--- title: "Small Business Bookkeeping Setup: A Practical Monthly Routine" description: "Set up small business bookkeeping with separate accounts, a chart of accounts and a monthly routine: receipts, reconciliations and two reports to read each month." url: https://wallacecpa.multisites.ai/guides/small-business-bookkeeping-routine publisher: Wallace CPA phone: +1-877-682-1171 quote: https://wallacecpa.multisites.ai/contact --- # Small business bookkeeping setup and a monthly routine Start with a separate business bank account, a simple chart of accounts and one place for receipts. Then follow the same routine each month: record transactions, reconcile every account, and read your profit and loss statement and balance sheet. The IRS says to record transactions as they happen. GuideUpdated October 21, 20266 min read ## Separate the accounts first The IRS says to open a business checking account and keep it apart from your personal account. ## Repeat one routine each month A short, fixed checklist beats a big cleanup at tax time. ## Read two reports The profit and loss statement and the balance sheet tell you how the business did and where it stands. Good books are a routine, not a project. This guide shows how to set them up once and run the same checklist every month. It uses IRS recordkeeping guidance and applies to most small businesses in Texas. It is general information, not advice for your business. ## Why should I separate business and personal money first? Open a business checking account and use it only for business. The IRS says this is one of the first things to do when you start a business. A clean account makes every later step easier and gives a clear record of income and expenses. Publication 583 gives the practical rules. Keep the business account apart from your personal account. Deposit receipts into the business account. Note the source of each deposit, such as income, owner funds or a loan. Avoid writing checks payable to cash. If you must pay cash for a business expense, keep the receipt. If you have more than one business, the IRS says to keep a complete and separate set of records for each. ## How do I set up a chart of accounts? A [chart of accounts](https://wallacecpa.multisites.ai/glossary/chart-of-accounts) is the list of categories your books use, such as sales, supplies, rent, payroll and loan payments. Keep it short. Create a category only when you will use it to make a decision or to prepare a tax return. Follow these steps. 1. List your income types. Examples are product sales, service fees and interest. 2. List your expense types. Use the categories you would expect on a tax return, such as advertising, insurance, rent, supplies and wages. 3. Add accounts for money you owe and own, such as loans, credit cards and equipment. 4. Review the list with your CPA before the first full month of entries. A short list is easier to keep clean. You can add a category later if a need arises. Many small changes are harder to untangle than a few planned ones. ## Which system should I use to keep the books? Use any system that shows your income and expenses clearly. The IRS says the law does not require a specific kind of record in most cases. The choice is a spreadsheet, a paper ledger or accounting software. What matters is that you keep it current and can support each entry. [Bookkeeping](https://wallacecpa.multisites.ai/glossary/bookkeeping) software saves time because it matches bank feeds, tracks categories and produces reports. QuickBooks is one common choice. If you use it, a CPA can help with setup, training or cleanup. See [QuickBooks services](https://wallacecpa.multisites.ai/services/quickbooks) for the kinds of help the firm lists. The IRS also describes the accounting method. With an accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them, even if cash moves later. Ask your CPA which method applies to your business. ## Which receipts and documents should I keep? Keep the documents that support each entry: sales records, bank and card statements, bills, receipts, invoices and contracts. The IRS says these records must support the income, expenses and credits you report. Store them in one place so you can find them later. The IRS says electronic records must meet the same requirements as paper ones. If you scan documents and shred the originals, test the system first. How long you keep each record depends on the item. See [how long to keep tax records](https://wallacecpa.multisites.ai/guides/how-long-to-keep-tax-records) for the periods the IRS lists. To send documents to your CPA, use the secure page at send a file. ## What is a good month-end checklist? A good month-end checklist has the same steps in the same order every month. Run it within the first two weeks of the next month. Mark each step as done, so you can see what is missing. Step What to do Why it matters 1\. Record transactions Enter or import all sales, bills and payments for the month The IRS says to record items when they occur 2\. Match receipts Attach a receipt or note to each expense Supports deductions if the IRS asks 3\. Reconcile bank and card accounts Make the statement, the checkbook and the books agree Finds errors and missed entries 4\. Review open invoices List unpaid customer invoices and unpaid bills Shows cash you expect and cash you owe 5\. Check payroll items Confirm wages and payroll tax deposits were recorded Payroll errors grow fast 6\. Read the reports Review the profit and loss and balance sheet Shows how the month went 7\. Save and back up Save reports and back up the file Keeps a record of each close Add steps that fit your business, such as inventory counts or sales tax review. ## How do I reconcile my accounts? Reconciling means making sure your bank statement, your checkbook and your books agree. The IRS says the statement balance may differ from the book balance for two common reasons. The statement may include bank charges you did not enter. It may also leave out deposits made after the statement date or checks that did not clear. Reconcile each bank account and each credit card every month. 1. Start with the statement’s ending balance. 2. Add deposits recorded in your books that are not on the statement yet. 3. Subtract checks and payments recorded in your books that have not cleared. 