You need to maintain your books so that it is easy for you to file taxes, calculate your profitability and cashflow and make projections for your business.
Depending upon your local laws and your legal structure your business expenses are probably tax-exempt. So its imperative to keep track of all these expenses.
How I work is this,
I have filters in my mailbox set for all my bills and vendors so the expense mails are automatically categorized as expenses. Once a day I forward all these emails to a specific email address. Once a month, I put them in our book keeping system.
Its important for your invoices to look professional. There are a lot of web-services you can use, but I recommend Freshbooks.
When you send your invoice this should mention
- Invoice amount
- Payment terms
- What period of time this invoice covers
- What work done this invoice covers
Most good invoice tool will handle this part for you.
Once a client pay, confirm the payment and send them a receipt.
For our expense tracking we use Zoho Books. Freshbooks has a basic expense tracking but we found it limiting.
You should categorize your expense in meaning ful categories. (Like salary, infrastructure, training) etc to find out where your money is going.