used in formal financial statements prepared under accrual-based accounting frameworks.<\/td><td>Uses accrual-based recognition of transactions and events.<\/td><\/tr><tr><td><strong>Canadian income tax treatment<\/strong><\/td><td>Available to farmers, fishers, and self-employed commission agents.<\/td><td>Generally required for other self-employment income.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The <a href=\"https:\/\/www.ifrs.org\/content\/dam\/ifrs\/publications\/pdf-standards\/english\/2026\/issued\/part-a\/conceptual-framework-for-financial-reporting.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">IFRS Conceptual Framework<\/a> explains that accrual accounting reflects transactions and events in the periods when their economic effects occur\u2014even when the related cash arrives or leaves at a different time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Neither method is \u201cbetter\u201d in every situation. What matters is what you need the accounts to show and which reporting rules apply to your business.<\/p>\n\n\n\n<h2 id=\"h-how-does-cash-basis-accounting-affect-financial-statements\" class=\"wp-block-heading\">How does cash basis accounting affect financial statements?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting can make the numbers easier to follow because they mirror payments made and received. But simplicity comes with a blind spot: unpaid invoices and bills disappear from the picture until cash moves.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That affects both the income statement and the balance sheet.<\/p>\n\n\n\n<h3 id=\"h-income-statement\" class=\"wp-block-heading\">Income statement<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Under cash basis accounting, revenue counts only once it\u2019s collected. Expenses follow the same rule.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This can make reported profit jump around from one month to the next even when business activity itself is fairly steady.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Revenue:<\/strong> work you\u2019ve completed won\u2019t appear as revenue until the customer pays.<\/li>\n\n\n\n<li><strong>Expenses:<\/strong> costs won\u2019t appear until you pay them, even if they relate to work completed earlier.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">In simple terms:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Cash basis profit = cash income received \u2212 expenses paid<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The calculation is straightforward. The interpretation is where you need to be careful.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A strong month on your cash basis books doesn\u2019t necessarily mean business suddenly took off. You may simply have collected several older invoices at once.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The reverse is true too: a quiet month can still contain plenty of profitable work if the cash hasn\u2019t arrived yet.<\/p>\n\n\n\n<h3 id=\"h-balance-sheet\" class=\"wp-block-heading\">Balance sheet<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting also leaves accounts receivable and accounts payable out of the balance sheet until payment happens.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That means it won\u2019t show:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Accounts receivable:<\/strong> money customers owe you but haven\u2019t paid yet.<\/li>\n\n\n\n<li><strong>Accounts payable:<\/strong> bills and other amounts your business still needs to pay.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Those figures matter because they show what is coming next, not just what has already happened.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A healthy bank balance might look reassuring today. But if a large supplier bill is due tomorrow\u2014or a chunk of your income is tied up in unpaid invoices\u2014you need more than the cash number to understand the full picture.<\/p>\n\n\n\n<h3 id=\"h-impact-on-financial-insight\" class=\"wp-block-heading\">Impact on financial insight<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting is good at answering one simple question: <strong>what money has actually moved?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s less good at answering bigger ones.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">How profitable was this month\u2019s work? How much do customers still owe you? What bills are around the corner? Are today\u2019s strong numbers the result of great trading\u2014or simply late payments finally arriving?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The more of those questions you need your accounts to answer, the more useful accrual accounting tends to become.<\/p>\n\n\n\n<h2 id=\"h-examples-of-cash-basis-accounting\" class=\"wp-block-heading\">Examples of cash basis accounting<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting is easiest to understand when you see the timing in action.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here are two examples: one simple, one more dramatic.<\/p>\n\n\n\n<h3 id=\"h-example-1-a-freelancer-s-invoice-and-payment\" class=\"wp-block-heading\">Example 1: A freelancer\u2019s invoice and payment<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A freelance web developer finishes a project in December. The customer pays in January.