4. Compare the result with your book balance. 5. Find and fix any difference, such as a missing bank fee or a duplicate entry. The IRS says reconciling lets you verify how much money you have in the account and catch errors. A book balance that does not match the bank is a signal to look closer. ## Which reports should I read each month? Read two reports: the profit and loss statement and the balance sheet. The IRS says you need good records to prepare these financial statements. They help you manage the business and deal with your bank or creditors. Report What it shows Questions to ask [Profit and loss statement](https://wallacecpa.multisites.ai/glossary/profit-and-loss-statement) Income and expenses for a period Did income cover costs? Which expense grew? [Balance sheet](https://wallacecpa.multisites.ai/glossary/balance-sheet) Assets, liabilities and owner equity on one date How much cash do we have? What do we owe? The IRS describes an income statement as the income and expenses of the business for a given period of time. It describes a balance sheet as the assets, liabilities and your equity in the business on a given date. Compare each month with the prior month and the same month last year. ## When should I hand the books to someone else? Hand them off when the routine slips or the risk grows. Common signs are late reconciliations, mixed personal and business charges, a new employee, a loan application or a notice from a tax agency. You can hand off the full job or one step, such as reconciliations or payroll. Before you hand off, gather your account list, bank and card access for the preparer, your chart of accounts, last year’s return and any open notices. Ask what the preparer will do and what you still must do each month. If you want a CPA to look at your setup, see [small business accounting](https://wallacecpa.multisites.ai/services/small-business-accounting). The [small business tax calendar](https://wallacecpa.multisites.ai/guides/small-business-tax-calendar) shows how a monthly routine fits the tax year. ## Next step Pick a date this week to open or clean up your business account, set up your chart of accounts and run your first month-end checklist. To talk through your setup, see [small business accounting](https://wallacecpa.multisites.ai/services/small-business-accounting), call (877) 682-1171 or use the form at [/contact](https://wallacecpa.multisites.ai/contact). This guide is general information, not advice for your situation. Talk to a CPA about your own situation before you act. ## Frequently asked questions ### Do I need bookkeeping software? The IRS says the law does not generally require a specific kind of record. You can use any system that clearly shows your income and expenses. Software helps most owners keep that record on time, but a careful spreadsheet can meet the same test. ### How often should I do my books? The IRS says it is generally best to record transactions on a daily basis. Many owners do a short weekly entry and a full month-end close. Pick a schedule you will keep. ### What is a bank reconciliation? It is a check that your bank statement, your checkbook and your books agree. You do it for each bank and card account, each month. ### When should I hand my books to a professional? Consider help when the work falls behind, when you add employees, or when you need clean reports for a bank or for taxes. A CPA can explain which tasks to hand off for your own business. ## Terms on this page - [Profit and loss statement](https://wallacecpa.multisites.ai/glossary/profit-and-loss-statement) - [Chart of accounts](https://wallacecpa.multisites.ai/glossary/chart-of-accounts) - [Balance sheet](https://wallacecpa.multisites.ai/glossary/balance-sheet) - [Bookkeeping](https://wallacecpa.multisites.ai/glossary/bookkeeping) - [Payroll tax](https://wallacecpa.multisites.ai/glossary/payroll-tax) ## Sources 1. [IRS Publication 583: Starting a Business and Keeping Records](https://www.irs.gov/publications/p583) 2. [IRS: How long should I keep records?](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records) Written by Wallace CPA and checked against the sources above on October 21, 2026. Tax rules and dates change, so check the linked page before you act. General information, not advice for your situation. ## Keep reading - [The small business tax and bookkeeping year, month by monthA small business tax year has fixed dates for returns, estimated tax, payroll reports and Texas franchise and sales tax.](https://wallacecpa.multisites.ai/guides/small-business-tax-calendar) - [How long to keep tax records, and which onesThe IRS says to keep records that support your tax return until the period of limitations runs out. For most returns that is 3 years.](https://wallacecpa.multisites.ai/guides/how-long-to-keep-tax-records) - [Texas business taxes, explained for small business ownersTexas has no state income tax, but a business can still owe several others. The main ones are the franchise tax, sales and use tax, property tax on business...](https://wallacecpa.multisites.ai/guides/texas-business-taxes) - [S corporation, LLC or sole proprietor: how the choices differ in TexasA sole proprietor reports business income on Schedule C of the personal return. An LLC is a legal structure, and its federal tax treatment depends on what it...](https://wallacecpa.multisites.ai/guides/s-corp-llc-sole-proprietor-texas) - [Starting a business in Texas: entity, EIN, franchise tax and sales taxTo start a business in Texas, choose a structure, file with the Texas Secretary of State if the structure requires it, get a free EIN from the IRS, and...](https://wallacecpa.multisites.ai/guides/starting-a-business-in-texas) - [Got an IRS notice? How to read it and what to do firstRead the whole notice, find its CP or LTR number, and note the reply date. A CP2000 is a proposal to change your return, not a bill.](https://wallacecpa.multisites.ai/guides/irs-notice-what-to-do) ## Talk to Wallace CPA Call the Southlake office and say what you need: a return, an IRS letter, your books or a new business. Have the notice or last year's return nearby if you have one. [Call (877) 682-1171](tel:+1-877-682-1171)[Send a message](https://wallacecpa.multisites.ai/contact) 180 State Street, Suite 225, Southlake, TX 76092