Moving from Cash to Accrual Accounting

Understanding your true financial position is critical for planning and decision making

ADOPTING GOOD MANAGEMENT ACCOUNTING PRACTISES

Ideally, all farm managers would opt for an accounting method that showed their companies’ real-time financial health. That’s what makes the accrual method so valuable. However, until now, the perceived complexity of accrual has dissuaded many from adopting it.

Accrual accounting is an accounting method in which transactions are recognised as the events occur, regardless of the timing of the related cash receipts and payments. Following this method, revenues are recognised when income is earned, and expenses are recognised when liabilities are incurred or resources consumed. This contrasts with the cash-accounting basis under which revenues and expenditures are recognised when cash is received and paid respectively.

Many of the consultants at BES are qualified accountants and can provide assistance with the transition from cash accounting. They know that cash accounting does not provide a true picture of your current financial position and is therefore not a good basis for planning or making important decisions.

The Sage 300 ERP accounting solution simplifies the process for you:

  • It has an integrated AP (Accounts Payable) and AR (Accounts Receivable) process which ensures your invoices and payments are allocated to the correct time period.
  • It will show you the impact of creditors or livestock movement.
  • It can handle deferred milk payout and also feed on hand.
  • The Asset Management system will correctly provide for depreciation and amortisation.
  • The system will always reflect the correct financial period for unusual events such as:
    • if you need to make a prepayment provision
    • any irregular revenue received or expenditures

The BES team can discuss this method with you and go through the steps with you as you make this change. They will keep in touch to ensure that your future processes are optimised and effective.

LETS TALK ABOUT HOW WE CAN MOVE YOU TO AN ACCRUAL ACCOUNTING BASIS

Contact us and we look forward to talking about your business issues with you. Our team understands how people, the processes and the systems work together to create solutions for these business issues.

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