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How do I track business expenses properly?

Start by separating business from personal finances. Open a dedicated business checking account and get a business credit card. Every business expense should flow through these accounts. Mixing personal and business purchases on the same card creates sorting nightmares and makes it harder to prove deductions if you’re ever audited.

Use accounting software like QuickBooks Online to record and categorize your expenses. Each transaction needs a category that matches your chart of accounts. Office supplies, software subscriptions, professional services, meals and entertainment. These categories determine where expenses land on your tax return and what your financial statements show. Getting categorization right from the start saves cleanup work later.

Record expenses as they happen, not weeks later when you’re trying to remember what that $73.42 charge was for. Same-day or next-day entry keeps your books accurate and your memory fresh. Waiting until month end means guessing at half your transactions and miscategorizing others.

Save receipts digitally. Take photos with your phone or use receipt capture apps that connect directly to your accounting software. Paper receipts fade and get lost. Digital copies are searchable, organized, and available when you need them. The IRS requires receipts for expenses over $75 and for all lodging, but having documentation for everything protects you regardless of amount.

Reconcile your accounts weekly instead of monthly. This means matching your accounting records against your bank and credit card statements to catch errors, duplicate charges, or transactions you forgot to record. Weekly reconciliation takes fifteen minutes. Monthly reconciliation after things pile up takes hours and you’ll miss mistakes you would have caught earlier.

Create a simple routine. Set aside time once a week to enter any transactions that didn’t get recorded, photograph outstanding receipts, and reconcile your accounts. Consistency matters more than perfection. A San Diego bookkeeper can help you set up systems that make this routine easier to maintain.

Know why you’re tracking expenses in the first place. Accurate expense data lets you see where your money actually goes, which services or products are profitable, and where you might be overspending. It also makes tax preparation straightforward instead of a scramble. Good tracking feeds directly into useful monthly bookkeeping that gives you real insight into your business.

If expense tracking feels overwhelming, that usually means the system needs work. The goal is a process simple enough that you actually follow it. Complicated spreadsheets and manual data entry create friction. Connected bank feeds, digital receipt capture, and weekly habits create something sustainable.

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More Questions

Should I use cash or accrual accounting for my business?

Most small service businesses do fine with cash basis because it's simpler and matches your bank activity. Accrual gives a more accurate picture of profitability if you have significant receivables or need financial statements for outside parties.

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What is bank reconciliation and why does it matter?

Bank reconciliation matches your accounting records to your bank statement to confirm they agree. It catches errors, detects fraud, and ensures your financial reports reflect reality. Without it, you don't actually know how much money you have.

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How much does a bookkeeper cost for a small business?

Small business bookkeeping typically costs $200 to $600 per month for basic services. The actual price depends on transaction volume, industry complexity, and what's included beyond basic reconciliation.

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What is the chart of accounts and how do I set one up?

A chart of accounts is the list of categories where your business transactions get recorded. Most accounting software includes a template based on your industry, so you customize that rather than building from scratch.

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How do I separate business and personal expenses?

Open a dedicated business bank account and use it exclusively for business transactions. Add a business credit card, pay yourself intentionally, and keep personal spending completely out of business accounts.

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How often should I update my books?

Monthly is the minimum for most small businesses. Weekly works better for high-volume operations or when you need current numbers for decisions. The key is establishing a consistent rhythm so your financial picture stays useful.

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Fresh Ledger provides full-service bookkeeping for San Diego County's small businesses. We handle monthly financials, payroll setup, and part-time CFO services for local business owners who want their numbers done right.

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