How to Do tiny Business bookkeeping in 2025 (+ Best Tools)

Launching your tiny business means taking on recent bookkeeping responsibilities. While managing your finances might not be the most exciting part of running your store, it’s essential for long-term achievement.

excellent bookkeeping practices assist you track how your business makes and spends money, compute taxes accurately, and file returns on period. Understanding your finances lets you make smarter decisions to boost your profits.

This navigator covers everything you require to recognize about tiny business bookkeeping, including the best bookkeeping tools to assist you manage your finances effectively.

Ready to commence your business? make your website today or discover more about Shopify’s tools for selling online and in person.

What is tiny business bookkeeping?

tiny business bookkeeping involves tracking, measuring, and organizing your business finances. These activities include recording transactions, reconciling lender statements, managing payroll and inventory, and handling taxes.

How to do tiny business bookkeeping in 13 steps

1. Open a tiny business lender account
2. construct your business financing score
3. Develop a tiny business bookkeeping structure
4. Track your tiny business costs
5. Set up a tiny business payroll structure
6. Investigate import responsibility
7. Choose your remittance methods
8. Set up sales responsibility procedures
9. recognize your responsibility obligations
10. compute gross margins
11. Get business financing
12. discover high-standard bookkeeping partners
13. Periodically review your bookkeeping methods

1. Open a tiny business lender account

A divide lender account for your business protects your personal assets if you face insolvency, lawsuits, or audits. Having powerful business budgetary records also makes it easier to get financing from creditors or investors.

To open a business lender account, you’ll require: 

• A registered business name
• State or provincial registration, if required
• Appropriate business licenses
• Additional documents (check with your chosen lender)

commence with a checking account, then add funds accounts to organize your liquid assets flow and schedule for taxes. Set aside 25% of your returns for taxes—high-returns businesses may require to save up to one-third.

Note: LLCs (particularly California LLCs, Texas LLCs, and Florida LLCs), partnerships, and corporations must legally maintain a divide lender account. While sole proprietors aren’t legally required to have a divide account, it’s strongly recommended.

2. construct your business financing score

As a recent business owner, getting a business financing card helps you construct financing—which you’ll require for upcoming financing or financing large purchase orders. If you run a corporation or LLC, you must use a divide financing card to keep personal and business finances divide.

Choose a business financing card that matches your business transactions. If you trip frequently, look for cards offering trip rewards. Some cards, like Shopify financing, provide liquid assets back on your highest spending category.

3. Develop a tiny business bookkeeping structure

Ecommerce bookkeeping helps you comprehend your business’s advancement by analyzing the data in your budgetary statements. You have two main options for managing your books:

1. Handle it yourself using software like QuickBooks, Wave, or a spreadsheet
2. Work with a bookkeeper or accountant (packed-period or agreement)

You’ll also require to choose between two bookkeeping methods:

• liquid assets way: Record revenues and costs when money changes hands
• Accrual way: Record transactions when they occur, even before money changes hands—this requires tracking receivables and payables

US businesses with revenues of less than $5 million can use either way. Larger businesses must use accrual bookkeeping.
Canadian businesses must technically use accrual bookkeeping, but can simplify by using liquid assets bookkeeping throughout the year and making one adjustment at year-complete for unpaid receivables and payables.

4. Track your tiny business costs

Tracking costs helps you monitor business growth, make budgetary statements, track deductions, and prepare accurate responsibility returns. While US store owners don’t require receipts for costs under $75, keeping records of all spending helps you comprehend your business’s budgetary health.

Keep detailed records for these five significant outlay types:

1. Meals and entertainment: When conference for business at a restaurant, note who attended and the conference’s purpose on the receipt.
2. Out-of-town trip: Keep receipts to document business activities while traveling—responsibility agencies look closely at trip costs.
3. Vehicle use: Record when and why you used your vehicle for business. Gas mileage is fully deductible if you keep detailed logs of business trips, including destinations and purposes.
4. Business gifts: If you provide tickets to an occurrence, note whether you attended. This determines if the outlay is classified as entertainment or a gift.
5. Home office: Starting your business at home is a great way to keep overhead low. You can deduct the percentage of your home used for business, plus portions of internet, phone, and transportation costs for business errands.

