Accounting is the backbone of the business, but it does not need to be complicated.  If your business is generating under $200,000 a year then you can probably just do the books by hand on a ledger.  You get a lot better information from an automated accounting program, but it is essential that all transactions are categorized properly.    If you mess up the categories, then all the cool tables and summaries in the world will not have much meaning. 

Keep it simple in the beginning.  Accounting should be completed daily.  Basically you just make sure any transfers to or from the business are logged into a ledger (basically a check book register).  All receipts should be stored in a daily pouch or envelope.  You would also need to log any type of barter transactions or free work that is completed.  I also found it is good if you can log your business miles in your transaction ledger.  Depending on your number of transactions, all of these entries should be transferred over into categories and summarized weekly and/or monthly.    There is no need to categorize everything daily in a small operation.

Categories would include sales, advertising expense, travel expenses, raw materials, equipment purchase, telephone, office supplies, etc. etc. etc...  You do not need to be an accountant or have an understanding of the tax system, just log like things together and keep your receipts and information organized by date.   At the end of the year, you take your monthly summaries and add up the columns into a yearly summary.  You take your yearly summary, monthly summaries, and your packaged receipts to your accountant to prepare the tax return. 

Hire an experienced business CPA to complete your tax returns.  They will be expensive, but they will end up saving you money and a great deal of grief.   Your CPA will re-categorize your information to suit the current tax code.  The key is to keep your record keeping as simple and as straight forward as possible.  Your CPA will also be the one to help you organize and meet employee regulations and payments.   But again, it really isn’t too complicated for you to handle a couple employees with direction from your CPA. 

When your business starts generating more than $200,000 (or is particularly complicated financially with tricky real estate deals, employment regulations, or investing transactions), then it is time to start looking at things like bookkeepers and possible incorporation.  It is your CPA who will be your best advisor with regard to how your business should be structured, once you are making significant money.  

In summary, accounting should be completed daily, kept simple, and logical.