Bookkeeping Basics for Small Business Owners (and Bad B*tches)

So you’re a small business owner wondering how in the hell to figure out the basics of bookkeeping? 

We got you, sweet baby angel. Because in this blog post, we’re giving you the low-down on bookkeeping 101, including everything from the difference between bookkeeping and accounting to the basics you’ll want to stay on top of every week, month, quarter, and year.

What in the funk is bookkeeping (and why is it important)?

At its most basic level, bookkeeping is the process of tracking all of the financial transactions within your business. 

We’re talking sh*t like the amount of money you’re bringing in, everything you’re spending money on, how much you’re paying yourself, loans you might be paying, and the cash you should be putting away for taxes, all of that good stuff. 

Bookkeeping is ridiculously important because it helps you:

• Track if your business is actually profitable (AKA bringing in more than you’re spending) 
• Help show you if you should be charging more $$$
• See where you can potentially cut back so you can put more cashola in your pockets
• Be clear about which strategic money moves you’re ready to make (like being financially ready to hire a virtual assistant or invest in redoing your website)
• Pay your damn self!
• Oh yeah, and calculate how much you need to set aside for taxes

And it’s one of those things that every business (big and small) is literally required to do, because in order to run a legit, you’ve got to report and pay your taxes. And in order to that, you’ve got to know what your taxable income is, what write-offs you can take, and the profit you’re churnin out (cuz you started your business to be a bad b*tch that gets rich).

Bookkeeping vs. accounting 

If you’re wondering what the hell is the difference between bookkeeping and accounting (or if you weren’t and are like, “oh sh*t, I had no idea there was a difference), hold on to your butts because we’re about to drop some seriously helpful knowledge…

While both bookkeeping and accounting center around your business finances, bookkeeping is more focused on tracking your finances, while accounting is about analyzing your numbers.

A bookkeeper will help you record every penny coming in and out of your business, but a CPA (Certified Public Accountant) or EA (Enrolled Agent) will help you file taxes, and if they’re one of the good ones, partner with you on tax strategy.

(Although, some bookkeepers *cough cough* Dory Dimes *cough cough* can help you with making strategic money moves, like figuring out if you’re pricing your services appropriately based on your industry and market, optimizing your deductions, analyzing which products you offer actually bring in a good profit, and more.).

Since accountants don’t help you track income and expenses, they often work directly with bookkeepers to get all of that info. 

In other words, having a bookkeeper and a CPA is the killer combo that has you covered on both ends.

Bookkeeping terms actually worth knowing

The financial world is full of big-ass terms that can be soops confusing. And honestly, you really don’t need to know all of them. But here are the basic bookkeeping terms you definitely want to know as a small business owner:

Sales and Revenue = technically these are two different terms, but a lot of people use them interchangeably and they refer to the amount of money your services or products are bringing in (plus any other money you might be earning, like interest or commissions). 

Expenses = what you’re spending. We’re talking monthly subscriptions, how much you’re paying a 2nd photographer, education related investments, advertising, etc.

Profit = how much is left over after subtracting your expenses from your income. 

(For example: let’s say you book two wedding packages for $5,000 each and both of your clients pay in full, your sales for the month would be $10,000. But then let’s say you have to pay your 2nd photographer $1,600 and your Dubsado renews for $400 for the year so your profit is actually $8,000).

Fixed Assets = more expensive gear purchases like a camera body, the latest lens, or a laptop, something that will last you several years.

Liability = these are monies you owe to someone else, but haven’t paid yet, like a credit card balance, Stripe or Honeybook loan, or sales tax you need to file with the state.

Bank reconciliation/reconciling = might sound scary, but really just means cross-checking that everything that happened in your bank account is reflected in your accounting software or bookkeeping spreadsheet and the ending balances match in both.

The 9 bookkeeping basics every small business owner should be doing 

Before we jump into the weekly, monthly, quarterly, and yearly bookkeeping basics you’ll want to stay on top of as a small business owner, you should…

#1 – Sort your legal sh*t 

That means registering your business with your state, applying for an EIN (Employer Identification Number), applying for business licenses (if needed), figuring out your contracts (check out The Legal Paige, if you want some awesome templates), and purchasing business insurance. 

#2 – Set up your financial sh*t

You’ll want to open a business bank account (and a credit card, when you’re ready) because whatever you do, you do not want to be mixing your business and personal finances.

(We recommend Chase or Bluevine for biz banking and Chase for credit cards, because they’ve got some of the best rewards you can find.) 

You’ll also want to get your invoicing set up so when you start collecting money from your clients, you’ve got a legit way for them to pay. (Like Honeybook, Dubsado, Stripe or Wave.)

#3 – Figure out what your tax obligations are (and when they are due)

We get it, truly. Taxes are confusing as funk. They might make you feel like you’re getting clawed at, in the face, by a rabid kitten. However, since you’re a bad b*tch who wants to keep their business legit… you have to know which taxes you are obligated to pay.