5. Set up a tiny business payroll structure

As your online store grows, you’ll eventually require to hire outside assist. First, determine whether to hire employees or independent contractors.

For employees:

• make a payroll schedule
• Set up responsibility withholding
• Consider payroll software or services (many bookkeeping tools propose this characteristic)

For independent contractors: 

• Track payments carefully
• Keep contact information for responsibility forms
• US businesses may require to file 1099s for each contractor at year complete

6. Investigate import responsibility

If you import products or sell internationally, you’ll require to handle taxes and duties—particularly significant for dropshipping businesses. Use Shopify Markets to:

• approximate import fees
• compute duties at checkout
• make a document trail for customs
• assist customers avoid shock fees

For more details, check the International Trade Administration (US) or Canadian Border Services Agency.

7. Choose your remittance methods

As orders arrive in, you’ll require reliable ways to get paid. Shopify Payments lets North American merchants receive financing and debit cards without setting up divide remittance processing.

If you use other remittance processors, contrast their fee structures:

• Percentage plus flat fee (typically 2.9% + 30¢ per trade)
• Flat trade fees
• Monthly subscription for unlimited transactions

With Shopify Payments, you can receive online payments or sell in person through Shopify POS. propose contactless payments, digital wallets, and even gain-free installments with Shop Pay. All data is available in your Shopify admin for straightforward bookkeeping.

“Shop Pay Installments is now 6.5% of our GMV [gross merchandise volume],” says Will Beck, director of business advancement at Pillow Cube. “We’ve also seen a consistent boost in our average order worth rate.”

8. Set up sales responsibility procedures

Sales responsibility rules differ for online and in-person sales. While brick-and-mortar stores fee responsibility based on their location, online stores require to consider where their customers live.

US businesses must first determine if they operate in an origin-based or goal-based state. Origin-based states require you to fee sales responsibility based on your business location, while goal-based states require responsibility based on the customer’s location.

Canadian businesses require to commence collecting goods and services responsibility (GST) and harmonized sales responsibility (HST) after reaching $30,000 in turnover within 12 months. You can submit these collected taxes in installments.

Selling to international customers can be simpler than domestic responsibility, but rules vary by region. Talk with your accountant about specific regulations for your location.

9. recognize your responsibility obligations

Your responsibility obligations depend on your business structure. If you’re self-employed through a sole proprietorship, LLC, or collaboration, you’ll claim business returns on your personal responsibility profitability and file annually by April 15.

Corporations file taxes separately from owners, since they’re considered divide responsibility entities. You’ll require to pay corporation responsibility by the 15th day of the fourth month after your responsibility year complete, and you’ll update any personal returns from the corporation as an employee. Working with a responsibility professional can save you period and money in the long run, especially when you’re unsure about your responsibility obligations.

10. compute gross spread

Your gross spread shows how much money you keep after paying direct costs to produce your product or service. This key metric helps you comprehend if your business can sustain itself.

To discover your gross spread percentage, subtract your expense of goods sold (COGS) from your turnover, then divide by turnover. COGS includes both materials and direct labor costs.

Gross spread (%) = (turnover – COGS) / turnover

💡 Pro tip: Use our free returns spread calculator to quickly run these numbers. 

11. Get business financing

Growing your business often requires additional financing. You might require fund to develop recent products, buy inventory, open retail locations, hire staff, or manage seasonal changes and unexpected sales downturns.

Most lenders require budgetary statements, including a equilibrium sheet, returns statement, and sometimes a liquid assets flow statement. Shopify fund offers a simpler alternative for Shopify merchants to secure financing, providing financing based on your store’s sales history, with repayments made through upcoming sales.

