For small businesses, it is important to keep accurate and up-to-date books so you always know the financial shape of your company and to ensure you stay in compliance with local, state, and federal tax laws. With that in mind, there are two basic goals of an effective bookkeeping system: 
- Accurately track income and expenses so your chances of turning a profit are increased.
- Collect the necessary information to file and pay all required taxes.
Toward that end, there are 3 essential functions your small business bookkeeping system should perform:
Track your Receipts: Every sale and purchase your business makes should be recorded, and the record should contain the amount, date, and other relevant details regarding the transaction. It is a good idea to have both paper and electronic copies of receipts and an organized filing system so they are easy to retrieve.
Create Transaction Summaries: Your receipts should be entered into some kind of software program so you can create transaction summaries that are easy to interpret. In addition, you should post receipts on a regular basis to keep your books up to date. For some businesses, this means daily and for others, this could be done weekly or even monthly. Whether you choose to use QuickBooks or another small business accounting program, make sure your software effectively performs this function.
Create Basic Financial Reports: The information from your transaction summaries can be combined to create various reports to show the overall shape of your business. Examples of financial reports to have access to include balance sheets, cash flow analyses, profit and loss statements, and tax compliance reports. These reports are important so you know where your business is at and what areas you need to focus on to improve your overall bottom line.
There are other considerations when setting up your bookkeeping system depending on the needs of your business. For example, you may be required to use either the cash method or accrual method for crediting your accounts. For help on setting up your software and assistance with more advanced bookkeeping and accounting issues that may impact your particular business, it is always best to speak with a small business accounting firm.