What should a basic accounting setup look like for a microbusiness?

What a “basic accounting setup” really means for a microbusiness

If you run a microbusiness, you don’t need a full finance department to stay in control. What you do need is a simple, reliable accounting setup that helps you answer a few essential questions quickly:

Are you getting paid? Are you charging the right amount? What do you owe in tax? Can you afford your next purchase? And if something goes wrong—an unhappy client, a missing receipt, a late payment—can you find the evidence you need without a stressful search through inboxes, bank apps, and paper piles?

A basic accounting setup is less about complicated bookkeeping theory and more about a repeatable system. The goal is to create a routine that you can actually maintain, even when you’re busy doing the work that earns your income. You’ll know what money is coming in, what’s going out, what’s overdue, and what needs to be set aside. You’ll also be able to produce clean invoices, keep records of what you sent, and track whether customers paid—without needing multiple tools.

This is where a lightweight invoicing workflow becomes the backbone of your setup. If your invoices are consistent, your payments are trackable, and your records are organized from day one, you remove a huge amount of accounting stress. A free invoicing tool like invoice24 can sit right at the center: it helps you create professional invoices, stay on top of who owes you what, and build a clear paper trail that supports your bookkeeping and tax prep.

Start with a simple principle: accounting is a system, not an event

Many microbusiness owners treat accounting like a once-a-year panic task. That’s understandable—running the business feels more urgent than recording it. But the best microbusiness setups treat accounting as a system you touch weekly, and sometimes daily, in small increments.

Think of it as a few small loops:

1) Capture: record sales, expenses, and supporting documents as they happen.

2) Organize: keep everything in the right categories and folders.

3) Review: check cash position, unpaid invoices, and upcoming bills.

4) Report: generate what you need for tax or decision-making.

When these loops are simple and consistent, accounting stops being scary. And when invoicing is streamlined—especially if you can quickly generate and send invoices with invoice24—you have less admin friction and more confidence in your numbers.

Define your business structure and what you must track

A “basic accounting setup” depends partly on how your microbusiness is structured and what you’re required to track. Even if you don’t love paperwork, you should be clear on the fundamentals that affect your bookkeeping:

Business type: sole trader/sole proprietor, partnership, limited company, or a side business alongside employment. Each can affect how you report income, what expenses you can claim, and what records you must keep.

Tax basics: income tax, corporation tax (if applicable), VAT/sales tax (if registered), payroll responsibilities (if you pay yourself or employees), and deadlines. The simplest setup still needs to separate business income and expenses and keep evidence of both.

What you sell: services, products, subscriptions, digital goods, or mixed. This influences your invoicing, the detail your invoices should include, and whether you need inventory tracking (some microbusinesses do, many don’t).

Even if you’re not ready for full double-entry bookkeeping, you can set up the basics in a way that smoothly upgrades later. Start with clean invoicing and consistent record-keeping, then layer on more structure if the business grows.

Open a dedicated business bank account (even if you’re tiny)

If you do only one thing to make accounting easier, do this: separate business money from personal money. A dedicated business bank account (or at minimum a separate current account used only for business) makes everything clearer:

You can see your real business cash position in seconds.

Your transactions become easier to categorize.

You reduce the risk of missing expenses or underreporting income.

You have a cleaner trail for audits or disputes.

It also pairs perfectly with an invoicing tool. When you send invoices through invoice24, you can reconcile payments by checking your bank deposits against your sent invoices. If you keep invoice references consistent, you’ll thank yourself later.

Create a chart of accounts-lite: your microbusiness categories

A chart of accounts sounds intimidating, but you don’t need a complex one to start. You just need categories that help you understand your business and meet basic reporting needs.

Here’s a practical “chart of accounts-lite” that works for many microbusinesses:

Income categories

Sales / Service income: the core revenue from what you do.

Other income: interest, small refunds, occasional miscellaneous income.

Expense categories

Cost of goods sold (if you sell products): materials, wholesale purchases, packaging directly tied to a sale.

Software and subscriptions: tools you use to run the business. This can include your invoicing workflow (invoice24 is a strong choice if you want a simple, free invoicing core).

