Do you know which one you're dating? In 16 years of small deals, I've never seen 100% cash or 100% accrual. It's always somewhere in between. Which means you need to know how to spot what you're looking at. Here's the quick tell: No accounts receivable or accounts payable on the balance sheet? You're probably dating Ms. Cash. Six months of income statements that look plus or minus the same? That's Ms. Accrual. Cash-basis financials look up and down depending on when cash was accepted. The other test: ask the seller to walk you through how an invoice is reported at every major milestone. If they can't describe it clearly — or the story keeps changing — you're in the land of "accrual-ish." Not accrual. Neither is unsafe. But games get played between the two. Know what you're looking at before you sign an LOI. More in my video: redacted