Basic Bookkeeping Setup for Small Business
Proper bookkeeping is essential for any small business. It helps you track income, expenses, and profitability while ensuring compliance with tax requirements. Here's how to set up a basic bookkeeping system:
Choose Your Bookkeeping Method
Cash Basis
- Record income when received
- Record expenses when paid
- Simpler for small businesses
- Good for service-based businesses
Accrual Basis
- Record income when earned
- Record expenses when incurred
- More accurate financial picture
- Required for businesses with inventory
Essential Bookkeeping Records
Income Records
- Sales receipts and invoices
- Bank deposit records
- Cash register tapes
- Credit card statements
Expense Records
- Receipts for all business purchases
- Bank statements and canceled checks
- Credit card statements
- Mileage logs for business travel
Setting Up Your Chart of Accounts
Assets
- Cash in bank
- Accounts receivable
- Inventory
- Equipment
Liabilities
- Accounts payable
- Loans payable
- Credit card balances
Equity
- Owner's capital
- Retained earnings
Income
- Sales revenue
- Service revenue
- Interest income
Expenses
- Office supplies
- Rent
- Utilities
- Professional services
Bookkeeping Software Options
Simple Solutions
- QuickBooks Simple Start
- FreshBooks
- Wave (free)
Advanced Solutions
- QuickBooks Online
- Xero
- Sage
Daily Bookkeeping Tasks
- Record all sales and income
- Enter all business expenses
- Reconcile bank accounts
- Update accounts receivable
Monthly Bookkeeping Tasks
- Reconcile all bank accounts
- Review and categorize expenses
- Generate financial statements
- Review accounts receivable aging
Record Keeping Best Practices
- Keep all receipts and invoices
- Use separate bank accounts for business
- Back up your records regularly
- Keep records for at least 3 years