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The developer also receives a $500 web hosting bill in December but doesn\u2019t pay it until January.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s what happens:<\/p>\n\n\n\n<figure class=\"wp-block-table alignfull is-style-data\"><table class=\"has-fixed-layout\"><thead><tr><th>Transaction<\/th><th>Type<\/th><th>Earned or incurred<\/th><th>Amount<\/th><th>Cash received or paid<\/th><th>Recorded in<\/th><\/tr><\/thead><tbody><tr><td>Client invoice<\/td><td>Revenue<\/td><td>December 15<\/td><td>$5,000<\/td><td>January 5<\/td><td>January<\/td><\/tr><tr><td>Web hosting bill<\/td><td>Expense<\/td><td>December 20<\/td><td>$500<\/td><td>January 10<\/td><td>January<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">On an accrual basis, the project would contribute $4,500 before considering any other costs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Under cash basis accounting, December shows neither transaction. Both land in January because that\u2019s when the money moves.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s the same project, the same customer, and the same costs. Only the timing in the accounts has changed.<\/p>\n\n\n\n<h3 id=\"h-example-2-a-multi-month-project\" class=\"wp-block-heading\">Example 2: A multi-month project<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Now take a bigger project.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A landscaping company agrees to a three-month contract worth $60,000. The customer pays only when the job is complete.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Meanwhile, the company spends $35,000 on wages and materials:<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-data\"><table class=\"has-fixed-layout\"><thead><tr><th>Item<\/th><th>Month 1<\/th><th>Month 2<\/th><th>Month 3<\/th><\/tr><\/thead><tbody><tr><td>Money paid out<\/td><td>$15,000<\/td><td>$12,000<\/td><td>$8,000<\/td><\/tr><tr><td>Money received<\/td><td>$0<\/td><td>$0<\/td><td>$60,000<\/td><\/tr><tr><td>What the cash basis books show<\/td><td>Loss of $15,000<\/td><td>Loss of $12,000<\/td><td>Profit of $52,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Read those months in isolation and the business looks as though it has gone from struggling badly to having a spectacular turnaround.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It hasn\u2019t.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Across the project, the company receives $60,000 and pays out $35,000, leaving $25,000 before any other costs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting simply puts all $60,000 of revenue into the month when the customer pays.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That is useful information\u2014but it\u2019s not the whole story.<\/p>\n\n\n\n<h2 id=\"h-what-are-the-advantages-and-disadvantages-of-cash-basis-accounting\" class=\"wp-block-heading\">What are the advantages and disadvantages of cash basis accounting?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting earns its appeal through simplicity. You record money when it comes in or goes out, without having to account for every unpaid invoice or bill.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But that simplicity comes at a price. Your books won\u2019t show everything you\u2019ve earned, everything you owe, or everything customers still owe you.<\/p>\n\n\n\n<h3 id=\"h-advantages\" class=\"wp-block-heading\">Advantages<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>It\u2019s simple to understand.<\/strong> Payments drive the records, making cash basis accounting relatively easy to follow when transactions are straightforward.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>There\u2019s less to track.<\/strong> You don\u2019t need to recognize receivables and payables as they arise, which can reduce the day-to-day bookkeeping involved.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Paid transactions are easy to see.<\/strong> Because entries follow actual payments, you can quickly see what has come in and what has gone out during a period.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For a simple business with relatively few transactions, that clarity can be appealing.<\/p>\n\n\n\n<h3 id=\"h-disadvantages\" class=\"wp-block-heading\">Disadvantages<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The numbers can be misleading in isolation.<\/strong> One month can look fantastic because several customers happened to pay at once. Another can look poor simply because payments were delayed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>You can lose sight of what\u2019s still coming.<\/strong> An unpaid invoice doesn\u2019t appear as revenue yet. A bill you haven\u2019t paid doesn\u2019t appear as an expense. Both still matter to the business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>It gives a weaker view of performance.<\/strong> Cash basis accounting doesn\u2019t match revenue and the costs that helped generate it in the same period, which makes profitability harder to assess.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>It has financial reporting limitations.<\/strong> Cash basis accounting doesn\u2019t provide the accrual-based recognition used in formal financial statements prepared under accrual-based accounting frameworks. The IFRS Conceptual Framework explains why accrual information provides a broader view of financial performance than information based only on cash receipts and payments.