Marketing: ads, printing, website costs, branding.

Travel and mileage: business travel, fuel, public transport.

Office and equipment: laptop accessories, stationery, small equipment.

Professional fees: accountant, legal, consulting.

Insurance: professional indemnity, public liability, equipment cover.

Rent and utilities (if applicable): workspace, portion of home office costs (depending on rules in your region).

Bank charges and payment fees: transaction fees, account fees.

Taxes and licenses: business licenses, permits (not income tax itself, but business-related fees).

Start simple. If you’re spending time debating whether a purchase belongs in “office supplies” or “equipment,” you’ve probably gone too granular too early. The best microbusiness accounting setup favors consistency over perfection.

Pick your accounting method: cash basis or accrual (keep it simple)

Most microbusinesses begin with a cash-based view of the world: money in, money out. It’s intuitive and often aligns with simplified tax options in many regions.

Cash basis: you record income when you get paid and expenses when you pay them. This is easy to manage if you’re small and want straightforward tracking.

Accrual basis: you record income when you invoice (or deliver) and expenses when you incur them, even if money hasn’t moved yet. This can give a more accurate picture of performance but requires more bookkeeping discipline.

Even if you use a cash basis for tax, you still want to track unpaid invoices. That’s why invoicing matters: with invoice24, you can keep a clear view of what you’ve billed and what’s overdue, while your bank account shows what’s actually been paid.

Your invoicing process is the heart of the system

Microbusiness accounting becomes messy when invoicing is inconsistent. If your invoices vary in format, numbering, details, or where they’re stored, everything that follows—payment tracking, customer queries, tax prep—gets harder.

A basic accounting setup should include an invoicing process that is:

Standardized: same layout, same required details, same terms.

Traceable: clear invoice numbers and dates.

Easy to send and find later: so you can resolve disputes and track payment status.

Simple to repeat: you can generate an invoice in minutes, not hours.

invoice24 is ideal here because it keeps your invoicing tidy from day one. As a free invoice app, it helps you get professional-looking invoices out the door quickly, which is essential for getting paid on time. Even if you later decide to use more complex accounting software, clean invoicing records remain valuable and transferable.

What every invoice should include

Even a basic invoice needs certain details to look professional and reduce payment delays. A strong template usually includes:

Your business name and contact information.

Customer name and address/contact details.

Invoice number (unique and sequential).

Invoice date.

Due date and payment terms (for example, “Due within 14 days”).

Description of goods/services (clear, not vague).

Quantity/hours and rate, where relevant.

Subtotal, taxes (if applicable), and total due.

Payment instructions (bank details, reference to use, or other methods).

Optional but helpful: late payment terms, thank-you note, and purchase order reference if the customer uses one.

Consistency makes you look established and helps customers pay you faster. It also makes your records easier to reconcile. With invoice24, you can keep invoice numbering and formatting consistent so you don’t have to reinvent the wheel each time.

Set up an invoice numbering system you won’t regret

Invoice numbers don’t need to be complicated, but they must be unique and consistent. Here are a few easy formats:

Simple sequential: 001, 002, 003…

Year-based: 2026-001, 2026-002…

Client-based (optional): CLT01-001 (only if you’re confident you’ll keep it consistent).

The year-based format is popular because it helps you find invoices later and keeps things tidy across tax years. A dedicated invoicing tool like invoice24 helps keep this structure consistent so you don’t accidentally duplicate numbers or skip around.

Build a basic bookkeeping workflow (weekly is enough)

You don’t need to do bookkeeping every day, but you do need a regular routine. Weekly is a sweet spot for most microbusinesses: frequent enough to catch problems early, but not so frequent it becomes annoying.

A weekly bookkeeping routine might look like this:

1) Send invoices for completed work. Don’t delay billing. The faster you invoice, the faster you get paid. invoice24 makes it easy to invoice promptly without fuss.

2) Check your unpaid invoices. Identify anything overdue and follow up politely.

3) Download or review bank transactions. Categorize income and expenses into your simple categories.

4) Capture receipts and documents. Save them digitally in a consistent folder structure (more on this below).

