Bookkeeping for a small business: what to do yourself and when to hire

Step by step

1. 1

   Open a separate business account

   Keep business money apart from personal money: one account only for the income and expenses of the business. This makes every transaction easy to find and prove at tax time. An EIN and, if you use a business name, a DBA registration help you open one.

2. 2

   Choose the cash or accrual method

   With the cash method, you record income when you receive the money and expenses when you pay them. With the accrual method, you record a sale when it is made, even if the client pays later. The cash method is simpler, because your books match your bank account.

3. 3

   Record every income and expense

   Once a week, enter each sale and each expense with the date, the amount, who paid you or whom you paid, and what it was for. Report all business income, including card and app payments, whether or not you get a Form 1099-K; payment apps must send that form above $20,000 in more than 200 transactions, and some send it for less. Software can pull transactions from your bank, so you only sort them.

4. 4

   Keep receipts and records

   Keep supporting documents: sales slips, paid bills, invoices, receipts, deposit slips and canceled checks, on paper or as scans. Keep tax records for at least 3 years, 6 years if you left out more than 25% of your income, 7 years if you claim a bad debt or worthless securities, and employment tax records for at least 4 years. If you drive for work, log business miles: the 2026 standard rate is 72.5 cents a mile from January to June and 76 cents from July to December.

5. 5

   Pay estimated taxes every quarter

   If you expect to owe $1,000 or more for the year, pay estimated tax with Form 1040-ES, online or through your IRS online account. For 2026 income, the dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Self-employment tax is 15.3% on top of income tax once your net earnings reach $400, so set aside part of every payment you receive.

6. 6

   Collect W-9s and send 1099s

   Before you pay a contractor, ask for Form W-9 with their tax number. If you pay one person $2,000 or more for services in 2026, you send them Form 1099-NEC; for payments through the end of 2025, the threshold was $600.

7. 7

   Choose software or a bookkeeper

   Software is enough if you have time to sort transactions yourself: Wave has a free plan, and Xero starts at $27 a month. A bookkeeper handles the routine work for less than a CPA, and online bookkeeping services start at $99 to $450 a month. A tax professional can help when you hire staff or change how the business is taxed.