Digits supports both cash and accrual accounting, so you can track your finances in the way that best fits your business.
What’s the Difference?
- Cash accounting: Income and expenses are recorded when money moves in or out of your account.
- Accrual accounting: Income and expenses are tracked when they’re earned or billed—even if the cash hasn’t moved yet.
Not sure which method is right for you? Check out our blog for a quick breakdown: Cash vs. Accrual Accounting for Startups
FAQ:
Can I Switch Between Cash and Accrual in Digits?
Absolutely—Digits gives you the power to work in cash or accrual based accounting, no toggles required. Unlike QuickBooks, which simplifies the view with a switch, Digits gives you the real deal: a full general ledger. That means you or your team can book transactions exactly how you want, with no software-imposed limits.
How does Digits Handle Accrual-Based?
Many of our integrations default to accrual-based behavior. For example:
- Gusto: Payroll entries are posted based on the end of the pay period (accrual), not the payment date.
- Ramp/Bill.com: Bills are recorded on the invoice date, regardless of when cash is paid.
- Revenue Recognition: Prepaid contracts currently require manual journal entries to defer and recognize revenue over time.
- Digits Pay & Invoicing: Automatically record entries to the ledger on an accrual basis. Once mappings are set in Settings, it’s truly “set it and forget it”—no manual entries needed.
This gives firms the structure needed to maintain accurate accrual-based financials, especially for clients that require audit-ready books.
When Digits is Cash-Based
Some integrations remain strictly cash-based:
- Stripe: Entries are recorded when a cash transaction occurs in the Stripe account. We do not currently recognize Stripe invoicing.
- Banks & Credit Cards: Transactions are recorded when cash moves in or out.
✨ Digits AI automatically categorizes transactions - but it may not always catch accrual-related items, such as Fixed Asset purchases.
Manual Adjustments
Accrual accounting often requires manual journal entries for transactions such as:
- Prepaid expenses
- Depreciation or amortization
- Accrued expenses
- Deferred revenue & complex revenue recognition
These entries can be created by navigating to Accounting > Ledger > New Transaction.
If you’re not sure how your books are set up—or think something looks off—reach out to your accountant or contact Digits support. We’re happy to help