Before taking any financing, compute your profitability on fund by comparing your expected financing costs, projected recent turnover, and gain costs. You can use our business financing calculator to make sure the financing will advantage your business in the long run.

12. discover high-standard bookkeeping partners

A talented budgetary planner can assist you better manage your money and schedule for growth. Consider working with the following:

• A certified community accountant (CPA) is essential if you face an audit—they’re the only professionals legally qualified to prepare audited budgetary statements.
• A bookkeeper handles your day-to-day records, reconciling accounts, categorizing costs, and managing accounts due amount and payable.
• responsibility professionals arrive in two forms: preparers who file your responsibility returns and set up estimated payments, and planners who assist reduce your responsibility burden before filing.

💡 Pro tip: Shopify Partners connects you with sales responsibility experts to simplify your bookkeeping procedure.

13. Periodically review your bookkeeping methods

You might commence with a straightforward spreadsheet to manage your books, but your budgetary needs will develop with your business. As you scale, consider more advanced solutions like QuickBooks or Bench.

Regularly reassess how much period you spend on bookkeeping and what it costs your business. The correct answer can free up your period and potentially reduce costs.

Best tiny business bookkeeping software

excellent tiny business bookkeeping software helps you track your finances efficiently. Once connected to your lender accounts, it categorizes transactions automatically and displays them in your chart of accounts. You can check balances, comprehend turnover and costs, approximate profits, and schedule for taxes.

When choosing bookkeeping software, look for:

• Platform integrations with your ecommerce platform and third-event tools
• Advanced reporting for inventory and costs to monitor budgetary health
• Sales responsibility configuration to assist with collection and remittance
• Reliable customer back, including 24/7 options and self-service resources

You’ll discover many user-amiable options in the Shopify App Store that integrate seamlessly with your store. Here are some popular choices:

Xero

Xero is a cloud-based bookkeeping structure designed for tiny and growing businesses. You can connect with trusted advisers and earnings visibility into your budgetary health from any device. Its advanced features assist you track liquid assets flow, transactions, and other key budgetary data.

Benefits:

• Inventory and ownership management
• Affordable pricing
• Connects to major banks
• straightforward to view and customizable reports
• Contact database and segmentation
• Payroll
• Mobile app
• lender reconciliation
• Integrates with Shopify

QuickBooks Online

QuickBooks Online, from Intuit, helps you track returns and costs while managing receipts and invoices. It shows all your costs—like inventory and maintenance—alongside your sales over period. The software updates your sales and inventory costs automatically using perpetual inventory tracking, and integrates with Shopify to keep your data organized.

Benefits:

• Mobile app
• Cloud-based
• Mileage tracking
• Contractor management
• Inventory tracking
• Separating business and personal costs
• Integrates with Shopify

Wave

Wave is a web-based bookkeeping answer built for tiny businesses. Link your lender accounts, PayPal accounts, and other data sources to view real-period transactions. The platform generates essential reports including accounts due amount, equilibrium sheets, returns and deficit statements, and sales responsibility reports.

Benefits:

• Affordable
• Competitive financing card processing fees
• Free bookkeeping and receipt scanning
• No trade or billing limits 
• Unlimited number of users
• Mobile app

FreshBooks

FreshBooks is cloud-based bookkeeping and invoice management software that handles outlay management, core bookkeeping, and basic bookkeeping for tiny businesses.

Benefits:

• straightforward to use
• straightforward pricing 
• Customizable invoices
• Detailed self-service back
• Integrates with Shopify

recognize your numbers to develop your business

Taking control of your business finances from the commence sets you up for achievement. From choosing the correct business financing card to calculating turnover per product, each budgetary selection shapes your business’s upcoming. Taking period to comprehend banking, trade management, and capital raising helps construct a powerful foundation for growth.