1. Separate business and personal money
Open a business bank account and, ideally, a business card. Run every business transaction through them. Mixing accounts is the single biggest cause of messy books and overpaid taxes.
2. Choose cash or accrual
Cash basis records income when it's received and expenses when paid — simple and common for small service businesses. Accrual basis records income when earned and expenses when incurred — a truer picture for businesses with inventory or credit terms, and sometimes required above certain sizes. Ask your accountant which applies to you.
3. Set up a simple chart of accounts
Categories such as sales, cost of goods sold, rent, payroll, software, marketing, travel, professional fees and bank fees. Keep it simple; too many categories make the reports harder to read.
4. Capture receipts as you go
Snap a photo of every receipt and attach it to the transaction in your accounting software. Tax authorities can ask for proof years later.
5. Reconcile monthly
Reconciling means matching your books to your bank and card statements so nothing is missing or duplicated. Monthly reconciliation takes an hour for most small businesses — and catches fraud, errors and forgotten subscriptions.
6. Read three reports
- Profit and loss — are you making money, and where are costs growing?
- Balance sheet — what you own and owe at a point in time.
- Cash flow statement — where cash came from and went.
7. Track what you're owed and what you owe
Review accounts receivable (unpaid customer invoices) and accounts payable (bills you owe) weekly. Pair this with the routine in our cash flow guide.
DIY, bookkeeper or accountant?
| Option | Best for |
|---|---|
| DIY with software | Very early stage, few transactions, comfortable with numbers |
| Part-time bookkeeper | Growing businesses that want monthly clean books and reports |
| Accountant / CPA | Tax planning, filings, structure decisions, financial statements for lenders |