Here are the tax types you should know as a small business owner:

Income tax: the one that has you groaning every year in April when you’re forced to file your official return. Income tax is calculated based on the money you have left over after expenses and write-offs are deducted, and what would normally be withheld from a paycheck if/when you work for the man. These are considered personal taxes even as a business owner, your business profits pass-through to your personal tax return (AKA Quarterly Estimated Taxes). There are both Federal and State versions.

Self-employment tax: the sibling of income taxes and is made up of Social Security and Medicaid. This bad boy gets filed annually in April and/or as part of your quarterly taxes and is also calculated from profit (money remaining after expenses). These are on the Federal and sometimes State level.

Sales tax: these are business taxes (not personal like the first two on this list) and are filed under your business EIN. You usually pay sales taxes monthly or quarterly, but sometimes semi-annually or annually. Instead of being calculated from profit, they are determined based on your total sales and are charged to and collected from your clients who purchase your goods and/or services. These are always at the State level, never Federal.

B&O (business and occupation) or GE (general excise) tax: similar to sales tax, but… worse because there are fewer exemptions. Typically filed and paid monthly or quarterly, but sometimes semi-annually or annually. These taxes are based on your total revenue. These are always at the State level, never Federal.

Franchise tax: an extra sh*tty tax, tbh, because it’s a “it’s a privilege of doing business” tax. Could be calculated as a percentage of your company’s worth or a flat rate, depending on your state. This is also a State tax.

Taxes suck, especially since no one ever teaches you about all the different types or how to prepare for them, so if you’ve got questions, that’s totally normal. It’s super-duper important to reach out to a professional early and check-in often, so you don’t fall into an anxiety spiral when things get busy. Schedule yourself an Ask a Dime session to learn all about business finances and how to get and stay ready for the IRS BS.

After you’ve got that foundational stuff nailed down, you’re ready to move on to the weekly, monthly, quarterly, and yearly bookkeeping basics for small business owners.

#4 – Make a plan for keeping track of all your receipts weekly

And we’re not talking about shoving them into a shoe box. (Especially because you have to keep financial documents for up to 7 years). Instead, consider creating a folder in Google Drive, your email inbox, Dropbox, HubDoc, or wherever you keep your sh*t, title that folder, “[Year] Taxes,” and create a subfolder for receipts. 

Then every time you buy something for your biz, snap a picture of the receipt, and upload it (or email it) straight to that folder.

(If you use QuickBooks, you can take a pic straight in the QB app).

Get in the habit of doing it right then and there so you aren’t searching for some random Amazon receipt 6 months later.

#5 – Block off 1-2 hours onca a week to review/record income and expenses

The best way to actually stay on top of your bookkeeping is to make it a habit. So, pick a day of the week where you block 1-2 hours off your schedule to give some love to your numbers. 

Use those 1-2 hours to:

• Send invoices and make sure all of your clients are paid up.
• Deposit checks or cash and review your bank account, credit card, and payment processor balances to see how much money you’ve got on hand.
• Review and record all of your transactions (both incoming and outgoing) either in your accounting software or in a bookkeeping spreadsheet.
• Check in to make sure you’ve got receipts for all of those expenses you’ve put into your bookkeeping spreadsheet or software.

And speaking of bookkeeping spreadsheets… 

The Dime Sheet is the bomb.com if you’re looking for a bookkeeping spreadsheet that will help you track income, expenses, how much to pay yourself, how much to set aside for taxes, and more (but wait, there’s more vibes).

#6 – Pay yourself biweekly or monthly

This one’s fun because this one is you paying yourself! A good rule of thumb for any small business is to pay yourself 50-60% of the bottom line, put 20-30% to tax savings, and invest 10-20% back into your business to keep it growing. 

We’d recommend paying yourself once a month or every two weeks rather than weekly. That way, you won’t constantly be transferring money around. 

#7 – Check in on big-picture stuff monthly

Once you’re nailing the weekly bookkeeping basics, you’ll want to remember to do some bigger-picture stuff monthly. Like… 

• Collections: double-checking that all of your clients are paid up, no invoice left behind!

• Reconciling: sounds scary, but you already know that just means making sure that everything that happened in your bank account is showing up correctly in your accounting software or spreadsheet 

• Evaluate your Profit & Loss statement: reviewing how much revenue (sales) your business is generating, what you’re spending your money on (expenses), and your net income (profit) at the end of each month. And it’s important as hell because this report helps you understand if you need to cut back on expenses, increase sales, or make other strategic money moves

#8 – Pay your quarterly taxes, quarterly (and your state taxes, if needed)

Federal estimated taxes are due four times a year and you can pay them yourself online, easy peasy, promise. Quarterly taxes are due on April 15th, June 15th, September 15th, and January 15th.

