Bookkeeping is the record of what came in, what went out, and what is left. That is the entire job. Everything else — software, categories, reports — exists to make that record accurate and readable.
Here is the whole process for a small business, in the order you should actually do it.
1. Open dedicated business accounts
One business checking account and one business card. Every dollar the business earns goes into that account, and every business expense goes out of it. This single decision removes most of the work later, because your statement becomes a nearly complete record instead of a mix you have to untangle.
2. Choose cash basis (most small businesses should)
Cash basis means you record income when the money arrives and expenses when the money leaves. Accrual basis records them when they are earned or owed. Most small businesses under a few million in revenue use cash basis because it is simpler and it matches how you experience the business.
3. Record income — including the money that never hits the bank
Card deposits are easy: they show up on the statement. The failure point is cash, Venmo, Zelle, and Cash App. If those are not logged the day they happen, they are gone. Under-recording income makes your profit look worse than it is, which distorts every decision you make from pricing to hiring.
Pick one place to log non-bank payments and log the date, amount, and who paid. Thirty seconds per job.
4. Categorize expenses to your tax return's lines
Do not build a custom chart of accounts. Use the Schedule C categories: advertising, car and truck, contract labor, insurance, legal and professional, office expense, rent, repairs, supplies, taxes and licenses, travel, meals, utilities, wages. Anything ambiguous goes into a single 'ask my preparer' bucket.
5. Keep documentation as you go
Photograph receipts at the point of purchase. Note the business purpose on meals. Keep invoices and 1099 records for contractors you pay $600 or more in a year. The IRS generally expects records to be kept for at least three years.
6. Close the month
Once a month, match your records to the bank statement. Every deposit accounted for, every charge categorized, nothing unexplained. This is where duplicate subscriptions, double-billed vendors, and price creep get caught while there is still time to do something about them.
7. Read the three reports that matter
- Profit and loss — revenue minus expenses for the month. What you actually made.
- Cash flow — what moved in and out, including cash that never touched the bank.
- Trends — this month versus last month and versus the same month last year, so you can tell a real change from normal seasonality.
8. Set aside tax money monthly
Self-employed owners generally owe quarterly estimated taxes. Setting aside a percentage of profit each month — rather than finding the money in April — is the difference between a manageable year and a painful one. Your preparer can tell you the right percentage for your situation.
Doing it with software
LedgerFast was built for small LLCs that run on mixed cash and card revenue. Log cash jobs in seconds, upload the bank statement once a month, and get a combined P&L, cash flow view, and anomaly warnings — with expenses already mapped to Schedule C lines. Plans from $49/month, first month free.
Disclaimer
This article is general information about bookkeeping practices, not tax, legal, or accounting advice. LedgerFast is not a CPA firm and does not provide tax preparation or filing services. Tax rules change and depend on your specific circumstances — consult a qualified tax professional before acting. Use of LedgerFast is governed by our Terms of Service.