The cash method is an accounting method in which income and expenses are recorded only when an actual receipt or payment occurs.

In other words:

• income exists when the money comes in
• an expense exists when the money goes out
• Issued or received invoices are not recorded until they are paid.

This method directly reflects the actual liquidity of the business.

Who the cash method is suitable for

The cash method is particularly suitable for:

• Micro-enterprises
• Self-employed workers
• Professionals
• Businesses with few clients and suppliers
• Businesses with fast payments
• Those who want to mainly monitor liquidity

How the cash method works in practice

With the cash method, accounting mainly follows the bank account (or cash register):

• You receive a payment → you record income
• You pay an expense → you record a cost
• If there is no cash movement → there is no entry

During the year:

• there are no receivables from clients
• there are no payables to suppliers
• the economic result coincides with the cash flow

What it shows well

• Available liquidity
• How much you have actually received
• How much you have actually paid
• The business’s ability to sustain outflows

It is particularly useful for daily monitoring of the financial situation.

What it does not show

• Invoices issued but not yet received
• Invoices received but not yet paid
• Revenues and costs that have accrued but are not yet settled

The cash method does not provide a complete view of the economic situation, but gives a very clear picture of the financial situation.

Advantages of the cash method 

The cash method is appreciated for its operational simplicity. The main advantages are:

• Easy to manage
  You only record what has been paid or received.
• Immediate control of liquidity
  You always know how much money is actually available.
• Less administrative work
  You don’t need to record all invoices during the year.
• Aligned with digital payments
  Bank transfers, cards, and electronic payments become the basis of accounting.

Limitations of the cash method

The cash method also has structural limitations, which are important to understand.

The main ones are:

• No view of receivables and payables
  You don’t see how much you have to receive or pay in the future.
• Partial economic result
  Revenues and expenses are tied to payments, not to their accrual.
• Limited comparability over time
  The result can vary greatly depending on the timing of receipts and payments. 

For this reason, the cash method alone is not always sufficient for economic analysis or formal financial statements.

To obtain a clearer view of the costs and revenues attributable to the financial year at the end of the accounting period, accruals and deferrals may be necessary in order to comply with the accrual principle.

• For more information, see Accruals and Deferrals in Assets and Liabilities.

It is less suitable for: 

• structured companies
• businesses with many receivables and payables
• companies that need to present full financial statements during the year

The cash method in Banana Accounting

With Banana Accounting, the cash method is easy to apply because the program naturally works based on bank transactions.

With Banana you can:

• Import transactions from your e-banking
• Automatically record receipts and payments
• Keep the balance sheet and income statement constantly updated
• Monitor liquidity in real time

During the year you work lightly, without having to record every invoice.

Tax aspects of cash-based accounting

Cash-based accounting is allowed only under specific tax requirements.

In Switzerland:

• it is reserved for companies with annual turnover below 5 million Swiss francs
• authorization from the FTA is required
• the request must be made at the start of the activity or later

Tax rules on the use of the cash method vary by country, especially regarding VAT. It is always advisable to consult local regulations or official tax guides.

In summary

The cash method is:

• simple
• immediate
• liquidity-oriented

It is ideal for getting started and managing day-to-day operations, but it shows its limits when a complete economic view is needed.

With Banana Accounting, you can use the cash method today and easily switch to a more complete approach when needed.

Turnover represents the total revenue generated from a company’s core business activities over a specific period. In simple terms:

• it is the value of goods sold
• and/or services rendered

Turnover does not measure profit, only the volume of activity carried out.

Who the revenue-based method is for

The revenue-based method, grounded in the accrual principle, is suitable for structured companies and businesses with many clients and suppliers who need a complete and time-comparable economic view, including receivables and payables. It is also required for all businesses with an annual turnover over CHF 500,000 (in Switzerland).

This approach is typical of accrual accounting, used to produce complete financial statements during the year.

What is included in turnover

Turnover includes:

• sales of goods
• services provided
• revenue linked to the company’s main business activity

Turnover does not include:

• collected VAT
• financial income
• extraordinary income
• grants or compensation not related to sales

Turnover is therefore an economic figure, not a financial one.

Turnover, revenue, and profit: differences

It’s important to distinguish between some commonly confused terms.

• Turnover
  Measures how much you have sold.
• Revenue
  May also include income other than core sales.
• Profit (or loss)
  Is the difference between revenue and expenses.

High turnover does not automatically guarantee a profit.

How turnover is calculated

Using the accrual method, turnover is based on sales that have accrued during the period, regardless of whether they have been paid.

