There is no right or wrong method for tax reporting purposes. However, your business profitability should always be based on the accrual method since it will give you a more realistic view of your business health.  Check with your accountant or tax advisor as to which method is best for you.

Cash Method:
This type of reporting is based on the actual cash going in and out of your business.  It is normally easier to track when the time comes to report your taxes.   Even though you invoice a customer for a service, if you did not get paid, it will not count as income for you.

It is sometimes confusing how you ‘Write-off’ an invoiced amount if a customer does not pay you.  The answer is, you don’t.  Since the invoiced amount has not actually been paid to you, you never counted it as income to begin with.  What about the expenses for the invoice?
If you paid the expenses, they were counted as an expense even if the customer did not pay you.
What about sales tax associated to the invoice?
There are some accounting systems that generate sales tax reports by using the accrual method only.  In this case, when the invoiced amount is credited the tax should also be credited and show on your monthly report.

Accrual Method:
This type of reporting is based on invoice and bill dates.  This means if you invoiced a customer you will be paying tax on the invoiced amount, even if you did not get paid.  At the same time, if you receive a bill from a vendor, this bill will be a tax deduction even if you did not pay the vendor.

*Methods cannot be combined – for example:  You cannot use the accrual tax method for expenses and the cash method for income.