For state taxes, the dates might be different so make sure to double-check what the due dates and obligations are for your state.  

And if you’re stressing about quarterly payments, check out our free Quarterly Tax Checklist that walks you through how, when, and where to make them. 

#9 – Don’t forget about your annual to-dos

And lastly, there are a few bookkeeping basics for small business owners that you’ll want to think about at least once a year. And those annual bookkeeping basic tasks are:

• Filing 1099s forms: for any contractor (like a web designer, copywriter, 2nd photographer, etc.) that you paid more than $600 to in cash, check, bank transfer (like Zelle), or personal Venmo/PayPal, during the calendar year, January-December, you will owe them a 1099-NEC form.

• Budgeting/Forecasting: October & November are a great time of year to do a more thorough review of your Profit & Loss for the year, set some goals, and create a forecast & budget for the following year, it’s called *manifesting* look it up.

• Sole Prop/LLC/S-Corp: whether you’re thinking of switching to an LLC to protect yourself by separating your personal and business assets, or filing as an S-Corp, which comes with some major tax savings. December & January are both perfect times to get that paperwork filed. PS, the deadline for filing as an S-Corp is March 15th!

Wondering what bookkeeping software you should use?

If you’re planning on DIYing your bookkeeping, we seriously recommend using a bookkeeping spreadsheet over a software. And that’s because a software like QuickBooks or Xero, can be complicated AF. If you’re not on top of it, things can go haywire and those things might end with you paying hundreds to thousands of extra dollars in taxes (barf).

(We’re not saying that to scare you, we’re saying that because we’ve seen it happen to our clients, we love you, and we don’t want to have to pay Uncle Sam anymore than you already do.)

However, if you are gonna use a bookkeeping software, for the love of all that’s good, please consult a pro before you jump in. 

(Also, if you choose to use QuickBooks, make sure to sign up for QuickBooks Online—not, we repeat, NOT Self-Employed.)

Wondering if you should say ‘funk this noise’ and hire a bookkeeper, instead?

There’s a reason this blog post is so beefy and that’s because there’s a sh*t ton that goes into bookkeeping, even when we’re just talking about the basics. 

If you do choose to DIY your bookkeeping over hiring a bookkeeper, we always recommend chatting with a profesh so you aren’t just free ballin in the wind, okay? That way, you’re for sure starting off on the right foot and can be confident in what you’re doing. 

If reading this blog post made your palms sweaty, knees weak, arms heavy… (vomit on his sweater already…), outsourcing could be the better move. 

Signs you’re ready to outsource your bookkeeping:

• You’re too busy to keep up with your bookkeeping and are starting to fall months behind 
• You’re borderline having panic attacks thinking about screwing things up
• You’re sales are growing past the $50,000 mark and you want to reach 6-figures+
• You’re selling products (at the very least you’ll want to consult with a bookkeeper, because having a product-based business makes shtuff way more complicated)

Obnoxiously, there’s no “right” answer, but hopefully those signs help point you in the direction of what’s right for you. 

And if you’re still not sure if it’s time (or you’re positive it’s well past time) to hire a bookkeeper, slide into our inbox and we’ll provide you the extra guidance you need.

Recap: bookkeeping basics for small business owners

To sum alllllll of that up? There’s a lot that goes into bookkeeping, but as a small business owner you need to know:

• Bookkeeping deals with the day-to-day details while accounting deals with the bigger money picture
• Sales, revenue, expenses, profit, assets, liability, and reconciling are bookkeeping terms worth.learning because you’ll hear them a lot and they’ll help you understand where the money you’re making is actually going.
• There are a bajillion types of taxes and it’s important to figure out which ones you need to pay.
• Make sure to set up your financial and legal foundations (like bank accounts, contracts, business insurance, invoicing systems, etc.) so you have the import sh*t covered before you start stacking benjamins.
• Keep Track all of your receipts. Full Stop.
• Block 1-2 hours on your calendar every week to send invoices, look at your bank accounts, record incoming and outgoing money, and organize receipts. Habits happen over time, schedule it in.
• Every month— pay yourself, pay your sales tax, make sure invoices are paid, review your Profit and Loss statement.
• Every quarter— pay your taxes (estimated federal taxes and state, if applicable).
• Every year— file 1099 forms, set financial goals and create a budget, consider switching your business entity (like to LLC or S-Corp), if it makes sense.
• And if you’re gonna DIY it, a bookkeeping spreadsheet (like this one) is the way to go.

Looking for more bookkeeping support?

We got you, boo. Check out our DIY resources to learn more about our 1:1 calls and our Bad B$tch Get Rich Club that offers ongoing support, as well as download all of our freebies that include a bookkeeping guide, the how-to for quarterly taxes, and the inside scoop on analyzing your numbers, so you know how much you’re making and where it’s all going. 

And if you’re interested in hiring us as your bookkeepers, check out our monthly bookkeeping services.