In practice:

• a sale counts towards turnover when the right to revenue arises
• even if the customer hasn’t paid yet

This results in turnover that is:

• economically complete
• comparable over time
• independent from payment timing

Turnover and VAT

With the turnover-based method, VAT is declared at the time the invoice is issued, regardless of whether the customer has paid or not.

• This is the standard method used by most businesses and generally required under Swiss VAT practice. 

Turnover is not the same as VAT:

• Collected VAT is not revenue
• It is an amount collected on behalf of the tax authority

VAT rules depend on each country’s legislation.

Why turnover is an important figure

Turnover is used to:

• assess the size of the business
• compare different periods
• define tax and administrative thresholds
• analyze sales trends

make strategic decisions

However, it is not sufficient on its own:

• it says nothing about costs
• it does not measure profitability
• it does not indicate available liquidity

Turnover in Banana Accounting: role of invoices

In Banana, turnover is determined by revenue entries, which come from the recording of customer invoices (not from bank transactions themselves).
Bank movements serve to settle receipts, not to define turnover — except when using the cash method.

• In Banana Accounting, turnover is determined through the posting of customer invoices, meaning transactions that generate revenue.
• Turnover is not a manually entered value and does not depend directly on the bank account, but on the entries in the revenue accounts.

When you post a customer invoice in Banana:

• revenue is recorded
• the revenue contributes to the turnover of the period
• VAT is handled separately
• the customer receivable is recorded (if required by the method)

Turnover is therefore generated at the moment the invoice is recorded, not when payment is received.

In summary

In Banana Accounting, turnover:

• comes from the posting of customer invoices
• is determined by revenue accounts
• may follow payment or invoice issuance, depending on the accounting method
• is independent of the bank account, except in the cash method

This setup makes turnover clear, verifiable, and consistent.

Managing accounting can seem complex, especially for those who want to focus on daily operations without getting lost in invoices and transactions. The Accrual–Cash method is an accounting approach commonly used by small businesses and professionals who record on a cash basis, but at year-end must include outstanding invoices to and from clients and suppliers.

The Accrual–Cash method is a hybrid accounting system that combines the cash principle during the year with the integration of open invoices at year-end, following the accrual principle.

With this method:

• Revenue and expenses are recorded when cash is received or paid (cash basis)
• At year-end, to determine the actual revenues and expenses, outstanding invoices from clients and suppliers are recorded, or, if necessary, through accruals and deferrals.
  More information:
  • Open customer invoices and Open supplier invoices
  • Accrued and deferred income and expenses

The Accrual–Cash method therefore represents an intermediate solution between the accrual method and the cash method, allowing for a clear view of the financial situation without the complexity of full accrual accounting.

Who it's for

This is a solution designed for those who want to work simply during the year, but obtain a year-end balance sheet that complies with the accrual principle. The Accrual–Cash method is particularly suitable for:

• freelancers
• artisans and small businesses
• service providers
• businesses that receive many invoices from suppliers
• businesses that issue few invoices and collect payments at a later time
• entities applying VAT on a cash basis (based on actual receipts and payments)

When it is not recommended

This method is not suitable for:

• entities applying VAT based on invoicing (at the time of issuing or receiving an invoice)
• companies that must keep full accrual-based accounting
• businesses with more complex accounting obligations
• situations requiring an official accrual-based financial statement

Why choose this method

With digital payment systems, most transactions today go through the bank. By importing bank transactions, the accounting is almost ready. There is no need to manually enter every invoice anymore.

This brings real advantages: less time spent on data entry, reduced risk of errors, and above all, the ability to always have an up-to-date overview of your liquidity. And for SMEs, liquidity is not a minor detail—it’s a key element in managing the business.

The accrual–cash method meets these needs:

• Time savings – no need to record each invoice when it’s issued or received
• Greater simplicity – less bureaucracy and complexity
• Always up-to-date data – thanks to imported bank transactions
• Liquidity control – the most important figure for managing actual inflows and outflows

Limitations of the accrual–cash system (and how to manage them)

Like any method, the accrual–cash approach has its limitations. During the year, the financial result mainly reflects receipts and payments; outstanding invoices are recorded at year-end to complete the financial statements. This means the economic picture may be partial.

Here are the main limitations:

• Receivables and payables are not visible during the year – open invoices appear only at the end of the period
• Partial view of accrued revenue/expenses – only those already paid are visible
• More work at year-end – additional entries are required (open invoices, accruals, deferrals, depreciation)
• Not suitable for all companies – highly structured businesses may prefer full accrual accounting

With Banana, these limitations are easily managed — you can add invoices and adjustments at any time, gradually transitioning to full double-entry accounting.

