Running a business isn't always as simple as trading your product or service for cash up-front. When managing large orders and long projects, you may not see a payment right away. While you earn revenue after selling a product or service, payment delays lead to accrued revenues. This accrual accounting contrasts standard cash accounting.
While accrued revenue doesn't create problems in itself, businesses need to account for this lack of cash flow in financial statements. If a company fails to adjust for accrued revenues, it risks accounting errors and a lower ROI. To help you along, we'll explain accrued revenue and show how you can record it to improve your bookkeeping.