How to do bookkeeping as a small business

Bookkeeping is an essential element of running a business. It includes keeping precise and up-to-date records of your company’s financial transactions, like sales, expenses, and payments. Good bookkeeping practices can allow you to track your company’s financial health, make educated choices, and ensure compliance with tax regulations and laws.

Although proper bookkeeping procedures are essential, most individuals need more confidence in managing complicated corporate accounts. Therefore, this guide will highlight the critical steps in bookkeeping for small businesses.

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Table of contents

How to do bookkeeping as a small business

Key practices for bookkeeping services for small businesses

1. Choose a bookkeeping method
Single-entry bookkeeping is an easy and simple method suitable for startups or small businesses with minimal transactions. It includes documenting transactions in a single column and helps track revenue. Double-entry bookkeeping is a more complicated method that includes recording transactions in two columns (debit and credit) and is suitable for companies with multiple accounts and complex financial transactions.

2. Open a separate bank account
Mainly smaller companies typically operate and perform all their business operations through their personal bank account. It leads to substantial confusion while preparing the accounting records because of the complexity of distinguishing between personal and business expenses.

Opening a different account for business transactions solves the same issue. It assists the owner in keeping track of the transactions and monitoring his expenses constantly and in a way that saves time.

3. Categorise transactions
Categorizing transactions is essential for bookkeeping because it lets you monitor your revenue and expenditures more accurately, which will help you make sound company decisions and prepare precise accounting records.

Below are a few common categories for small business transactions:

  • Revenue: Any earnings your business generates from sales, assistance, or other sources.
  • Cost of sales:These costs are explicitly linked to producing or delivering your goods or services. Instances include raw materials, direct labor, and delivery charges.
  • Operating expenses: These are the costs of running your business that is not explicitly linked to producing or delivering your goods or services. Instances include rent, utility services, insurance, advertising, and office supplies.
  • Capital expenditures: This group includes purchases of long-term assets like machinery, furniture, or cars.
  • Owner’s equity: This group includes transactions that impact the owner’s equity in the business, like investment opportunities, loans, or distributions.

4. Make a bookkeeping schedule
Making a bookkeeping schedule can assist small businesses in staying organized and guarantee accurate financial records. Some of the bookkeeping activities include:


  • Document all expenses and sales in the accounting system
  • Reconcile credit card statements and bank accounts
  • Follow up on any unpaid bills or invoices


  • Review financial statements (balance sheet, income statement, and cash flow statement) to know the company’s financial health.
  • Review accounts payable and accounts receivable to maintain accuracy.
  • Prepare and submit any necessary tax returns.


  • Analyze the budget and adjust it if required
  • Review profit and loss statements to know the trends and make strategic decisions about the company


  • Conduct a full audit of financial transactions to maintain precision
  • Prepare tax returns and financial statements for the year-end
  • Make a budget for the upcoming year

Also, handle your books when your mind is fresh and engaged—at the beginning of the day instead of late at night. You want to be at your brightest when looking at numbers that describe your company’s profitability, growth, etc.

5. Create financial reports
Financial reports are valuable for businesses as they help understand the business’s financial health and planning for the future. There are various types of financial statements you can create from your bookkeeping system, including:

  • Income statement: This report shows your business’s revenue, expenses, and profit or loss for a particular period. It offers a snapshot of your business’s profitability and assists you in identifying areas where you can cut costs or increase profitability.
  • Balance sheet: It demonstrates your company’s assets, liabilities, and equity at a specific time. It assists you in understanding your company’s financial position and whether you have sufficient assets to cover your liabilities.
  • Cash flow statement: This statement shows your company’s cash in flows and outflows during a particular period. It assists you in understanding your business’s liquidity and cash flow, essential for managing your day-to-day tasks and planning for the future.
  • Accounts receivable aging report: This report demonstrates the outstanding invoices you have yet to collect from clients and how long they have been outstanding. It assists you in identifying customers who are slow to pay and taking steps to manage remaining invoices.

6. Consider hiring a professional
Bookkeeping may become more complex and time-consuming as your organization expands. Hiring a small business bookkeeper will free up your time so you can concentrate on other areas of your company while ensuring your finances are in order. Below are a few reasons you should consider working with a bookkeeper.

  • Expertise: A qualified accountant or bookkeeper has the skills and knowledge to manage your capital effectively and efficiently, including understanding tax rules and regulations.
  • Time-saving: Managing your business activities while doing bookkeeping can be time-consuming. A professional can take care of your finances while giving you more time to concentrate on your primary business areas.
  • Accuracy: A knowledgeable bookkeeper or accountant can ensure that your financial records are precise and up-to-date, reducing the possibility of mistakes or errors that could harm your business.
  • Financial reporting: A professional can help you make financial reports and statements that will assist you in understanding the financial success of your company.

Hire small business bookkeepers

Work with a UK-based accountant for tax, accounting, payroll, & EIS/ SEIS needs.

Have a question? Call us on
0203 900 3500
Monday to Friday 9am – 5pm

Final thoughts

Bookkeeping is an essential task because it helps businesses and individuals to keep track of their financial activities. By properly recording expenses and income, bookkeeping enables small companies to determine their profits and losses, track their cash flow, and make sound decisions about their financial future.

Additionally, up-to-date bookkeeping is essential for tax purposes and can assist businesses in avoiding costly errors or penalties. Fortunately, bookkeeping doesn’t need to be complicated. By using various tools and technologies, there are several efficient ways to manage accounting and bookkeeping services for small businesses. Following the above guidelines and best practices, you’ll be better prepared to lay a solid financial foundation for future growth, profitability, and ultimate success.

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