Cash-basis bookkeeping tells you what money moved. Accrual-basis accounting tells you what actually happened economically. The difference matters when you’re trying to understand whether your business is profitable, plan for upcoming expenses, or present financials to a bank or investor.

Prepaids are expenses you’ve paid for but haven’t used yet. Annual insurance premiums, prepaid rent, software subscriptions paid upfront. If you pay $24,000 for annual insurance in January and expense it all that month, your January profit looks terrible and the rest of the year looks artificially good. A controller spreads that $24,000 across twelve months so each month reflects $2,000 of insurance cost. Your financials now show the actual cost of operating each month.

Accruals work the opposite direction. You’ve received something or incurred a cost, but you haven’t paid for it yet. Your employees worked the last week of December but won’t get paid until January. You received inventory but the vendor invoice hasn’t arrived. Without accruals, your December looks more profitable than it was, and January takes a hit for expenses that belong to the prior period.

The bookkeeper records what happened. The controller makes sure the timing is right. This requires understanding not just debits and credits but the business itself. Which expenses should be spread? What revenue was actually earned this month versus billed in advance? When does a deposit become recognized revenue?

Monthly close is where this work happens. A controller reviews transactions, identifies items that need adjustment, and posts the entries that make your financial statements meaningful. They maintain schedules that track prepaid balances and amortize them correctly. They review contracts to determine when revenue recognition should occur.

This matters most when you’re making decisions based on your numbers. If you’re looking at monthly profit to decide whether to hire, expand, or cut costs, you need those numbers to reflect reality. A month that looks profitable because you haven’t accrued $40,000 in commissions owed isn’t actually profitable. You just haven’t recorded the obligation yet.

It also matters for taxes. Accrual-basis taxpayers need accurate accruals to report the right income. And if you’re presenting financials to a lender or potential buyer, they’ll expect proper treatment of prepaids and accruals. Messy books signal that other things might be wrong too.

Most internal bookkeeping staff handle the transactional work well. They pay bills, record deposits, reconcile accounts. The adjusting entries for prepaids and accruals require a different skill set and a broader view of the business. That’s where controller services in Boca Raton add the most value. You get financials that tell the truth about your business, not just a record of what cleared the bank.