<\/p>\n\n\n\n<h2 id=\"h-what-are-common-cash-basis-accounting-mistakes\" class=\"wp-block-heading\">What are common cash basis accounting mistakes?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting may be simple, but simple doesn\u2019t mean foolproof.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The biggest problems usually come from focusing so closely on cash that other important information slips out of view.<\/p>\n\n\n\n<h3 id=\"h-letting-cash-expenses-disappear\" class=\"wp-block-heading\">Letting cash expenses disappear<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Not every business expense comes neatly through the bank account.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You might pay something from a till, use a personal card for a business purchase, or reimburse an employee outside your normal accounting process.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you don\u2019t capture those payments, your accounts understate what the business has actually spent.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A simple rule helps: <strong>if business money moved, make sure there\u2019s a record of it.<\/strong><\/p>\n\n\n\n<h3 id=\"h-forgetting-what-you-re-owed-or-what-you-owe\" class=\"wp-block-heading\">Forgetting what you\u2019re owed\u2014or what you owe<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting doesn\u2019t require unpaid invoices and bills to appear in the same way accrual accounting does.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That doesn\u2019t make them any less real.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Lose sight of unpaid customer invoices and an apparently \u201cslow\u201d month can arrive as a nasty surprise. Forget about upcoming supplier bills and a healthy-looking cash balance can disappear very quickly.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Your books may follow the cash, but your business still needs to look ahead.<\/p>\n\n\n\n<h3 id=\"h-mixing-personal-and-business-transactions\" class=\"wp-block-heading\">Mixing personal and business transactions<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">When personal and business spending run through the same account, even simple accounting gets messy quickly.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Separate accounts make it easier to see what belongs to the business, reconcile transactions, and understand what the numbers are actually telling you.<\/p>\n\n\n\n<h3 id=\"h-reading-too-much-into-one-month\" class=\"wp-block-heading\">Reading too much into one month<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounts can be noisy.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A single late customer payment can push revenue into the following month. Paying several annual bills together can make expenses spike.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Look for the pattern rather than the drama.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">One unusually good or bad month rarely tells the whole story.<\/p>\n\n\n\n<h2 id=\"h-how-does-cash-basis-accounting-work-for-tax-purposes-in-canada\" class=\"wp-block-heading\">How does cash basis accounting work for tax purposes in Canada?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">For Canadian income tax purposes, most business income must be reported using the accrual method.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The CRA allows farmers, fishers, and self-employed commission agents to choose either the cash method or the accrual method. Other self-employment income must generally use accrual accounting.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can check the current requirements in the <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/businesses\/topics\/sole-proprietorships-partnerships\/accounting-methods.html\" target=\"_blank\" rel=\"noreferrer noopener\">CRA\u2019s guidance on accounting methods<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For someone who is eligible to use the cash method:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Income is reported in the fiscal period when it is received.<\/li>\n\n\n\n<li>Allowable expenses are generally deducted in the fiscal period when they are paid, although separate rules can apply to items such as prepaid expenses.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The CRA also explains that cash-method income can include payment received in cash, property, or services.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That means payment timing can affect when income and deductions fall for tax purposes. But cash basis accounting shouldn\u2019t be thought of as a general tax-planning shortcut available to every Canadian small business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There is another important distinction: income tax accounting and sales tax accounting don\u2019t necessarily follow the same rules.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, the CRA states that farmers using the cash method for their farming business must still use the accrual method for separate business activities and for GST\/HST\/QST purposes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re unsure which method applies to your business, check the latest CRA guidance and speak to a qualified accountant or tax professional.