So, You Started a Small Business. Now What?
You had a dream, you took the leap, and now you’re officially a small business owner. That’s huge!! But along with the excitement comes the not-so-glamorous side of running a business – keeping track of your money.
Maybe you’re still tracking expenses on sticky notes (yikes), or maybe you’re thinking, “I’ll figure it out at tax time.” (Double yikes.)
Here’s the truth: A solid bookkeeping system is the difference between a thriving business and a financial nightmare. And lucky for you, I’m here to help.
Step 1: Choose Your Bookkeeping Method
Before you dive in, you need to decide how you’ll handle bookkeeping:
Cash-Based Accounting: You record income when you receive it and expenses when you pay them. Simple and great for small businesses without inventory.
Accrual-Based Accounting: You record income when earned and expenses when incurred—even if money hasn’t exchanged hands yet. Required for businesses making over $25 million, but also helpful for long-term financial planning.
For most small businesses, cash-based accounting works just fine. But if you want a more accurate picture of your finances, accrual might be the way to go.
Step 2: Separate Business and Personal Finances
Look, I get it. You’re the heart and soul of your business, so it feels natural to mix personal and business expenses. But trust me – this is one of the biggest mistakes you can make.
🛑 DO THIS INSTEAD:
- Open a separate business checking account and business credit card (if credit is needed).
- Pay yourself a salary (even if it’s small).
- Keep every business receipt – yes, even that $5 coffee you bought for a client meeting.
Pro Tip: If you haven’t set up an LLC yet, consider doing so to protect your personal assets. Check out SBA’s guide to choosing a business structure to learn more.
Step 3: Pick the Right Bookkeeping Software
Gone are the days of tracking finances in a giant ledger (unless you like that old-school accountant vibe). Now, there are tons of tools that make bookkeeping easier:
🔹 QuickBooks Online – Industry standard, great automation, works for all business sizes.
🔹 Wave – Free option for solopreneurs and freelancers.
🔹 Xero – Affordable and user-friendly, perfect for small businesses.
🔹 FreshBooks – Great for invoicing and service-based businesses.
The best software is the one you’ll actually use. If you feel overwhelmed, consider outsourcing your bookkeeping (*wink wink*).
Step 4: Create a Chart of Accounts
A chart of accounts (COA) is the backbone of your bookkeeping system. It categorizes all your income, expenses, assets, and liabilities.
Think of it like a neatly labeled closet: when everything has a place, it’s easy to find what you need.
At a minimum, your COA should include:
📌 Income (sales, service revenue)
📌 Expenses (rent, advertising, supplies)
📌 Assets (cash, accounts receivable, equipment)
📌 Liabilities (loans, credit card balances)
Step 5: Track Income and Expenses (Daily, Not Yearly!)
The biggest bookkeeping mistake? Waiting until tax season to organize everything.
✅ DO THIS INSTEAD:
- Set a reminder to reconcile accounts weekly.
- Use an app like Expensify or Dext to snap photos of receipts.
- Categorize transactions immediately (not six months later when you’ve forgotten what they were for).
Pro Tip: The IRS loves a well-organized small business. Check out their small business tax guide for tips on deductions and record-keeping.
Step 6: Stay on Top of Invoices and Payments
Nothing kills cash flow faster than unpaid invoices. If you’re not tracking what customers owe you, you’re basically handing out interest-free loans.
🔹 Send invoices immediately (don’t wait until “you have time”).
🔹 Follow up with overdue payments—yes, even if it feels awkward.
🔹 Offer multiple payment options to make it easy for clients.
Pro Tip: Automate invoicing with QuickBooks or FreshBooks to avoid the headache.
Step 7: Set Aside Money for Taxes
Taxes sneak up on small business owners like a horror movie jump scare. 😱 Avoid the panic by setting aside 25-30% of your income for taxes.
Want to make it easy? Open a separate business savings account and transfer a percentage of every payment you receive. Your future self will thank you.
Final Thoughts: DIY or Hire a Pro?
I won’t lie—setting up a bookkeeping system takes time and effort. You can DIY it, but if the thought of spreadsheets and receipts makes you want to run for the hills, why not let a pro handle it?
💡 Hiring a bookkeeper (like me) means:
✔️ More time to grow your business
✔️ Less stress over tax season
✔️ No more late-night number crunching
If you want your books done right from the start, let’s chat! Contact me today and let’s get your bookkeeping set up the smart way.
