Cash Basis Accounting for SMEs: When It's Enough

Many small business owners in Switzerland keep their books more complicated than necessary — or conversely, they underestimate when a simple record no longer suffices. The question of which accounting method is legally required concerns every SME owner, every self-employed person and every accountant. This article shows where the boundaries lie, which mistakes are typical and how to find the right method without detours.

What Swiss law requires

Swiss Code of Obligations (OR) distinguishes roughly two levels:

Level 1 — Simple Accounting (Art. 957 Para. 2 OR)
Sole proprietorships and general partnerships with annual turnover below CHF 500,000 need only keep cash basis accounting records and a statement of assets and liabilities. Double-entry bookkeeping is not required.

Level 2 — Ordinary Accounting (Art. 957 Para. 1 OR)
All corporations (AG) and limited liability companies (GmbH) — regardless of turnover — as well as sole proprietorships and general partnerships from CHF 500,000 annual turnover onwards must maintain double-entry bookkeeping with balance sheet and profit and loss statement.

Important: The CHF 500,000 threshold refers to turnover from the last financial year, not profit. Anyone close to this limit should review the figure annually — a successful year can unexpectedly cross the threshold.

What cash basis accounting must accomplish

A simple record is not a free pass for chaotic notes. It must:

• Be chronological: All cash inflows and outflows are recorded by date.
• Be receipt-based: Every entry needs supporting documentation (receipt, bank statement, internal record).
• Show asset position: Receivables, payables and fixed assets must be visible at year-end — even without a complete balance sheet.
• Be retained: Ten years of retention applies here too.

Typical tools range from a simple Excel spreadsheet to lightweight accounting software. What matters is not the tool, but completeness.

Common errors in simplified accounting

1. Not separating private withdrawals

If a sole proprietor also uses the business account privately, business and private assets get mixed up. This not only complicates accounting but can raise questions during a tax audit. A separate business account is recommended even without formal bookkeeping obligations.

2. Not maintaining clean VAT records

Once a company is subject to VAT — i.e. from CHF 100,000 annual turnover — income and expenses must be split by tax rate. The rates 8.1% (standard rate), 2.6% (special rate for accommodation) and 3.8% (special rate for catering services) must be shown separately. Anyone keeping all income in a single column will have problems by the time of VAT settlement. Fundamentals on current rates and classifications can be found in the comprehensive article on Swiss VAT basics 2026 — rates, duties and special rules.

3. Forgetting open invoices

Cash basis accounting records transactions on the cash basis (payment date). Outstanding receivables from deliveries therefore do not appear in the running record — but must appear in the year-end asset and liability statement. Anyone who forgets this shows an incorrect net asset position.

4. Booking investments as immediate expenses

A new laptop costing CHF 2,500 is not a running expense but a fixed asset. Even under the simplified method, larger purchases should be recorded in the asset statement and depreciated over their useful life — not as a one-time expense.

When switching to double-entry bookkeeping makes sense

Not every company that stays below CHF 500,000 benefits most from the simple method. A switch often makes sense earlier if:

• External financing is sought: Banks and investors expect a complete balance sheet.
• Multiple cost centers exist, such as different product lines or locations.
• Growth is foreseeable: Crossing the threshold at the right time without needing to change the accounting system in the short term saves effort.
• An accountant prepares the annual accounts and works with double-entry bookkeeping anyway.

A thoughtfully structured chart of accounts can be set up from the start to allow for a smooth later transition without data loss.

Tax considerations

There are cantonal differences: some cantons require self-employed earners to provide records for income and wealth tax that are effectively equivalent to simplified balance sheets. If you operate in Canton Zurich or Bern as a sole proprietor, you should ask your local tax authority or accountant what documents specifically need to be submitted.

Cash basis accounting serves as proof of business profit in the tax return, which counts as earned income and is subject to social insurance contributions. Social insurance contributions are calculated on net income after deducting half the social insurance contribution — a detail often overlooked in annual planning.

Checklist: Maintaining correct cash basis accounting

Item	What to do
Separate business account	Separate private and business payments
Chronological recording	Date, description, amount (gross/net), tax rate
Archive receipts	10 years, organised, legible (digital also permitted)
VAT splitting	Split income/expenses by tax rate
Year-end statement	Receivables, payables, fixed assets
Social insurance reserve	Account for half social insurance contribution in planning
Turnover check	Review CHF 500,000 threshold annually

Recording issued invoices correctly

An often-overlooked point: the quality of issued invoices determines how cleanly accounting runs. Faulty or incomplete invoices lead to follow-up questions, delayed payments and incorrect entries. If you create your invoices with SnapBill, you ensure that the QR payment section, VAT disclosure and mandatory fields are correct from the start — saving corrections later.

At a glance

• Sole proprietorships below CHF 500,000 turnover may keep simplified cash basis accounting.
• Corporations and limited liability companies must always use double-entry bookkeeping, regardless of turnover.
• Even the simple method requires chronological recording, receipts and a year-end asset and liability statement.
• VAT-liable companies must split income and expenses by tax rate.
• Once external financing, growth or more complex structures come into play, early transition to double-entry bookkeeping pays off.
• The chart of accounts should be structured from the start to allow smooth later transition.

Anyone following these basic rules creates a solid foundation — for the tax return, for discussions with their accountant and for their own business overview. SnapBill helps Swiss SMEs design the invoicing process so that accounting records are correct from the start.