Early-stage founders often treat accounting like an afterthought—but it’s the bedrock of your financial strategy. Choosing between cash and accrual accounting isn’t just about taxes—it impacts how you raise capital, measure performance, and scale your company.

Let’s explore what each method means and which one might be the smartest fit for your stage.

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What’s the difference?

• Cash accounting: You record income and expenses only when cash moves in or out of your account.
• Accrual accounting: You recognize revenue and expenses when they’re earned or incurred, regardless of when cash changes hands.

Quick example: You close a $50K contract in March. You get paid in June.

• With cash, you record revenue in June.
• With accrual, you record it in March.
  
  

The Pros and Cons (no fluff)

Cash Accounting ✅ Simple and cost-effective
✅ Better for cash flow visibility
❌ Doesn’t show financial obligations accurately

Accrual Accounting ✅ Aligns with SaaS/subscription models
✅ Investors prefer it—cleaner P&L view
❌ Requires more structure and possibly expert support

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What do investors want? 

If you’re raising VC money (or plan to), accrual is usually the way to go. It offers a more accurate snapshot of recurring revenue, burn rate, and growth trajectory.

We’ve seen founders switch just to get their books investor-ready—and raise faster because of it.

Want to run your books by a fundraising-savvy expert? Schedule a call.

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When should you switch to Accrual? 

Here’s when it’s time to reconsider cash-based accounting:

• You have long-term contracts or subscription revenue
• You’re preparing for a raise
• Your board or accountant says it’s time

Switching doesn’t have to be painful—especially when we handle the transition for you.

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What we recommend at Lazo

• Pre-revenue or MVP stage? Cash is fine for now.
• Scaling or fundraising? Accrual gives you clarity.

We help founders set up accrual books with AI + expert support—so you’re not alone in the process.

Your accounting method should support growth—not hold you back 

Accounting isn’t just a compliance task—it’s a strategic foundation. Choosing the right method sets you up for clean books, better insights, and smoother growth.

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✅ Curious whether it’s time to switch or optimize your setup? Book a free consult with our finance team today.

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