<\/p>\n\n\n\n<h2 id=\"h-how-to-simplify-your-cash-basis-accounting-workflow\" class=\"wp-block-heading\">How to simplify your cash basis accounting workflow<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Simple accounting still needs good habits behind it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re eligible to use cash basis accounting\u2014or use cash-based information internally\u2014the goal is to make every payment easy to trace and nothing important easy to miss.<\/p>\n\n\n\n<h3 id=\"h-use-accounting-software\" class=\"wp-block-heading\">Use accounting software<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Good <a href=\"https:\/\/www.sage.com\/en-ca\/accounting-software\/\">accounting software<\/a> gives you one place to capture income and expenses, reconcile transactions, and keep supporting records.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Automation can take some of the repetitive work away, but don\u2019t let \u201ccash basis\u201d become \u201cbank account only\u201d. You still need enough detail to understand what each payment was for.<\/p>\n\n\n\n<h3 id=\"h-keep-an-eye-on-what-s-coming-next\" class=\"wp-block-heading\">Keep an eye on what\u2019s coming next<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting is backward-looking by nature: it tells you what has already been paid.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Your business can\u2019t afford to be.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Track unpaid customer invoices and upcoming bills separately so you know what cash is likely to come in\u2014and what will need to go out.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.sage.com\/en-ca\/blog\/how-to-create-a-cash-flow-forecast\/\">Cash flow forecasting<\/a> can help you spot a squeeze before it becomes a problem.<\/p>\n\n\n\n<h3 id=\"h-reconcile-regularly\" class=\"wp-block-heading\">Reconcile regularly<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting follows money movement, so <a href=\"https:\/\/www.sage.com\/en-ca\/blog\/glossary\/what-is-bank-reconciliation\/\">bank reconciliation<\/a> is one of your strongest checks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Match the transactions in your records against your bank statement regularly. That helps you catch duplicates, missing entries, and timing differences such as <a href=\"https:\/\/www.sage.com\/en-ca\/blog\/outstanding-cheques-bank-reconciliation\/\">outstanding cheques<\/a> before they turn into bigger problems.<\/p>\n\n\n\n<h3 id=\"h-plan-for-tax\" class=\"wp-block-heading\">Plan for tax<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A payment landing in your account doesn\u2019t mean every dollar is yours to spend.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Set money aside for tax obligations and keep upcoming deadlines on your radar. Future-you will thank you.<\/p>\n\n\n\n<h3 id=\"h-keep-business-and-personal-money-separate\" class=\"wp-block-heading\">Keep business and personal money separate<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Separate business accounts make everything cleaner: bookkeeping, reconciliation, reporting, and conversations with your accountant.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The fewer mixed transactions you have to untangle, the easier it is to trust the numbers in front of you.<\/p>\n\n\n\n<h2 id=\"h-is-cash-basis-accounting-right-for-your-business\" class=\"wp-block-heading\">Is cash basis accounting right for your business?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cash basis accounting has one big advantage: it\u2019s easy to understand.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can see what has been paid, what has been received, and what happened to your cash.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The question is whether that is enough.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If your business regularly waits weeks for customers to pay, carries inventory, has significant unpaid bills, or runs projects that stretch across several months, cash alone can hide a lot of what is happening financially.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Before relying on cash basis accounting, think about three things.<\/p>\n\n\n\n<h3 id=\"h-1-nbsp-nbsp-nbsp-nbsp-what-are-you-required-to-report\" class=\"wp-block-heading\">1.&nbsp;&nbsp;&nbsp;&nbsp; What are you required to report?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In Canada, most self-employment income must be reported to the CRA using the accrual method. Start with the rules that apply to your business, not simply the method that feels easiest.<\/p>\n\n\n\n<h3 id=\"h-2-nbsp-nbsp-nbsp-nbsp-how-complicated-is-the-business-becoming\" class=\"wp-block-heading\">2.&nbsp;&nbsp;&nbsp;&nbsp; How complicated is the business becoming?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The more receivables, payables, stock, long projects, and payment terms you have, the more useful accrual accounting tends to become.<\/p>\n\n\n\n<h3 id=\"h-3-nbsp-nbsp-nbsp-nbsp-who-needs-to-understand-the-numbers\" class=\"wp-block-heading\">3.&nbsp;&nbsp;&nbsp;&nbsp; Who needs to understand the numbers?