The Easy Reports dashboard has two views - Cash View and Accrual View.
This option relates only to Easy Invoicing data, and determines which invoices are included in "income" totals shown on the dashboard.
- Accrual accounting records income from invoices when they are created. So the income is recorded on the invoice document date, regardless of when or if it's paid by the customer. The purpose of this approach is so that you can report the income you receive in the same period that you provide the goods or services to your customer. IE you spent the effort serving your customer this month, so the income from that effort is recorded this month.
- Cash basis accounting records income from invoices when they are paid. So the income is reported on the date of payment, instead of the invoice document date.
For example: You issue a customer invoice with an invoice date of 1st January, and it's paid by the customer on 1st February: The accrual method will report the income in January when you performed the service and issued the invoice. But the cash method will report the income in February when you received payment.
Note that all income is recorded excluding GST. Run the cashflow report for a true reflection of actual cashflow coming in which includes GST.
Which Option Should I Use?
Generally speaking, most small businesses operate using Cash basis accounting. This places importance on when payments are received and helps you keep track of the actual money coming into your business.
However, it's useful to look at the Accrual view as this gives a view of how profitable you are, regardless of when cash is actually changing hands. It shows you income for goods and services you've provided at the time you provide them, irrespective of when you get paid.
In both cases, it's important to ensure you are chasing up your unpaid invoices.
Note that you are only changing the Dashboard view when you change this option, not actually how any data is recorded in the system. So, feel free to flick back and forth a bit between the two options if you want to understand the difference!