Should I use cash or accrual accounting?

I don’t have an accounting background, but I do keep the accounts for our startup using Quickbooks. When I first started using it, it asked if wanted to use cash or accrual accounting. I didn’t understand the significance of the question.

My fundamental desire with numbers and finance is simplicity. I want to be able to see how things fit together. I want the bank account, my accounts, and the checkbook to balance.

Unfortunately, I chose “accrual accounting” with Quickbooks. At the end of the first month, the cash balances and the accounts were very very different. Once I started to think about this, I realized that when I sent out an invoice, I recorded a sale but didn’t have the cash. I also realized that when I recorded an expense, I had not actually paid the bill. Then I found that if I made a mistake on the invoice or the check, nothing balanced. I was totally confused.

Luckily, I identified this confusion early on. It was then easy for me to change to “cash accounting” and things began to make more sense. It’s not prefect, but it makes sense.