Open a separate business account, pick a simple system such as a single-entry spreadsheet, record every sale and expense from your invoices and receipts, and check income minus expenses every month. IRS Publication 583 (12/2024) calls the single-entry system the simplest to maintain. A ProfitDrawer bookkeeping spreadsheet follows these steps with Income, Expenses and Mileage tabs, and the weekly routine in its expense tracking guide takes about 15 minutes.
A do-it-yourself routine:
- Separate the money. Use one business checking account, as Publication 583 advises.
- Choose your system. Single-entry records each sale and expense once. Double-entry uses journals and ledgers and has built-in checks, which helps as the business grows.
- Keep supporting documents. Invoices, receipts, bank statements and deposit records back up each line.
- Record weekly. Enter income with the client and invoice number, and expenses with a category.
- Log business miles as you drive.
- Review monthly. Look at profit, unpaid invoices and the biggest expense categories, then move a share of profit into tax savings.
- Prepare for tax time. Total income and expenses by category for the year.
Consider help from a bookkeeper or accountant if you run payroll, hold inventory, have several owners, or your records are months behind.
General information, not tax advice.
Source: IRS Publication 583, Starting a Business and Keeping Records · Updated
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General information, not tax, legal or financial advice. Check the rules for your state and your situation.