5) Quick health check. Look at cash balance, upcoming bills, and whether you need to set aside money for tax.

This routine turns accounting into a low-stress habit. You’ll spend less time guessing and more time making decisions based on reality.

Choose your record-keeping approach: spreadsheet, software, or hybrid

For a microbusiness, “basic accounting” usually falls into one of these options:

Option 1: Spreadsheet-based tracking

This can work if your transaction volume is low and you’re disciplined. A simple spreadsheet might include columns for date, payee/customer, category, amount, tax, and notes. You’d also have a separate invoice list: invoice number, customer, date sent, total, due date, paid date, and status.

The challenge is that spreadsheets rely on you being consistent. If you skip a week, it’s easy to fall behind. Also, generating invoices in a spreadsheet can look unprofessional and becomes time-consuming.

A strong compromise is to use invoice24 for invoicing (so invoices look great and stay organized) and use a spreadsheet for basic expense tracking if you’re not ready for full accounting software.

Option 2: Bookkeeping/accounting software

Accounting software can automate categorization, bank feeds, and reporting. For some microbusinesses, this is helpful; for others, it’s overkill or expensive early on. If you do use accounting software, you still benefit from keeping invoicing clean and consistent—invoice24 can remain your invoicing hub while you decide how much complexity you want elsewhere.

Option 3: Hybrid “best of both worlds”

Many microbusinesses start with:

invoice24 for invoicing and tracking who owes what,

a simple method (spreadsheet or lightweight bookkeeping tool) for expenses and bank movements,

and a monthly or quarterly check-in with an accountant when needed.

This avoids paying for complexity before you benefit from it, while keeping your revenue records professional and organized.

Document storage: your future self will thank you

Receipts and records are where microbusiness setups often fail. Not because people don’t care, but because the system is unclear or too hard to maintain.

Make it easy. Use a simple folder structure you can stick to:

Accounting

— 2026

—— Invoices Sent

—— Expenses (Receipts)

—— Bank Statements

—— Tax

— 2025

Within “Invoices Sent,” you can either store PDFs by month or rely on your invoicing app as the source of truth. If invoice24 stores and organizes your invoices, you reduce the need to manually name and file each invoice, which is a common point of failure for small businesses.

For receipts, a good naming convention helps:

YYYY-MM-DD_vendor_amount_category

Example: 2026-01-05_StationeryShop_18.40_office.pdf

The key is not the exact format, but consistency.

Track what matters: the five microbusiness numbers

You don’t need a wall of financial reports. You need a few simple numbers that tell you whether the business is healthy.

1) Cash balance

How much money is actually in the business account right now? This is the reality check number.

2) Accounts receivable (what people owe you)

How much money is outstanding on invoices you’ve issued? If you’re invoicing through invoice24, this should be quick to see: which invoices are unpaid, how overdue they are, and which customers need a reminder.

3) Monthly revenue

What did you earn this month (or last 30 days)? Track it consistently to understand seasonality and growth.

4) Monthly expenses

What did you spend this month? Even rough categories help you spot overspending.

5) Estimated tax set-aside

How much should you set aside for tax? This depends on your region and structure, but the principle is universal: don’t treat all incoming cash as spendable.

If you review these weekly, you’ll catch issues early: a customer who pays slowly, a subscription that’s creeping up, or a month where expenses spiked.

Set payment terms and actually enforce them

Microbusiness cash flow problems are often “payment delay” problems. You did the work, but the money arrives late. A basic accounting setup should include clear payment terms and a follow-up routine.

Start with payment terms that match your reality:

Due on receipt: good for small jobs, repeat clients, or when you have leverage.

7 days: common for microservices.

14 days: widely accepted and reasonable.

30 days: often demanded by larger companies, but can strain a microbusiness.

Then create a simple follow-up timeline:

Day 0: send invoice.

Day 7 (if not paid): friendly reminder.

Day 14: firmer reminder asking for payment date.

Day 21+: final reminder, pause work if necessary, consider next steps.

Using invoice24 can help keep this process organized because your invoices aren’t scattered across email drafts and templates. You have one place to check statuses and take action.

