Bookkeeping

What is bookkeeping?

Bookkeeping is the foundation of business accounting—the routine work of recording every financial transaction that happens in your business. Every invoice you send, payment you receive, expense you pay, and purchase you make gets logged in your books.

For contractors and small business owners, good bookkeeping means you always know where your money is going and coming from, and you're ready when tax time arrives.

What bookkeeping involves

Regular bookkeeping tasks include:

• Recording invoices — Logging every invoice you send to clients
• Tracking payments — Recording when invoices are paid
• Logging expenses — Categorizing and recording business costs
• Reconciling accounts — Matching your records to bank statements
• Managing receipts — Keeping documentation for all transactions
• Maintaining records — Organizing documents for tax and legal purposes

Bookkeeping vs. accounting

Bookkeeping is the daily recording of transactions—data entry, essentially. Accounting takes those records and interprets them through financial statements, tax planning, and strategic analysis. Many small business owners handle their own bookkeeping using software, then hire an accountant for tax preparation and financial advice.