The California State Contractor's
License Board tells me that contractors
fail in business mostly due
to poor business ability, not lack of
trade knowledge. And those who
fail as a result of bad business ability
most often use the cash method
rather than the accrual method of
accounting. The upshot: A novice
contractor using the cash method
may be working against big odds.
Cash Method
The cash method of accounting
records income and expenses in
the profit-and-loss statement when
money is actually received or paid
out. Although this method may
work for some, it can be a poor
indicator of the real ins and outs of
cash flow.
For example, if bills for a job
aren't paid for a month after