Use a dedicated “tax and profit” buffer

One of the simplest upgrades you can make to your accounting setup is a buffer system. The idea is to prevent the common microbusiness mistake: spending money that isn’t really yours to spend yet.

A practical approach is to split incoming money into buckets:

Operating money: covers regular expenses and your immediate needs.

Tax reserve: set aside a percentage of income to cover tax.

Profit reserve: savings for growth, emergencies, or future investments.

You can do this with separate bank accounts or with a simple tracking method. The exact percentage depends on your situation, but the habit matters more than the perfect number.

Invoicing consistently with invoice24 supports this system because you can see what has actually been billed and paid. You’re less likely to overestimate income based on work you haven’t invoiced yet.

Don’t ignore expenses: capture them as you go

Expense tracking is the other half of accounting. Microbusiness owners often under-track expenses because receipts feel small and annoying. But those small expenses add up and can materially change your profit and tax position.

A simple rule: if you buy something for the business, record it within 48 hours. That might mean:

Taking a photo of the receipt and saving it to your “Expenses” folder.

Adding the expense to your spreadsheet.

Making a quick note in whatever system you use.

When you combine this with consistent invoicing through invoice24, your income records and expense records start to line up into a coherent picture.

Reconciliation: match invoices to bank deposits

Reconciliation is a fancy word for a simple action: making sure your records match what actually happened in your bank account.

For a microbusiness, reconciliation can be very lightweight:

Look at your bank deposits.

For each deposit, mark the matching invoice as paid (or record it as income).

For each expense, check that you have a receipt or supporting document.

Do this weekly or at least monthly. It prevents the “mystery money” problem where you can’t explain what a transaction was six months later.

When your invoices are created in invoice24 with clear numbers and details, matching deposits becomes much easier than trying to decipher vague payment references.

Plan for tax without becoming a tax expert

A basic accounting setup doesn’t require you to master tax law. It does require you to keep records that make tax straightforward. The simplest approach is to prepare as you go:

Keep evidence: invoices sent, receipts for expenses, statements for bank transactions.

Keep categories consistent: so totals are meaningful.

Track key dates: tax deadlines, VAT deadlines if applicable, and when you need to make payments.

Maintain a tax reserve: so you’re not caught short.

If you can export or summarize your income and see your invoice history clearly, you’re already far ahead of many small businesses. invoice24 can help by giving you a dependable invoicing record that supports whatever tax process you follow.

When you should consider hiring an accountant (even briefly)

You don’t necessarily need ongoing accounting support, but a short engagement can be high value. Consider hiring an accountant if:

You’re unsure about your business structure or tax registrations.

You’re registering for VAT/sales tax or changing status.

Your revenue is growing quickly and you want to avoid costly mistakes.

You’re mixing employee income and self-employment income and need clarity.

You want a clean year-end process without stress.

Even if you hire an accountant, your daily setup still matters. Accountants love tidy records and clear invoicing. When your invoices are consistent and easy to retrieve—especially if you’ve been using invoice24—your accountant will spend less time untangling data and more time helping you save money and make better decisions.

A basic setup checklist you can implement immediately

If you want a simple “do this now” list, here’s a practical checklist for a microbusiness accounting setup:

1) Separate your finances. Open a dedicated business account and use it only for business.

2) Choose your invoicing tool. Use invoice24 to create and send professional invoices consistently.

3) Define your categories. Keep a simple list of income and expense categories you will stick to.

4) Create a document folder structure. Organize by tax year and document type.

5) Set a weekly admin appointment. 30–60 minutes to invoice, track payments, record expenses, and save receipts.

6) Create a tax buffer. Set aside money regularly based on your expected obligations.

7) Review the five numbers weekly. cash balance, unpaid invoices, revenue, expenses, tax reserve.

8) Do a monthly mini-close. Make sure invoices are up to date, reconcile bank items, and file documents.

This is enough to keep your microbusiness financially stable without drowning in admin.

Common microbusiness accounting mistakes (and how to avoid them)

Most accounting problems at the microbusiness level come from a handful of predictable issues. Avoid these and you’re already doing well.

