How to Set Up a Simple Bookkeeping System From Scratch

Starting your business bookkeeping doesn't have to be overwhelming. Here's how to create a small-scale system that actually works—for real people, not accountants.

🧠 Why This Matters

Many small business owners avoid bookkeeping because it feels too technical or time-consuming. But with a simple, structured setup, you can stay organized, reduce stress, and make smarter business decisions—without hiring a full-time bookkeeper.

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🔧 Step 1: Choose Your Bookkeeping Method

Start by choosing between two common approaches:

1. Spreadsheet-based system (Excel or Google Sheets)
Ideal for:

• New or very small businesses

• Businesses with fewer monthly transactions

• Those comfortable with DIY tracking

We have a FREE Google Sheets Bookkeeping spreadsheet for you! Download your bookkeeping spreadsheet here.

2. Bookkeeping software (like QuickBooks or Wave)
Ideal for:

• Growing businesses

• Needing reports and automation

• Wanting to invoice, accept payments, and categorize easily

Pro tip: Don’t wait until you’re overwhelmed. Start simple now—you can always upgrade later.

🗂 Step 2: Separate Business and Personal Finances

Open a dedicated business checking account and business credit card.
Mixing personal and business expenses makes taxes harder and could put your legal protections at risk (especially if you're an LLC).

🧾 Step 3: Set Up a Transaction Tracking System

No matter what method you choose, track:

• Date

• Vendor - aka the person or company you’re paying.

• Amount

• Category (e.g., rent, supplies, advertising)

• Payment method (credit card, bank, etc.)

• Notes or receipt references

If you're using Excel, make a template with these columns (again, we have a free Google Sheets spreadsheet you can download for free.
If you're using software, sync your bank account and review transactions weekly.

📦 Step 4: Choose Your Chart of Accounts

This is the list of categories used to organize your income and expenses. For a service-based business, common accounts might include:

Income:

• Service Income

• Product Sales (if any)

Expenses:

• Rent

• Software

• Advertising & Marketing

• Professional Services

• Travel

• Supplies

Don’t overcomplicate it—just use what you need and build from there.

🧮 Step 5: Reconcile Monthly

Every month, compare your records to your bank and credit card statements to ensure accuracy. This is called reconciliation—and it’s a must-do if you want your books to stay clean. If you need help reconciling, we have a collection of helpful YouTube bookkeeping tutorials here.

📊 Step 6: Run Monthly Reports

Even if you're DIYing, you can (and should) review your numbers monthly:

• Profit and Loss Statement (P&L)
  Shows income vs. expenses.

• Balance Sheet
  Shows what your business owns, owes, and is worth.

• Cash Flow Statement
  Helps you understand your money in/money out patterns.

Most bookkeeping software will generate these automatically. If you're using Excel, you can create basic reports manually or use templates.

🧠 Final Tips for Success

• Block 1–2 hours each week for bookkeeping

• Keep digital or physical copies of receipts

• Back up your spreadsheet or data

• Consider working with a bookkeeper quarterly or annually to review your work

📍Need Help?

If you’re looking for an affordable bookkeeper (👋 like us!), we can help set up or review your system—even if you’re not ready to fully outsource yet.