Bookkeeping for Small Business
Bookkeeping for small business means recording every dollar that comes in and goes out, categorising those transactions by type, and keeping supporting documents so you can file taxes, track profit, and make decisions with real numbers. You can do it yourself with software like QuickBooks or Wave, hire a part-time bookkeeper, or use a subscription service—most sole proprietors and small LLCs start with DIY software and upgrade when monthly transactions exceed 50-75.
What exactly does a small business bookkeeper do every week?
A bookkeeper records income and expenses, reconciles bank accounts, categorises transactions, and maintains a general ledger. Every week you log invoices sent and payments received, enter bills and credit card charges, attach receipts, and match bank statement lines to your records.
How do I set up a bookkeeping system from scratch?
Open a dedicated business bank account and business credit card; never commingle personal and business funds. Choose accounting software (QuickBooks Online, Xero, Wave, or FreshBooks) or set up a spreadsheet with columns for date, description, category, income, and expense.
What records and receipts must I keep and for how long?
Keep every receipt, invoice, bank statement, and deposit record that supports an income or expense entry. The IRS requires you to substantiate deductions, so save receipts for travel, meals, equipment purchases, contractor payments, and anything over $75.
Should I hire a bookkeeper or do it myself with software?
Do it yourself if you have fewer than 50 transactions per month, no employees, and you are comfortable learning software. QuickBooks Online costs $30-$200 per month depending on the plan; Wave is free for basic bookkeeping.
How do I handle sales tax and payroll in my books?
Sales tax: if your state requires you to collect sales tax, record the full amount the customer pays as income, then record the tax portion as a liability in a "Sales Tax Payable" account. When you remit to the state Department of Revenue, categorise that payment as a reduction of the liability, not an expense.
What are the most common bookkeeping mistakes that cost small businesses money?
Mixing personal and business expenses in the same account makes reconciliation nearly impossible and raises audit risk; the IRS can disallow deductions if you cannot prove business purpose. Failing to reconcile monthly means you miss bank errors, duplicate charges, or fraudulent transactions, and your reports show incorrect cash balances.
FAQ
Can I use a spreadsheet instead of accounting software?
Yes, if your business is very simple—under 30 transactions per month, no employees, and you are disciplined about weekly updates. A spreadsheet works for tracking income and expenses and calculating profit, but you lose automatic bank feeds, error-checking, built-in reports, and audit trails.
How often should I reconcile my accounts?
Monthly, at a minimum. Reconciliation confirms that every transaction in your books matches your bank statement.
Do I need different bookkeeping methods for an LLC versus a sole proprietor?
The legal structure does not change the bookkeeping mechanics—you still record income and expenses the same way. The difference shows up at tax time: sole proprietors report on Schedule C, single-member LLCs also use Schedule C by default, partnerships and multi-member LLCs file Form 1065, and S corps and C corps file separate returns.
What is the difference between a bookkeeper and an accountant?
A bookkeeper records daily transactions, reconciles accounts, and produces financial statements. An accountant (CPA or Enrolled Agent) interprets those statements, prepares and files tax returns, advises on tax strategy, handles audits, and provides financial planning.
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