Cash vs Accrual
Most ABA practices start on cash basis because it is simple and it matches the tax return. As the practice grows past a couple of clinicians, cash basis stops telling you the truth about the business. Here is the practical difference, and when it is worth switching.
The difference in one sentence
Cash basis records revenue when the payer pays you. Accrual basis records revenue when you deliver the session. In ABA, those two dates can be sixty days apart.
Why the gap matters in ABA
Your largest cost is payroll, and payroll is paid on the delivery schedule, not the payment schedule. If you pay your BTs in March for March sessions but the payer funds those claims in May, cash-basis books show a terrible March and a wonderful May. Neither number is real. You cannot price a service, staff a location, or evaluate a payer contract off a report that moves revenue two months away from the cost that produced it.
A simple example
Say you deliver $200,000 of billable sessions in March and pay $130,000 of direct staff cost in March. Collections on those claims arrive in May. On cash basis, March shows $0 revenue against $130,000 of cost, a $130,000 loss. May shows $200,000 of revenue against whatever May cost happened to be. On accrual basis, March shows $200,000 of revenue against $130,000 of cost, a 35 percent gross margin. That 35 percent is the number you actually manage the business with.
What accrual actually requires from your books
Three things. Revenue recorded in the period of service rather than the period of payment. An accounts receivable balance that reflects real, collectible claims. And a contractual allowance so you are not carrying billed charges at a value you will never collect. If you record gross billed charges as revenue and never true up to expected reimbursement, accrual books are worse than cash books, because they overstate revenue with confidence.
The weekly cutoff problem
Accrual only works if the period cutoff is clean. Sessions get delivered every day and months end on arbitrary dates. If your invoices group dates of service by week, QuickBooks Online reports run cleanly weekly and monthly off the same data. When a month ends mid-week, that week needs to split into two invoices so the last few days land in the right period. Skip that and every partial week becomes a manual accrual entry somebody has to remember to reverse.
Do you still file taxes on cash basis?
Often, yes. Many practices keep accrual books for management reporting and let their CPA convert to cash at tax time. That is a normal setup, and it is a conversation to have with your tax preparer rather than a reason to avoid accrual internally. We are not tax advisors, so confirm the treatment for your entity with your CPA.
When to switch
Switch when payroll and the revenue that funded it stop landing in the same month. When you have more than one location or payer mix to compare. When you are talking to a lender or a buyer. Or when you cannot answer whether last month was good without doing math in your head.
How Qlarity handles it
Qlarity posts from your CentralReach billing export into QuickBooks Online on an accrual basis. Dates of service are grouped by week, and weeks that straddle a month end split into two invoices so weekly and monthly reports both tie. Revenue is broken out by funder, location, and procedure code. Nothing gets double-posted, and no PHI is stored. $199 per month, and the first 30 days are free.
