Cash vs. Accrual Accounting: What’s Right for Your Clinic?

Jovin Richard
Jun 19
2 min read

At ACCORDPRO, we help clinics and businesses choose accounting systems that match their operations and growth goals. Here's a breakdown of cash vs. accrual accounting—and how to decide what’s right for your clinic.

Make Informed Financial Decisions With the Right Accounting Method

Choosing between cash and accrual accounting isn’t just a bookkeeping decision—it directly affects how you manage revenue, track profitability, and prepare for tax season. For healthcare clinics, choosing the wrong method can lead to cash flow confusion or IRS trouble down the line.

What Is Cash Accounting?

Cash accounting records income when it’s received and expenses when they’re paid. It’s simple, intuitive, and works well for smaller practices.

Advantages:

Easier to manage and understand
Real-time snapshot of cash on hand
Often preferred for tax simplicity by smaller clinics

Disadvantages:

Doesn’t show money you’re owed (Accounts Receivable)
Can distort profitability if revenue and expenses don’t align in the same period
Not accepted for larger entities under IRS rules

Best For: Startups, small practices, or clinics with low overhead and simple cash flow.

What Is Accrual Accounting?

Accrual accounting tracks income when it’s earned (not received) and expenses when they’re incurred (not paid). It provides a more accurate long-term financial picture.

Advantages:

Matches revenue to expenses in the correct period
Provides better financial forecasting
Required for GAAP compliance and many lenders or investors

Disadvantages:

More complex and time-consuming
May show profits when cash is low (or losses when cash is high)
Requires strong A/R and A/P tracking systems

Best For: Growing practices, multi-location clinics, or those seeking outside investment or partnerships.

Key Differences at a Glance

Feature	Cash Accounting	Accrual Accounting
Revenue Recorded	When received	When earned
Expenses Recorded	When paid	When incurred
Accuracy Over Time	Limited	High
Complexity	Low	Moderate to High
IRS Acceptance	Yes (for most small clinics)	Yes (mandatory above $27M revenue)
Cash Flow Visibility	High	Lower without adjustments

Which Method Is Right for You?

Ask yourself:

Do you need to understand your cash position day-to-day? → Cash may be enough.
Are you billing insurance or using invoicing? → Accrual provides clearer insight.
Are you planning to scale, seek loans, or investors? → Accrual is more robust.

Final Thoughts

Choosing the right accounting method can improve decision-making, budgeting, and compliance. Many practices start with cash and later switch to accrual as they grow—but the key is doing it intentionally with the right support.

ACCORDPRO offers specialized bookkeeping for healthcare and non-healthcare businesses, helping you set up or transition your system without the guesswork.