Bookkeeping is just the habit of recording what your business earns and spends. Follow these eight steps and you'll have clean records for tax time and a clear picture of how your business is doing.
The Basic Steps
Use a Separate Business Bank Account
Keep business transactions separate from personal transactions. Run every business dollar through the LLC's own bank account so your records stay clean and the separation between you and your business stays clear.
Track All Business Income
Record money received from customers and other business sources. Each time your LLC receives money, note what it was for, how much it was, and when it arrived.
Track Business Expenses
Keep records of expenses such as advertising, supplies, insurance, software, professional services and other legitimate business costs. Write down what each expense was for — that note is often the difference between an expense you can document and one you can't.
Save Receipts and Supporting Documents
Keep receipts, invoices, bills, bank records and other documentation supporting transactions. A shoebox of paper works, but a folder of scans or photos on your phone is easier to search later.
Track Contractor and Employee Payments
Maintain accurate records of payments made to workers and contractors — who you paid, how much, what the work was, and when you paid them. These records also feed the forms you may need to file at year end.
Reconcile the Business Bank Account
Regularly compare bookkeeping records with bank transactions to find missing, duplicated or incorrect transactions. Once a month, go line by line until your records and your bank statement tell the same story.
Review Profit and Loss
The math is simple: Revenue − Expenses = Profit or Loss.
Review the business's income and expenses regularly — monthly is a good rhythm — rather than waiting until tax time. A quick review shows whether the business is making money and where the money is going, while you can still act on it.
Choose How You Will Keep Your Books
Three beginner-friendly choices:
- Simple spreadsheet — suitable for some very small or simple businesses.
- Accounting software — useful as transaction volume and bookkeeping needs grow.
- Bookkeeper or accountant — useful when the business becomes more complicated or the owner wants professional help.
Official Resource
The IRS explains what business records you should keep and how long to keep them.