What are Accounting Modes?

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Introduction

Our Accounting Modes are to two different settings within the platform that determine when conversion and revenue credit are given.

They're named to roughly mirror cash basis vs. accrual accounting in corporate finance. Here are how the two modes are different:

What is Cash Snapshot?

In the Cash Snapshot, revenue and transactional credit are given to when the transaction occurs, or when the order was placed.

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Cash Snapshot is useful for understanding the amount of money coming in on any given day (cash flow).

What is Accrual Performance?

In the Accrual Performance, revenue and transactional credit are given to when the contributory marketing touchpoints occur.

Marketing touchpoints refer to any interaction that results in a website visit, which triggers our Northbeam Pixel

Examples:

• Click on an Ad that lands on your site
• Click on an Email or SMS message that lands on your site
• Click on an Influencer link that lands on your site
• Click on an Affiliate link that lands on your site
• Click on an Organic Search link that lands on your site
• Click on an Organic Social link that lands on your site
• Direct Visit that lands on your site

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In Conclusion...

Accrual Performance is meant to help understand the direct return of your marketing dollars and designed to show the full impact of marketing channels on your business.

Example that illustrates the difference between Cash Snapshot and Accrual Performance

Let's say Dan visits the "Widgets Co" website on three different days:

1. Jan 1 - site visit from clicking on a Facebook Ad
2. Jan 2 - site visit from clicking on a Google Ad
3. Jan 3 - site visit after clicking on an affiliate link and placed a $90 order

For simplicity, let's suppose we're using an equal-weight attribution model -- where all marketing channels receive equal credit (i.e. Linear attribution model) -- so the Facebook Ad, the Google Ad, and the affiliate link get 1/3 credit for the purchase.

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In the Cash Snapshot...

All revenue and transactional credit is given to Jan 3 since the order was placed on Jan 3.

Here's a breakdown of the credit allocation:

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Why is this important?

All credit is given to Jan 3. Zero credit given to Jan 1 and 2, despite the touchpoints occurring on these days.

As a result, it's easy to assume Jan 1 and 2 didn't have an influence on the purchase.

To take it one step further, let's say $10 was spent on Facebook and Google on each day, your data would look like something like this.

Jan 1 Performance

Jan 2 Performance

Jan 3 Performance

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How this could be misleading when scaling media...

• Jan 1 and 2 received no revenue credit, with 0.0 MER -- it's easy to assume these days had poor performance
• Jan 3 received all the credit, with 3.0 MER -- it's easy to assume this day had great performance

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This concept is magnified if your brand has a longer purchase conversion cycle.

Suppose you're selling a higher AOV product and it takes roughly 30 days for a customer to convert. Let's say you're looking at this week's ad performance on Cash Snapshot. This could be a result of marketing efforts from up to 30 days ago.

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Pro Tip: Most Ad Managers report their numbers using the Cash Snapshot.

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In the Accrual Performance...

Revenue and transactional credit is divided between Jan 1, 2, 3 and assigned to the touchpoints that resulted to the site visits.

Here's a breakdown of the credit allocation:

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Keep in mind...

Accrual is our most popular accounting mode since credit is given to the marketing touchpoints -- which gives the most accurate view of ad performance.

With this in mind, the Overview and Sales page in our dashboard are defaulted to Accrual accounting mode.

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Cash Snapshot - Use Cases

Use Case 1: Goal Setting Based on Blended MER

Many brands nowadays track their company's performance using a target MER Goal -- as MER typically points to profitability.

For context, MER is calculated the same way as ROAS (Total Revenue / Total Spend), but the difference is this: MER is used in the Cash Snapshot, while ROAS is used in Accrual Performance.

Why is MER used in Cash accounting, while ROAS is used in Accrual accounting?

It boils down to the accounting modes. We know Cash Snapshot does not attribute the orders and transactions to the contributory touchpoints. While the same formula is used (Revenue/Spend), we merely see it as a ratio, also known as Media Efficiency Ratio (MER).

On the other hand, we attribute orders and transactions to the touchpoints in Accrual accounting. Therefore, we see (Revenue/Spend) in Accrual accounting as more of a true return on your ad spend (ROAS).

Now, we can use a Blended MER goal to track business-level performance.

To take it one step further, a Blended MER can waterfall down into lower-level ROAS or CAC goals at the platform levels. In this context, Blended MER refers to MER across all channels: total revenue / total spend.

Let's say your Blended MER goal was a 3.0 and looking at your historical data, we saw the following:

We can use the (benchmarks in bold) for Facebook, Google, and TikTok when tracking performance using the Accrual accounting mode. In fact, we have a Benchmarking Tool that helps you do this within the Sales page.

Accrual Performance - Use Cases

Use Case 1: General Media Buying

The Accrual accounting mode attributes all conversions to when the touchpoints occurred. As a result, it's a more true return on your dollars spent and you're able to understand ad efficacy more clearly.