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A business owner might be comfortable looking at cash in the bank. A lender, investor, or business partner may need to know much more: what you\u2019ve earned, what you owe, and what is still due to you.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If your business is growing, it\u2019s worth thinking ahead rather than waiting until your accounting method becomes a constraint.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Bring your accountant into that conversation early and make sure your accounting software can grow with you.<\/p>\n\n\n<section class=\"wp-block-sage-faq\">\n\t\n<h2 id=\"h-faqs-about-cash-basis-accounting\" class=\"wp-block-heading\">FAQs about cash basis accounting<\/h2>\n\t\t\t<div class=\"faq-items\">\n\t\t\t<div class=\"wp-block-sage-faq-item\" id=\"faq-item-1b68a287\">\n\t<div class=\"faq-item-question\">\n\t\t\n<h3 id=\"h-what-is-modified-cash-basis-accounting\" class=\"wp-block-heading\">What is modified cash basis accounting?<\/h3>\n\t<\/div>\n\t\t\t<div class=\"faq-item-answer\">\n\t\t\t\n<p class=\"wp-block-paragraph\">Modified cash basis accounting mixes elements of cash and accrual accounting.<\/p>\n\n<p class=\"wp-block-paragraph\">Most day-to-day transactions may still be recorded when money moves, while selected items\u2014such as longer-term assets or liabilities\u2014are treated more like they would be under accrual accounting.<\/p>\n\n<p class=\"wp-block-paragraph\">It can provide more detail than pure cash basis accounting, but it isn\u2019t the same as full accrual accounting. Formal financial and tax reporting still needs to follow the rules that apply to the business.<\/p>\n\t\t<\/div>\n\t<\/div>\n<div class=\"wp-block-sage-faq-item\" id=\"faq-item-7c097114\">\n\t<div class=\"faq-item-question\">\n\t\t\n<h3 id=\"h-can-canadian-small-businesses-use-cash-basis-accounting\" class=\"wp-block-heading\">Can Canadian small businesses use cash basis accounting?<\/h3>\n\t<\/div>\n\t\t\t<div class=\"faq-item-answer\">\n\t\t\t\n<p class=\"wp-block-paragraph\">Most Canadian small businesses can\u2019t simply choose cash basis accounting for reporting self-employment income on their tax return.<\/p>\n\n<p class=\"wp-block-paragraph\">The CRA generally requires the accrual method, with the cash method available to farmers, fishers, and self-employed commission agents. See the <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/tax\/businesses\/topics\/sole-proprietorships-partnerships\/accounting-methods.html\" target=\"_blank\" rel=\"noreferrer noopener\">CRA\u2019s accounting methods guidance<\/a> for the current rules.<\/p>\n\n<p class=\"wp-block-paragraph\">A business can still use cash-based information internally, but that doesn\u2019t change its tax reporting obligations.<\/p>\n\t\t<\/div>\n\t<\/div>\n<div class=\"wp-block-sage-faq-item\" id=\"faq-item-382d4eb7\">\n\t<div class=\"faq-item-question\">\n\t\t\n<h3 id=\"h-is-cash-basis-accounting-the-same-as-cash-flow\" class=\"wp-block-heading\">Is cash basis accounting the same as cash flow?<\/h3>\n\t<\/div>\n\t\t\t<div class=\"faq-item-answer\">\n\t\t\t\n<p class=\"wp-block-paragraph\">No. Cash basis accounting is a method for deciding <strong>when revenue and expenses are recorded<\/strong>. Cash flow describes <strong>money moving into and out of the business<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">They\u2019re closely connected, but they aren\u2019t interchangeable. Cash basis accounts won\u2019t tell you everything you need to know about future bills, unpaid customer invoices, financing, or the wider health of your cash position.<\/p>\n\t\t<\/div>\n\t<\/div>\n<div class=\"wp-block-sage-faq-item\" id=\"faq-item-8206743c\">\n\t<div class=\"faq-item-question\">\n\t\t\n<h3 id=\"h-can-you-switch-from-cash-basis-to-accrual-accounting\" class=\"wp-block-heading\">Can you switch from cash basis to accrual accounting?<\/h3>\n\t<\/div>\n\t\t\t<div class=\"faq-item-answer\">\n\t\t\t\n<p class=\"wp-block-paragraph\">Yes, where you\u2019re eligible to use the cash method, but you may need to follow specific CRA requirements.<\/p>\n\n<p class=\"wp-block-paragraph\">The CRA says someone changing from the cash method to the accrual method must request permission from their tax services office in writing before the relevant tax return is due.<\/p>\n\n<p class=\"wp-block-paragraph\">Changing methods can also affect how income, expenses, receivables, and payables are brought into the accounts, so this is one to work through with an accountant rather than treating it as a simple bookkeeping switch.<\/p>\n\t\t<\/div>\n\t<\/div>\n<div class=\"wp-block-sage-faq-item\" id=\"faq-item-10b0e76c\">\n\t<div class=\"faq-item-question\">\n\t\t\n<h3 id=\"h-does-cash-basis-accounting-affect-how-you-file-taxes\" class=\"wp-block-heading\">Does cash basis accounting affect how you file taxes?<\/h3>\n\t<\/div>\n\t\t\t<div class=\"faq-item-answer\">\n\t\t\t\n<p class=\"wp-block-paragraph\">Yes, if you\u2019re permitted to use it. The cash method changes <strong>when<\/strong> income and allowable expenses are reported: income is generally recorded when received and eligible expenses when paid, subject to CRA rules.<\/p>\n\n<p class=\"wp-block-paragraph\">For most Canadian self-employment income, however, the accrual method is required.