Today we’re happy to announce the addition of accrual-based reporting to Harpoon! It’s a feature many of you have requested, but if you’re not familiar with the accrual method of accounting read on for a quick explanation.
When it comes to tracking and recognizing your business’s revenue there are two main methods of accounting: the cash method and the accrual method.
Cash Method
When using the cash method of accounting your business recognizes revenue when the cash is actually collected. For example, if you send your client an invoice for $2,000 in July and receive payment for the invoice in August, the cash method of accounting will recognize the $2,000 as revenue for the month of August because that’s the month you actually collected the payment.
Accrual Method
In contrast when using the accrual method of accounting your business recognizes revenue when your client is billed. Using the same example from above, the accrual method of accounting will recognize the $2,000 as revenue for the month of July because that’s the month you billed the client.
The cash method of accounting is a popular approach for many freelancers and small businesses because of its simplicity. But you might be in a situation where for a variety of reasons your accountant has opted for the accrual method. If that’s the case you can now take advantage of our new accrual option when running reports in Harpoon.
How It Works
When running Profit & Loss or Tax Summary reports in Harpoon you’ll see a new filter for selecting your method:
The “Collected (Cash)” option uses the cash method described above, while the new “Billed (Accrual)” option uses the accrual method described above. In the past Harpoon has used the cash method when generating these reports, so unless you deliberately select the new “Billed (Accrual)” option these reports will be consistent with what you’re already accustomed to.
If you’ve been waiting for this new accrual-based reporting feature we hope it makes tax time much easier for both you and your accountant!