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# Cash or Accrual? What is the Best Accounting Method for Your Practice?

Therasoft Webmaster
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May 23, 2017

## Cash or Accrual? What is the Best Accounting Method for Your Practice?

The differences between the accrual and cash methods of accounting for those who might not be familiar are fairly straight forward.

While they both represent ways for tracking business income and expenses, their differences may have a huge impact on your practice at tax time.

## Cash or Accrual?

The very simplified difference between the two is that the cash method doesn’t count income until the cash is actually received, while the accrual method counts transactions when the services occur as either an expense or income.

For many practices which are getting paid right at the time of service the method they choose may not make much difference. However, when they decide to take insurance claims things change dramatically.

Cash or Accrual? What is the Best Accounting Method for Your Practice?

If your practice is growing rapidly and has an aging claims list that contains tens of thousands of dollars in unpaid insurance claims, you may find yourself getting into hot water.

While you may not have been paid on your insurance claims you are still obliged to pay tax on the amount. This issue is further compounded and complicated when you take into account contractually obligated write offs, and the fact that you may not get paid the full amount from the insurance companies.

Choose the Best Accounting Method for Your Practice

You may find you are paying tax on money you haven’t received and which you never may.

## Be Prepared and You Won't be Over Paying

If you are considering accepting insurance it is a good idea to speak to an accountant who has a great deal of experience in the different accounting methods.

Ensure you are adequately prepared for all eventualities and your practice won’t suffer paying tax on income it hasn’t earned.