Starting and running a small business comes with a steep learning curve, and one of the most crucial—yet often misunderstood—aspects is bookkeeping. Proper bookkeeping helps you understand your financial position, stay compliant with tax regulations, and make smarter business decisions. Whether you’re a sole trader, a startup, or running a growing enterprise, learning the basics of small business bookkeeping is one of the smartest investments you can make.
In this guide, we’ll break down what every small business owner needs to know: from daily tasks to monthly reports, how to set up your chart of accounts, and the best bookkeeping software to consider.
Why Bookkeeping Matters for Small Businesses
Bookkeeping isn’t just about logging transactions. It gives you a real-time view of your business’s financial health. With accurate books, you can:
- Track your income and expenses
- Prepare for tax season with ease
- Apply for loans or funding confidently
- Understand which products or services are most profitable
- Avoid compliance penalties from the ATO or tax authorities
Ignoring bookkeeping—or doing it incorrectly—can lead to missed deductions, cash flow issues, and in the worst case, business failure.
Daily, Weekly, and Monthly Bookkeeping Tasks
To keep your books in good shape, it helps to break tasks into daily, weekly, and monthly routines. Here’s a breakdown of what should happen when:
Daily Tasks
- Record sales and receipts: Log every transaction for the day, whether it’s through a POS system, invoice, or online sale.
- Capture expenses: Save all receipts and record purchases immediately to avoid losing track. Apps like Dext or Hubdoc can automate this.
- Track cash flow: Keep an eye on your bank balance and cash on hand to ensure you can cover immediate costs.
Weekly Tasks
- Reconcile bank transactions: Match your bank and credit card transactions to your accounting records to catch errors and avoid duplication.
- Pay bills and vendors: Schedule supplier payments to avoid late fees and maintain good relationships.
- Send invoices and follow up on receivables: Keep your cash flow healthy by staying on top of client payments.
- Run payroll (if applicable): Ensure employees are paid correctly and superannuation obligations are met.
Monthly Tasks
- Reconcile accounts completely: Double-check all accounts (bank, credit, loans, etc.) for discrepancies.
- Review the Profit & Loss statement: Analyze your revenue, expenses, and net income to understand how your business is performing.
- Assess the Balance Sheet: Ensure assets, liabilities, and equity are in check.
- Lodge your BAS (Australia-specific): If you’re registered for GST, ensure your Business Activity Statement is prepared and submitted.
- Backup your financial data: If you’re not using a cloud platform, ensure regular backups are in place.
Chart of Accounts for Small Businesses
A Chart of Accounts (COA) is the backbone of your bookkeeping system. It’s a categorized list of all the accounts you use to track money in and out of your business. For a small business, a well-organized COA typically includes:
1. Assets
- Bank accounts
- Accounts receivable
- Inventory
- Equipment and vehicles
2. Liabilities
- Accounts payable
- Loans
- Credit cards
- GST or tax obligations
3. Equity
- Owner’s capital
- Retained earnings
- Owner’s drawings (or distributions)
4. Income
- Sales revenue
- Service income
- Other income (e.g. interest, affiliate revenue)
5. Expenses
- Rent
- Wages and superannuation
- Utilities
- Insurance
- Office supplies
- Marketing and advertising
- Professional services (e.g. accounting, legal)
- Software subscriptions
Setting up a COA correctly from the beginning allows you to track your finances clearly, and it helps your accountant come tax time.
Best Bookkeeping Software for Small Businesses
Gone are the days of Excel spreadsheets and shoeboxes of receipts. Today’s cloud accounting software is affordable, easy to use, and can automate many tasks. Here are three top options for small business bookkeeping:
1. Xero
- Best for: Australian and NZ businesses, growing operations
- Features: Bank feeds, BAS/GST support, payroll, invoicing, multi-currency
- Pros: Clean interface, integrates with hundreds of apps
- Cons: Slightly more expensive than entry-level options
2. QuickBooks Online
- Best for: Service-based businesses, freelancers, U.S.-based companies
- Features: Invoicing, mileage tracking, time tracking, payroll add-ons
- Pros: Easy to set up and use, strong mobile app
- Cons: Some features require higher-tier subscriptions
3. Wave
- Best for: Very small businesses and sole traders
- Features: Free invoicing, income/expense tracking, receipt scanning
- Pros: No monthly fee for core features
- Cons: Limited support, lacks some advanced features (like payroll outside North America)
Choosing the right software depends on your business size, location, and budget. If in doubt, start with a free trial and see what fits your workflow.
Tips for Staying on Top of Your Bookkeeping
Even with great software, bookkeeping still requires attention. Here are some practical tips to stay ahead:
- Schedule a weekly bookkeeping time block: Make it a habit to review your finances regularly.
- Automate where possible: Use bank feeds, recurring invoices, and auto-categorization.
- Hire a professional if needed: A bookkeeper can save you time and ensure accuracy, especially around tax time or as your business grows.
- Keep business and personal finances separate: Always use a dedicated business bank account.
- Review your reports regularly: Don’t wait for your accountant to tell you if something’s wrong—know your numbers.
Final Thoughts
Bookkeeping may not be the most glamorous part of running a small business, but it’s one of the most important. By understanding the basics—daily tasks, monthly reviews, your chart of accounts, and using smart software—you’ll gain control over your finances and reduce the stress that comes with tax time.
Whether you’re managing it yourself or planning to outsource, this foundation will help you make better decisions and build a sustainable, compliant business.