<\/p>\n\t\t<\/div>\n\t<\/div>\n\t\t<\/div>\n\t<\/section>\n\n\n\n<section class=\"wp-block-sage-container is-constrained\"><div class=\"sage-container__inner\">\n<p class=\"wp-block-paragraph\"><em>This article provides general information only and isn\u2019t intended as accounting or tax advice. Rules can depend on your circumstances, so speak to a qualified accountant or tax professional if you\u2019re unsure which accounting method applies to your business.<\/em><\/p>\n<\/div><\/section>\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner on-scroll-highlight__target\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Discover Sage Intacct<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Our cloud financial management platform delivers deep accounting capabilities across multiple industries designed with a single aim\u2014to accelerate your success.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"https:\/\/www.sage.com\/en-ca\/sage-business-cloud\/intacct\/\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\tid=\"cta-id-7124\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tdata-button-location=\"cta_box\"\n\t\t\t\t\t\t\t\t\t\t\t>Learn more about Sage Intacct<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/04\/GettyImages-954307646-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/04\/GettyImages-954307646-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n<section class=\"more-topics alignfull has-grey-light-background-color wp-block-sage-post-topics\">\n\t<div class=\"container\">\n\t\t<div class=\"row\">\n\t\t\t<div class=\"col col-12 col-lg-4\">\n\t\t\t\t<h3 class=\"more-topics__title h2\">Browse more topics from this article<\/h3>\n\t\t\t<\/div>\n\t\t\t<div class=\"col col-12 col-lg-8\">\n\t\t\t\t<ul class=\"post-tags__list\">\n\t\t\t\t\t\t\t\t\t\t\t<li class=\"post-tags__item\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-ca\/blog\/tag\/accounting-101\/\" class=\"post-tags__link button button--secondary\">\n\t\t\t\t\t\t\t\tAccounting 101\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t\t\t\t\t\t<li class=\"post-tags__item\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-ca\/blog\/tag\/bookkeeping\/\" class=\"post-tags__link button button--secondary\">\n\t\t\t\t\t\t\t\tbookkeeping\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t\t\t\t\t\t<li class=\"post-tags__item\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-ca\/blog\/tag\/business-finances\/\" class=\"post-tags__link button button--secondary\">\n\t\t\t\t\t\t\t\tbusiness finances\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t\t\t\t\t\t<li class=\"post-tags__item\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-ca\/blog\/tag\/cash-flow\/\" class=\"post-tags__link button button--secondary\">\n\t\t\t\t\t\t\t\tcash flow\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t\t\t\t\t\t<li class=\"post-tags__item\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-ca\/blog\/tag\/cfo\/\" class=\"post-tags__link button button--secondary\">\n\t\t\t\t\t\t\t\tCFO\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t\t\t\t<\/ul>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/section>\n\n\n<div class=\"alignfull wp-block-sage-related-posts\">\n\t<section class=\"related-posts card-grid has-dark-background-color\">\n\t<div class=\"container\">\n\t\t\t\t\t<div class=\"row\">\n\t\t\t\t<div class=\"col\">\n\t\t\t\t\t<h2 class=\"related-posts__heading related-posts__heading--featured h1\">Explore more wisdom<\/h2>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\n\t\t\t<div class=\"row related-posts__featured\">\n\t\t\t\t<div class=\"col card-grid__item\">\n\t\t\t\t\t<article\n\t\tclass=\"card-post related-post related-post-0 post-15173 post type-post status-publish format-standard has-post-thumbnail hentry category-money-matters tag-business-finances tag-cash-flow tag-cfo business_type-small-business business_type-medium-business industry-professional-services card-post--is-clickable\"\n>\n\t<div class=\"card-post__media-wrapper\">\n\t\t<figure class=\"card-post__media\">\n\t\t\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/04\/GettyImages-642293271-1440x810.jpg\" class=\"card-post__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/04\/GettyImages-642293271-684x384.jpg 684w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/04\/GettyImages-642293271-768x432.jpg 768w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/04\/GettyImages-642293271-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 250px, (min-width: 30em) 100vw, 100vw\" \/>\t\t\t\n\t\t\t\n\t\t\t\t\t<\/figure>\n\t<\/div>\n\n\t<div class=\"card-post__content\">\n\t\t\t\t\t<div class=\"card-post__label\">Recommended<\/div>\n\t\t\n\t\t\t\t\t<div class=\"card-post__meta\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2026-10-15T16:01:22-04:00\">October 15, 2026<\/time><\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"reading-time\">12 min read<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\n\t\t<p class=\"card-post__title h3\">\n\t\t\t\t\t\t\t<a\n\t\t\t\t\tclass=\"card-post__title-link\"\n\t\t\t\t\thref=\"https:\/\/www.sage.com\/en-ca\/blog\/professional-services-cash-flow-challenges\/\"\n\t\t\t\t>\n\t\t\t\n\t\t\tGrowing fast but short on cash? The cash flow challenges facing professional services firms\n\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/p>\n\n\t\t\n\t\t\t\t\t<p class=\"card-post__description\">\n\t\t\t\tMore projects and higher revenue don&#8217;t always mean more available cash. Discover how professional services firms can reduce billing delays, manage DSO, and forecast cash flow as they grow.