When you first decide to go into business for yourself, you have to go through a lot of the initial setup. You’ll want to register your business name, for instance, and get all the permits that you’ll need to operate legally and effectively. You’ll also need to set up your books.

In general, there are two main styles for tracking your revenue and your expenses. One method isn’t necessarily superior to the other, but they each offer advantages and disadvantages over one another.

First, you can have cash-based accounting. This means that something doesn’t go “into the books” until actual money changes hands, either as revenue or as an expense. This means that if you receive a utility bill, for instance, the entry in your books won’t happen until you pay that bill.

Second, you can record the entries as they are earned or received. Using the same example of the utility bill, you would record the entry in your books on the date the invoice is received. Similarly, your revenue is recorded on the date you send out the invoice to your customer.

Which method do you prefer?