In early September 2026, the UN General Assembly adopted a resolution by a vote of 164 to 1, with 6 abstentions, recommending area-preserving world maps where size matters. Admittedly, it’s not immediately obvious what a vote on map projections has to do with accrual accounting in a Swiss SME. Nevertheless, I consider it one of the most instructive.
The background in two sentences: The standard world map is based on the 16th-century Mercator projection. On this map, Greenland appears to be about the same size as Africa—but in reality, Africa is fourteen times larger.
The key point here is that this map contains no errors. It was designed for navigation at sea, and in that context, it accomplishes something no other projection can—a constant compass bearing appears as a straight line on it. It simply does not answer the question of how large something is. Anyone who uses it for that purpose will get a precise, clear, and completely misleading answer.
It is precisely this mechanism that lies behind one of the most common misunderstandings in the financial management of small and medium-sized enterprises. And it is costly because it does not generate an error message.
Key Points at a Glance
- The invoice list shows when invoices were issued—the income statement shows when the services were rendered. These are two different matters.
- For one client, the invoiced amount for a given month was about 36 percent lower than the previous year's figure, while the reported revenue was completely normal.
- Three months later, the same list showed an increase of about 370 percent—again, without any changes to the business.
- Without accrual-based accounting, any month-over-month or year-over-year comparison becomes useless as soon as the billing cycle changes.
Why the invoice list answers a different question
Every report is designed for a specific purpose. The accounts receivable list answers the question: Which invoices are outstanding, which are unpaid, and whom do I need to send a reminder to? It is perfectly suited for this purpose, and no other report can replace it.
It doesn't answer the question of how business is going. That's because it assigns each amount to the day the invoice was issued—not to the period during which the work was performed. As long as the pattern remains consistent, this isn't noticeable. Anyone who invoices the previous month on the third day of each month has a neat series, even if it's shifted by four weeks.
Things get interesting the moment the rhythm changes. And it changes more often than you might think: when there’s a system change, a staff change in administration, the introduction of QR invoicing, after a vacation—or simply because someone decides to do things better going forward.
A month that looked like a slump
A client has changed his billing process. Previously, he would issue invoices for a given month at the beginning of the following month. This is convenient because it ensures that all services are included, but it pushes each transaction back by four weeks. Since then, he has been issuing invoices at the end of the month to which the service pertains.
The transition was technically sound. It left a dip and a spike in the invoice list: one month with just a single invoice, because the old cycle had already ended and the new one hadn’t started yet—and three months later, a catch-up month with more than twice as many invoices as usual. Compared to the previous year, this resulted in a decrease of about 36 percent and, shortly thereafter, an increase of about 370 percent.
Neither of these factors is reflected in the income statement. There, revenue for those same months remains within a narrow range. No drop, no spike. The difference consists of a handful of entries in the “Revenue Not Yet Received” account.
How to Tell If Your Comparison Doesn't Hold Up
Accounting for accruals isn't just a topic for specialists—it's a prerequisite for making numbers comparable in the first place. Here are three signs that your month-over-month comparison is built on shaky ground:
- One month stands out from the rest, and no one can explain why. No lost customer, no order—just a number that doesn't add up.
- A weak month is followed by a strikingly strong one. This is almost always a shift, not a recovery.
- Invoices tend to pile up at the beginning of the month. That's when the previous month's invoices are systematically processed, and your billing cycle is shifted by one month.
In my work with owners of growing companies, I regularly see how such “artifacts” turn into real decisions. One owner once wanted to cut marketing expenses because two consecutive months looked weak. In fact, the administrative department hadn’t sent out invoices during the holidays. The work had been done, the revenue was there—only the invoices were still in draft form. The cut would have slowed down a business that was running smoothly.
What "proper accrual accounting" Means in Practice
Accrual accounting does not mean that you have to change your invoicing process. It means that the accounting department allocates the service to the period to which it belongs—regardless of when the invoice is issued.
Specifically, this requires three things. First, an estimate of the services rendered but not yet billed at the end of the month. Second, the offsetting entry in the corresponding accrual account. Third, the reversal in the following month to ensure nothing is counted twice. For a small business, this amounts to just a few journal entries per month.
The effort is minimal, but the impact is significant: Only then can you really tell whether a month was a good one. And only then does the year-over-year comparison make sense. Anyone citing a growth figure should base it on revenue, not on accounting data—otherwise, they’re simply measuring their own billing cycle.
Conclusion: Define the scope first, then compare
There is no undistorted, flat map of the world. Every projection sacrifices something: area, angle, or distance. The resolution is not legally binding and expressly states that the Mercator projection remains suitable for maritime and aviation use without modification. It recommends area-preserving maps for cases where size matters and requires that the limits of each representation be clearly indicated.
The same applies to analyses. Accurate bookkeeping is a prerequisite, not the goal. Every single invoice in the case described was correctly dated and properly recorded. The distortion did not result from an error, but from the fact that the wrong analysis was used to address the question.
The timeline is just one of several projections. The same question arises with customers—who really adds value, and who mainly creates work? That’s what customer profitability is all about : The Greenland Effect in the portfolio.
If there’s one thing you take away from this article: Take a look at your monthly report and ask yourself where the revenue figure comes from. If it matches your invoicing, it’s time to make an accrual adjustment. I describe what this kind of financial management looks like in everyday practice in my section on “CFO as a Service.”
Frequently Asked Questions
What does "accrual accounting" mean, explained simply?
Accrual accounting allocates revenue and expenses to the period in which the service was rendered—not to the date of invoicing or payment. This ensures that the income statement reflects how the business actually performed during a given month.
Do small businesses really need monthly accruals?
As soon as you use monthly figures for decision-making, yes. Without accrual accounting, you’re measuring your billing cycle rather than your business. For the annual financial statements, Art. 958b of the Swiss Code of Obligations (OR) requires accrual accounting based on time and substance anyway; only those with net revenue of less than CHF 100,000 may instead base their accounting on expenses and revenues. Keeping these records on a monthly basis requires hardly any additional effort.
Why does my revenue in the accounting system differ from my invoice list?
Because they answer different questions. The invoice list shows the billing date, while the income statement shows the reporting period. A discrepancy is normal and usually indicates that accrual accounting is being applied correctly.
TF Financial Services supports Swiss SMEs with everything from day-to-day bookkeeping to financial management at the executive and board of directors levels. If you’d like to verify whether your monthly figures are reliable, please feel free to contact us.