USA Cash vs. Accrual: Evidence, Transition, Costs, Benefits

[thomas.sheldrake]

I work for company that has grown from nothing to 5m/yr in sales in 4 years, and continues to grow. We do have inventory. And even if we didn't, I prefer the accrual basis as that's what I'm trained in. I even tried cash basis once and I actually didn't know how to do it.

The company uses cash basis on the advise of the CPA, and has a bookkeeper who was trained by us, no previous experience. I am going to make a case to the big man to change to accrual basis, especially since growing to > 25m is not out of the question, and becuase we have inventory, and for many other reasons. He is going to ask me for evidence (as in studies) showing that it works better. Is anyone here aware of any empiriacal studies that have been done?

Second, say we do this, what will the transition be like in terms of time, staff, costs.

And finally, will it pay for itself? I'm gonna assume yes, it will, but how do I prove that?

Thanks in advanced.

 

[kirby]

It's great that you are already trained in the accrual basis because then you will already know how to do the following:
In order to determine the results of changing to accrual, do a proforma at a month end. So on a pro forma basis, add in the sales that would have been recognized on the accrual basis and, likewise, deduct the costs of the expenses that would have been recognized on the accrual basis.
How long will that take? Depends on your unique situation. If you have very little to accrue, then it does not take long.