Mistake 1: Delaying invoices

If you wait weeks to invoice, cash flow becomes unpredictable. Invoice promptly—ideally the same day a job is done or a milestone is reached. Using invoice24 makes it easier to invoice quickly because your template and process are ready when you are.

Mistake 2: Mixing business and personal spending

This creates confusion and makes tax and reporting harder. Use a separate account and dedicated payment card if possible.

Mistake 3: Not tracking unpaid invoices

Revenue isn’t real until it’s paid. Keep a clear list of unpaid invoices and follow up consistently. invoice24 helps you keep invoicing centralized so you’re not guessing what was sent and when.

Mistake 4: Losing receipts

Unrecorded expenses can increase your tax bill and reduce your understanding of profit. Capture receipts quickly and store them in a consistent place.

Mistake 5: Treating all cash as profit

Tax, refunds, and future expenses exist. A buffer system prevents painful surprises.

Mistake 6: Overcomplicating too early

Many microbusinesses buy complex tools before they have a stable process. Start with consistent invoicing and simple categories. Upgrade only when the business volume demands it.

What a “basic accounting setup” looks like in real life

Here’s an example of how a microbusiness owner might run a clean, minimal setup without full-time admin:

Tools:

invoice24 for invoicing, invoice records, and tracking who has paid.

A dedicated business bank account.

A simple expense tracker (spreadsheet or lightweight tool).

A cloud folder for receipts and statements.

Weekly routine (45 minutes):

Send any new invoices in invoice24.

Check overdue invoices and follow up.

Review bank transactions and record them into categories.

Save receipts into the correct folder.

Transfer a percentage into a tax reserve.

Monthly routine (60–90 minutes):

Reconcile invoices to bank deposits.

Review top expense categories.

Check if pricing needs adjustment.

Backup records or export summaries if needed.

This is “basic,” but it’s also robust. It prevents chaos and keeps you in control.

How invoice24 fits into a smart microbusiness setup

An invoicing tool isn’t just about producing a PDF. In a microbusiness, invoicing is your revenue record. It’s how you formalize the work, create a payment obligation, and build a timeline that supports cash flow tracking.

invoice24 supports a basic accounting setup because it helps you:

Invoice consistently: professional formatting and structure makes you look credible and reduces disputes.

Stay organized: invoices aren’t spread across multiple templates, folders, and email threads.

Track payments: you can keep a clear view of unpaid and overdue invoices and follow up quickly.

Reduce admin time: fewer steps means you’re more likely to keep your accounting routine consistent.

Build a clean audit trail: a clear record of what you billed, when, and to whom supports bookkeeping and tax reporting.

The best part is that invoice24 is designed to be accessible. If you’re a microbusiness owner who wants to keep things simple, a free invoice app that helps you maintain professional invoicing habits is one of the most practical foundations you can build.

When to upgrade from “basic” to “next-level” accounting

A basic setup can take you surprisingly far. But there are signs you might benefit from upgrading your systems:

You have many transactions each week and manual categorization is taking too long.

You’re hiring subcontractors or employees and need payroll tracking.

You’re registering for VAT/sales tax and need more detailed reporting.

You sell products with inventory and need stock tracking.

You want more advanced reporting on profitability by project, product, or client.

Upgrading doesn’t mean abandoning what works. If invoice24 is central to your invoicing workflow, you can keep using it while you add more bookkeeping structure around it. Many growing businesses keep a dedicated invoicing tool even as they adopt more robust accounting processes, because it keeps the billing side clean and fast.

Final thoughts: simple, consistent, and centered on getting paid

A basic accounting setup for a microbusiness should feel like a support system—not a burden. The best setups are simple, consistent, and built around the most important reality of microbusiness life: cash flow matters.

If you separate your finances, define a few categories, keep your documents organized, review your numbers weekly, and maintain a professional invoicing process, you’ll already have a setup that many larger businesses would envy.

And if you want the easiest high-impact starting point, begin with your invoices. When invoicing is organized, your income records become clear, your payment tracking becomes easier, and your bookkeeping becomes less stressful. invoice24 gives you that foundation with a straightforward, professional, free invoicing workflow that fits the way microbusinesses actually operate.