Smoothing Out Accrual-basis Accounting for Agencies, with Sara Snyder

Episode 74:

Sara Snyder is a Certified Public Accountant with a background in accounting since 2017. Currently, she serves as an Account Manager and Outsourced CFO at Craig Cody and Company, Inc., specializing in advanced tax reduction with the designation of Certified Tax Coach.

In this episode, we discussed an issue that impacts the accuracy of your financial statements — recognizing revenue in the correct period using accrual-basis accounting.

Many agency owners think they’re using accrual-basis accounting, but in reality, they’re often doing it incorrectly. To teach us the correct way to use this accounting method, I invited Sara Snyder to give us some tips and tricks.

She explains why it’s sometimes better to record revenue as deferred or unearned rather than recording it right away. We go over a few different scenarios where this approach makes more sense than traditional revenue reporting.

While it requires some upfront effort, proper accrual-based revenue recognition provides a much clearer view of actual monthly profitability. This enables better forecasting and staffing assessments and ultimately increases the perceived value if you decide to sell your agency down the road.

Don’t continue distorting your metrics. Take the steps now to implement proper accrual accounting and revenue recognition. Your financial statements, and your business, will be much better off.

What you will learn in this episode:

  • What circumstances can throw off accrual-based accounting
  • What’s a magic spreadsheet?
  • Making sure your revenue is matching expenses
  • How to properly set up payments so they don’t mess with your revenue numbers
  • The benefits of doing accrual-basis accounting the right way
  • How long does it take to fix your numbers if they’re off base?