\t\t\t<\/p>\n\t\t\n\t\t\t<\/div>\n\n\t<\/article>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\n\t\t\t\t\t<div class=\"row related-posts__non-featured\">\n\t\t\t\t<div class=\"col col-12\">\n\t\t\t\t\t<h2 class=\"related-posts__heading related-posts__heading--more h4\">More on this Topic<\/h2>\n\t\t\t\t<\/div>\n\n\t\t\t\t\n\t\t\t\t\t<div class=\"col col-6 col-lg-3 card-grid__item\">\n\t\t\t\t\t\t<article\n\t\tclass=\"card-post related-post related-post-1 post-15163 post type-post status-publish format-standard has-post-thumbnail hentry category-compliance category-money-matters tag-accounting-101 tag-ai tag-financial-insights tag-pricing tag-revenue business_type-small-business business_type-medium-business business_type-accountants industry-financial-services\"\n>\n\t\t\t<a\n\t\t\tclass=\"card-post__link\"\n\t\t\thref=\"https:\/\/www.sage.com\/en-ca\/blog\/saas-asc-606-revenue-recognition\/\"\n\t\t\t\t\t>\n\t\t\t<figure class=\"card-post__media\">\n\t\t\t\t\t\t\t<img decoding=\"async\" width=\"684\" height=\"384\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2025\/08\/Mar2025_Financial-Family-office_0746-684x384.jpeg\" class=\"card-post__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2025\/08\/Mar2025_Financial-Family-office_0746-684x384.jpeg 684w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2025\/08\/Mar2025_Financial-Family-office_0746-768x512.jpeg 768w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2025\/08\/Mar2025_Financial-Family-office_0746-1214x810.jpeg 1214w\" sizes=\"auto, (min-width: 48em) 250px, (min-width: 30em) 100vw, 100vw\" \/>\t\t\t\n\t\t\t\n\t\t\t\t\t<\/figure>\n\n\t\t\n\t\t\t\t\t<div class=\"card-post__meta\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2026-10-15T15:33:26-04:00\">October 15, 2026<\/time><\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"reading-time\">11 min read<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\n\t\t<p class=\"card-post__title h5\">\n\t\t\tIs\u00a0your SaaS business ready for IFRS 15\/ASC 606 revenue recognition and AI\u00a0token-based pricing?\t\t<\/p>\n\n\t\t\t<\/a>\n\t\n\t\n\t\t\n\t\n\t<\/article>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t<div class=\"col col-6 col-lg-3 card-grid__item\">\n\t\t\t\t\t\t<article\n\t\tclass=\"card-post related-post related-post-2 post-15218 post type-post status-publish format-standard has-post-thumbnail hentry category-business-planning category-money-matters category-planning-globally category-strategy-legal-operations tag-business-finances tag-business-management tag-cash-flow tag-cfo tag-financial-insights tag-making-financial-decisions tag-midsized-business tag-trending-topics business_type-medium-business\"\n>\n\t\t\t<a\n\t\t\tclass=\"card-post__link\"\n\t\t\thref=\"https:\/\/www.sage.com\/en-ca\/blog\/tariffs-margins-cash-flow-forecasts\/\"\n\t\t\t\t\t>\n\t\t\t<figure class=\"card-post__media\">\n\t\t\t\t\t\t\t<img decoding=\"async\" width=\"684\" height=\"384\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2025\/10\/getty-images-ch164WxAoR8-unsplash-684x384.jpg\" class=\"card-post__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2025\/10\/getty-images-ch164WxAoR8-unsplash-684x384.jpg 684w, 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forecasts\t\t<\/p>\n\n\t\t\t<\/a>\n\t\n\t\n\t\t\n\t\n\t<\/article>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t<div class=\"col col-6 col-lg-3 card-grid__item\">\n\t\t\t\t\t\t<article\n\t\tclass=\"card-post related-post related-post-3 post-12509 post type-post status-publish format-standard has-post-thumbnail hentry category-growth-customers category-strategy-legal-operations tag-accounting-101 tag-bookkeeping tag-business-intelligence tag-midsized-business tag-profit-and-loss tag-small-business business_type-small-business business_type-medium-business\"\n>\n\t\t\t<a\n\t\t\tclass=\"card-post__link\"\n\t\t\thref=\"https:\/\/www.sage.com\/en-ca\/blog\/what-is-a-trial-balance\/\"\n\t\t\t\t\t>\n\t\t\t<figure class=\"card-post__media\">\n\t\t\t\t\t\t\t<img decoding=\"async\" width=\"684\" height=\"384\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/12\/GettyImages-1252669747-684x384.jpg\" class=\"card-post__image\" alt=\"Woman smiling at desk\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/12\/GettyImages-1252669747-684x384.jpg 684w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/12\/GettyImages-1252669747-768x432.jpg 768w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2022\/12\/GettyImages-1252669747-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 250px, (min-width: 30em) 100vw, 100vw\" \/>\t\t\t\n\t\t\t\n\t\t\t\t\t<\/figure>\n\n\t\t\n\t\t\t\t\t<div class=\"card-post__meta\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2026-09-30T06:56:49-04:00\">September 30, 2026<\/time><\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"reading-time\">11 min read<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\n\t\t<p class=\"card-post__title h5\">\n\t\t\tWhat is a trial balance in accounting? A complete guide\t\t<\/p>\n\n\t\t\t<\/a>\n\t\n\t\n\t\t\n\t\n\t<\/article>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t<div class=\"col col-6 col-lg-3 card-grid__item\">\n\t\t\t\t\t\t<article\n\t\tclass=\"card-post related-post