Accounting Modes 101: What Marketers Need to Know

Today’s top marketers aren’t just marketers: they’re data analysts, product insiders, customer champions, growth strategists, and more. Marketers have to hold an overview of the entire organization in their mind in order to best position their company’s products and services for success. They have to be savvy with numbers and comfortable getting down with accounting principles to make the best of their budget. 

Understanding the different accounting modes — the different ways that ROI can be calculated and accounted for — makes a significant difference in how you assess the performance of your marketing campaigns. 

In this guide, we’ll cover basic accounting modes and discuss the two most common ones on the Northbeam platform and beyond: Cash Snapshot and Accrual Performance. 

What are accounting modes?

In this context, accounting modes refer to the different ways in which conversions and revenue can be credited within an analytics platform. Northbeam uses the Cash Snapshot and Accrual Performance modes to mirror traditional accounting methods used in corporate finance: cash basis and accrual accounting. 

At a high level, accounting modes can shape how you interpret key metrics like revenue, return on ad spend (ROAS), and media efficiency ratio (MER). 

Cash Snapshot mode credits all revenue and conversions to the date when a given transaction actually takes place. This mode is particularly useful for measuring immediate cash flow. It helps you keep track of what is coming in on a daily basis. For example, if a customer makes a purchase on your website tomorrow, all the associated revenue would be attributed to that date. 

Accrual Performance mode, on the other hand, credits revenue and conversions to the dates when relevant marketing touchpoints occur. This allows marketers to see a more accurate reflection of how different channels and campaigns contribute to conversions over time. If a customer interacted with your Meta ad yesterday, clicked on your email today, and made a purchase tomorrow, revenue would be distributed across all of these individual dates and touchpoints. 

Read More: What Makes Northbeam’s Data Different?

When should you use each mode? 

Cash Snapshot mode

Cash Snapshot mode is more commonly used because it aligns with the way that businesses typically track their finances — based on when cash is received. For example, if you’re reporting on MER, Cash Snapshot mode can provide a clear view of the ratio between total revenue and total spend on a daily basis. This method is straightforward and easy to understand, making it a go-to for many marketers. 

However, the simplicity of Cash Snapshot mode can sometimes lead to oversimplified or misleading interpretations of marketing performance. For example, if you launch an ad campaign that leads to significant engagement but no immediate purchases, Cash Snapshot mode might make the campaign seem like a failure, even if it leads to more purchases down the line. 

Accrual Performance mode

Accrual Performance mode offers a more nuanced understanding of how your marketing efforts are contributing to conversions. By attributing revenue to the individual dates when marketing touchpoints occur, this mode gives you a clearer picture of which channels and campaigns are truly effective and generating ROI. This can be particularly valuable for marketers focused on scaling paid media and calculating ROAS. It can also be useful for products or services with long sales cycles where individual touchpoints need to be accounted for to get the full picture. 

On the other hand, Accrual Performance mode could be over-complicated for straightforward sales cycles or simple marketing strategies. If you don’t have a lot of resources, or aren’t running a lot of campaigns, you may choose to keep things as simple as possible. 

The benefits of choosing the right accounting mode

Take the time to think through your options and choose the right accounting mode so you can make the best decisions for your business. If you’re in doubt, try running both and looking at how the results compare. Northbeam lets users choose their preferred accounting mode, or toggle between the two for comparison. 

Choosing the right accounting mode helps you:

• Assess the true impact of your marketing efforts
• Improve your budget allocation
• Manage your daily finances
• Align your marketing strategy with your business goals
• And more. 

When in doubt, chat with an expert. Northbeam’s dedicated advisors are happy to talk you through which accounting mode is best for your unique situation. 

Learn more about accounting modes in our knowledge base.