What bookkeeping system should a self-employed person use?

Good bookkeeping is the foundation of accurate tax filing and maximising your deductions. As a self-employed sole proprietor, you have several options: **Minimum viable bookkeeping:** 1. Separate business bank account (never comingle personal and business funds) 2. Business credit card for all business purchases 3. Track all income: bank deposits, PayPal transfers, cash payments 4. Categorise every transaction against your Schedule C line items **Software options (from simple to advanced):** - **Wave** (free): good for freelancers just starting out - **QuickBooks Self-Employed** (~$15/month): designed for Schedule C, auto-tracks mileage, connects to bank - **QuickBooks Online Simple Start** (~$30/month): more robust, better for growing businesses - **FreshBooks**: invoicing-first, good for service businesses - **AnyDayAnyTax**: AI-powered bank statement analysis for fast Schedule C categorisation **Cash vs. Accrual accounting:** Most sole proprietors use the **cash method** — income is recorded when received, expenses when paid. This is simpler and allowed for businesses under $27 million annual revenue. **When to hire a CPA:** If your business earns over $75,000/year, has multiple income streams, employees, or complex deductions (depreciation, home office, vehicle), a CPA can save you more than their fee.

• Open a separate business bank account — critical foundation of good bookkeeping
• Use a business credit card to automatically document business expenses
• Cash method of accounting is standard for sole proprietors
• Software: Wave (free), QuickBooks Self-Employed, FreshBooks, QuickBooks Online
• Consider a CPA once income exceeds $75k or complexity increases