How to Do Bookkeeping for Small Business

Bookkeeping isn’t just about data entry. It’s about understanding your numbers so you can run your business with clarity and confidence.

Whether you're just starting out or you’ve been winging it for too long, this guide will walk you through what bookkeeping actually involves, when to outsource, and how to avoid the most common mistakes small business owners make.

Do you need abookkeeperfor your business?Sam's Listsimplifies the search so you can find bookkeepers,accountants, and CPAs specialized to your industry, needs, and stage of growth. Get connected in seconds!

What Is Bookkeeping?

Bookkeeping is the process of tracking your financial transactions — revenue, expenses, payments, payroll, and more. But it’s also how you:

• Know what you’re spending (and where to cut)

• Stay ready for tax season year-round

• Avoid cash flow issues before they hit

• Make smarter business decisions, faster

Abookkeeperhelps you stay organized so your accountant can help you optimize.

Can You Do Your Own Bookkeeping?

Yes — especially when you're just starting out.

Plenty of founders DIY their bookkeeping using Excel or QuickBooks. But over time, it becomes one of the most painful and error-prone parts of the business if you're not careful.

If you're spending 10+ hours per month sorting receipts, reconciling accounts, and still feel unsure if your reports are right... it's time to get help.

"We see a lot of business owners using cheap AI tools or trying QuickBooks without guidance, and it ends up being more frustrating than helpful. You need to reconcile consistently — ideally monthly — or hire someone who can." — Sam’s List

Explore vetted bookkeepers here

What Do You Need to Get Started?

You’ll need a few basic components to do bookkeeping well:

1. A dedicated business bank account

2. Bookkeeping software(like QuickBooks, Xero, or Wave)

3. A consistent system(weekly or monthly reconciliation)

4. A basic understanding of income vs. expenses

5. Receipts and supporting documentation

6. A calendar to track due dates (quarterly taxes, payroll, etc.)

Many new business owners forget to separate personal and business expenses. Don't be that person—it’ll mess up your deductions and give your accountant a headache.

Tools You Can Use to DIY (When It Makes Sense)

If you’re early stage and want to do it yourself for now, here are some tools that help:

• QuickBooks Online— industry standard, connects to banks and apps

• Xero— a great QuickBooks alternative with strong reporting

• Wave— free and simple for freelancers

• Bench— hybrid bookkeeping service + software

Make sure to:

• Reconcile monthly

• Separate business and personal expenses

• Set calendar reminders for monthly bookkeeping check-ins

Consistency is more important than complexity.

DIY vs. Hiring a Bookkeeper

Find bookkeepers who work with small businesses

Signs It’s Time to Hire a Bookkeeper

You should consider outsourcing bookkeeping if:

• You're spending more than 5–10 hours/month on it

• You're making $250K+ in annual revenue

• You’ve missed tax deadlines or don’t know your numbers

• You’re managing inventory, contractors, or multiple bank accounts

Even solopreneurs benefit from a solid bookkeeping system once they’re growing. And ecommerce brands especially need help — inventory management and cash flow timing can get complicated fast.

“Bad books don’t just hurt during tax time. They can hide real issues like overspending or missed growth opportunities.” — Sam’s List

We’ve seen ecomm founders onboard a bookkeeping firm and realize their inventory was miscategorized for months — leading to massive confusion over profit margins and tax liabilities.

Lessons from Sam’s List

One solopreneur told us they didn’t touch their books for 9 months—then spent $1,200 having someone clean them up during tax season.

Another business owner hired a cheap “automated” service, only to discover it missed thousands in uncategorized expenses.

“The system looked cool, but no one actually reviewed it. I switched to a human bookkeeper fromSam’s Listand now get monthly reports I can actually understand.”

Common Bookkeeping Mistakes to Avoid

• Mixing personal and business expenses

• Falling behind on reconciliations

• Not tracking reimbursable expenses

• DIY’ing too long and miscategorizing everything

• Skipping reviews of cash flow and P&L

Another business owner realized they were losing thousands in subscription double charges because no one had flagged recurring payments across multiple tools.

Want more like this? Read:Common Bookkeeping Mistakes to Avoid

How to Stay on Top of Your Books

Here’s a simple monthly checklist:

Pro tip: Schedule a 30-minute "Finance Friday" every month to check your books.

FAQ

What’s the easiest way to do small business bookkeeping?

Use software likeQuickBooks Onlineor Xero, and build a monthly habit of reconciling and reviewing your numbers.

How much does a bookkeeper cost?

Freelance bookkeepers start around $300/month. Boutique accounting firms with advisory support can cost $800–$2,500/month depending on your business needs. See our full breakdown:How Much Does a Bookkeeper Cost

Should I use cash or accrual accounting?

Most small businesses start withcash accounting(recording money when it moves). But if you’re growing fast, talk to a bookkeeper aboutaccrual accounting— it gives a more accurate picture of your financial health.

What financial reports should I review each month?

At minimum: yourProfit & Loss,Balance Sheet, andCash Flow Statement. A good bookkeeper will prepare these for you every month.

How do I choose a good bookkeeper?

Look for industry experience, responsiveness, and clear monthly deliverables. Read our full guide:How to Find a Good Bookkeeper

You Might Also Like

1. Best Bookkeeping for Startups 

2. DIY vs. Outsourced Bookkeeping 

3. How Much Does a Bookkeeper Cost

Author: Kimi, Co-founder of Sam’s List
Kimi writes about what she's learning while building Sam's List and shares honest takeaways from her conversations with accountants and financial advisors across the country. None of this is financial advice—just the stuff most people wish someone told them sooner.