related-post-4 post-12478 post type-post status-publish format-standard has-post-thumbnail hentry category-accountants category-strategy-legal-operations category-trends-insights tag-accounting-101 tag-bookkeeping tag-business-finances tag-business-intelligence tag-cash-flow tag-financial-insights tag-midsized-business tag-profit-and-loss tag-small-business business_type-small-business business_type-medium-business\"\n>\n\t\t\t<a\n\t\t\tclass=\"card-post__link\"\n\t\t\thref=\"https:\/\/www.sage.com\/en-ca\/blog\/net-income-formula\/\"\n\t\t\t\t\t>\n\t\t\t<figure class=\"card-post__media\">\n\t\t\t\t\t\t\t<img decoding=\"async\" width=\"684\" height=\"384\" src=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2023\/04\/GettyImages-1011227656-708x708-1-684x384.jpg\" class=\"card-post__image\" alt=\"woman working\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2023\/04\/GettyImages-1011227656-708x708-1-684x384.jpg 684w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2023\/04\/GettyImages-1011227656-708x708-1.jpg 708w, https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2023\/04\/GettyImages-1011227656-708x708-1.jpg 708w\" sizes=\"auto, (min-width: 48em) 250px, (min-width: 30em) 100vw, 100vw\" \/>\t\t\t\n\t\t\t\n\t\t\t\t\t<\/figure>\n\n\t\t\n\t\t\t\t\t<div class=\"card-post__meta\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2026-09-30T06:44:33-04:00\">September 30, 2026<\/time><\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"reading-time\">10 min read<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\n\t\t<p class=\"card-post__title h5\">\n\t\t\tNet income formula: How to calculate net income\t\t<\/p>\n\n\t\t\t<\/a>\n\t\n\t\n\t\t\n\t\n\t<\/article>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n<\/section>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Cash basis accounting records income and expenses when money moves. Learn how it works, how it compares with accrual accounting, and what Canadian businesses need to know.<\/p>\n","protected":false},"author":1910,"featured_media":11847,"menu_order":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_yoast_wpseo_is_cornerstone":"","_yoast_wpseo_meta-robots-noindex":"","_yoast_wpseo_meta-robots-nofollow":"","_yoast_wpseo_opengraph-title":"","_yoast_wpseo_opengraph-description":"","_yoast_wpseo_opengraph-image":"","_yoast_wpseo_opengraph-image-id":"","_yoast_wpseo_twitter-title":"","_yoast_wpseo_twitter-description":"","_yoast_wpseo_twitter-image":"","_yoast_wpseo_twitter-image-id":"","_yoast_wpseo_schema_page_type":"","_yoast_wpseo_schema_article_type":"","_sage_video":false,"_yoast_wpseo_focuskeywords":"[{\"keyword\":\"cash basis\",\"score\":93},{\"keyword\":\"cash basis of accounting\",\"score\":93},{\"keyword\":\"what is cash basis accounting\",\"score\":93},{\"keyword\":\"cash basis meaning\",\"score\":61}]","_yoast_wpseo_keywordsynonyms":"[\"\",\"\",\"\",\"\",\"\"]","_yoast_wpseo_primary_category":"7","sage_membership_post_content_type":"","sage_membership_post_featured_video_id":"","sage_membership_post_video_type":"","sage_membership_post_featured_video_duration":"","post_featured_image_hide":false,"sage_hide_published_date":false,"sage_hide_read_time":false,"sage_hide_share_buttons":false,"_pwl_sage_podcast_buzzsprout_src":"","footnotes":""},"categories":[7],"tags":[162,165,266,271,274],"business_type":[3,99],"lilypad":[],"context":[],"industry":[],"persona":[],"imagine_tag":[255,67],"coauthors":[528],"class_list":["post-15058","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","tag-accounting-101","tag-bookkeeping","tag-business-finances","tag-cash-flow","tag-cfo","business_type-small-business","business_type-medium-business"],"sage_meta":{"region":"en-ca","author_name":"Laura Slingo","featured_image":"https:\/\/www.sage.com\/en-ca\/blog\/wp-content\/uploads\/sites\/12\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0794.jpg","imagine_tags":{"255":"SBC Accounting","67":"Small business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice Canada English","distributor_original_site_url":"https:\/\/www.sage.com\/en-ca\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/posts\/15058","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/users\/1910"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/comments?post=15058"}],"version-history":[{"count":5,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/posts\/15058\/revisions"}],"predecessor-version":[{"id":15063,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/posts\/15058\/revisions\/15063"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/media\/11847"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/media?parent=15058"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/categories?post=15058"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/tags?post=15058"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/business_type?post=15058"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/lilypad?post=15058"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/context?post=15058"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/industry?post=15058"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/persona?post=15058"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/imagine_tag?post=15058"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/coauthors?post=15058"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}