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