How Banana simplifies the accrual–cash method

With Banana Accounting, you can manage the Accrual–Cash method by working primarily with imported bank transactions throughout the year, which are then completed using automatic rules. Outstanding invoices and period-end adjustments can be recorded when needed, to produce an accrual-compliant balance sheet.

• Import your bank transactions
  • Download the file from your e-banking (ISO 20022, CSV, MT940, etc.)
  • Import your bank transactions into Banana.
• Apply automatic rules
  • Define rules to classify transactions (counterpart, VAT code, cost center)
  • On the next import, Banana will automatically complete the transactions.
• Monitor your accounts in real time
  • Balance sheet, cash flow, margins, and VAT are always up to date with the latest import
• Manage open invoices at year-end
  • Unpaid customer invoices → Customers to Revenue
  • Unpaid supplier invoices → Expenses to Suppliers
  • Typical adjustments → accruals, deferrals, depreciation, exchange rate differences
• Generate an accrual-compliant balance sheet, ready for banks, shareholders, and tax authorities.

An advantage also for fiduciaries and accountants

The accrual–cash system is also valuable for professionals managing clients’ accounts. They no longer have to wait for the client to send every invoice — accounting can be built starting from bank transactions, avoiding work overloads and drastically reducing time spent. When needed, they can complete the accounts with year-end adjustments. This approach allows handling more mandates in less time and offering more efficient services.

• Less manual work – no need to enter every client invoice as soon as it is issued or received
• Ready-to-use accounting – start directly from imported bank transactions
• More clients managed – saved time can be dedicated to consulting and analysis
• Professional financial statements – at year-end, add the necessary transactions to obtain complete accounts

With Banana, fiduciaries can provide faster and more efficient services, increasing the value delivered to clients.

Accounting methods and VAT in Switzerland

In Switzerland, regarding VAT (MWST/TVA), depending on when VAT becomes due:

• Accrual method – VAT is due when you issue an invoice to the customer or receive one from the supplier
• Cash method – VAT is due when you collect a payment from the customer or make a payment to the supplier
• Accrual–Cash method – VAT becomes due at the time of collection or payment, as in the cash system

Summary

• If you use the accrual method – VAT is recorded when the invoice is issued
• If you use the cash method – VAT is recorded only when the payment is actually received

In Switzerland, both cash and accrual accounting methods are allowed for VAT declarations, provided the conditions for using the cash method are met (typically annual turnover below CHF 5 million).

• More information on how VAT works in Switzerland.

A hybrid system for Switzerland and abroad

Here is a brief list of real-world examples from those who use, recommend, or promote a hybrid approach to accounting both in Switzerland and internationally:

• Banana.ch – VAT on collection and year-end accruals and deferrals
  Explains the hybrid method as an optimal practice for those using cash-based accounting but integrating outstanding items at year-end for a complete balance sheet.
• Raiffeisen – Digital accounting with e-banking and AbaNinja (German, French and Italian only) 
  Demonstrates how, by importing bank transactions, payments can be automatically linked to invoices, avoiding duplicate entries and maintaining control over outstanding invoices.
• FiscoOggi (Italy) – Cash regime for small enterprises (Italian only) 
  The Italian regime for small businesses is actually a hybrid system: accounting is kept on a cash basis, but with year-end adjustments for inventory, depreciation, open invoices, etc.
• HMRC UK – Expanding the cash basis for the self-employed (PDF)
  Article explaining UK government measures to expand cash-basis eligibility while allowing for the carry-forward of profits and losses like under the accrual method.
• IRS (USA) – Publication 538: Accounting Methods
  In the United States, the hybrid method is legal and widespread: it allows using the cash basis for current transactions and accrual accounting for managing inventory, liabilities, accruals, etc.

Conclusion

At school we are taught that the cash and accrual principles are clearly distinct. But the reality of modern SMEs calls for a flexible, automated, and accurate system.

Banana Accounting Plus is the tool that combines the operational simplicity of the cash principle with the accounting completeness of the accrual principle.

Banana Accounting provides predefined templates for cash-based accounting, with the option to integrate receivables and payables based on the accrual principle.

The choice of accounting method affects how you monitor your business throughout the year. Some methods prioritize simplicity and liquidity, while others offer a more complete economic overview, including receivables and payables.

The table below helps you understand, based on your operating situation and legal requirements, which method is most suitable: the cash basis method, the hybrid accrual–cash method, or the accrual basis method (revenue-based accounting).

* For sole proprietorships and partnerships. Legal entities are always required to use full accrual accounting.