Registration is the part everyone helps you with. What happens the week after is the part nobody mentions, and it is where most first-year problems start — not through anything dramatic, just through records that were never set up and cannot be reconstructed a year later.
From your first transaction you need a separate business bank account, a proper invoice series, and a habit of keeping the document behind every entry. None of it is complicated. All of it is far cheaper to start correctly than to rebuild at year-end.
Just registered and not sure what to set up? WhatsApp us, and we will tell you what applies to your business specifically.
Quick Summary — Set These Up First
| What | Why it matters | When |
| Separate business bank account | Mixed accounts are the single biggest cause of messy first-year books | Before first transaction |
| Invoice numbering series | Must be sequential and unique for the financial year | Before first invoice |
| Document storage | Every entry needs something behind it | From day one |
| Accounting software | Spreadsheets stop working sooner than you expect | First month |
| Expense discipline | Personal and business cannot be untangled later | From day one |
💡 TaxKitab Tip The record that saves the most money later is the one nobody thinks of as a record: a note of why you did something. A payment to a relative that was actually a loan, an expense that was genuinely half business, a transfer that was capital rather than income. Twelve months on, the bank statement shows the amount and nothing else, and the explanation has to be reconstructed from memory during an assessment. A one-line note attached to the entry at the time costs seconds and settles the question permanently. — From our GST Filing Mistakes Guide (Book 1). Available at taxkitab.com/books (Rs 179)
A Separate Bank Account, Before Anything Else
This is the one that decides how the rest of your year goes.
When business and personal transactions run through the same account, every single entry needs a judgment call about which it was. Six months in, nobody remembers. The reconstruction is slow, it is billable, and it is never fully accurate.
For a company or LLP, this is not optional — the entity is legally distinct from you and its money has to sit separately. For a proprietorship, it is technically your money either way, which is exactly why people skip it and exactly why they regret it.
Open it before your first transaction, not after your first busy month.
Invoice Numbering, Which Is Stricter Than It Looks
Your invoice series has to be sequential and unique within the financial year. Gaps and duplicates both create questions, and under GST the numbering is part of what makes an invoice valid.
A few things worth settling on day one. Decide your format and keep it — a prefix and a number is enough. Start fresh at the beginning of each financial year. Never delete an invoice; if something is wrong, issue a credit note. And if you are raising invoices from more than one place, make sure the series cannot collide.
The reason this matters early is that fixing a broken series retrospectively is genuinely awkward, and it tends to surface during an audit rather than before one.
The Document Behind Every Entry
An entry in your books is a claim. The document is the evidence.
Sales invoices you raised, purchase invoices you received, bank and card statements, receipts for expenses, contracts and agreements, delivery documents where goods move, and bank advices for anything foreign.
Two practical points. A supplier invoice without their GSTIN generally will not support input tax credit, so check that at the time rather than at year-end. And a photograph of a receipt is usually fine — an illegible photograph is not, and you will not find out until someone asks.
Where to Keep It
Cloud storage, organised by year and then by type. It sounds obvious and most new businesses do not do it.
Whether it is Google Drive, OneDrive or Dropbox matters far less than having one place that everything goes into. The pattern that fails is documents living in WhatsApp threads and personal email, because both become unsearchable within months and neither survives a phone change.
Keep the original where you can. A scan of an original is acceptable for most purposes; a forwarded screenshot of a scan is where things start getting thin.
How Long Any of This Has to Survive
Longer than most owners assume, and the periods do not agree with each other.
Under the Companies Act, books and records are generally kept for eight financial years. Under income tax law the period is shorter, and under GST shorter again. The safe approach is to work to the longest period that applies to your entity rather than trying to hold three different clocks.
Storage is cheap. Reconstruction is not. Keep everything.
Personal and Business Expenses
The rule is simple and the discipline is not: a business expense has to be for the business.
Where something is genuinely shared — a phone, a vehicle, part of your home — a reasonable split is normal, but it needs a basis you can explain rather than a number you picked. Claiming personal costs through the business creates a problem at assessment, and it also quietly misstates your own numbers, which means you do not actually know whether you are profitable.
Where you have paid for something personally and want the business to reimburse it, record it as a reimbursement with the receipt attached, rather than as a direct business expense from an account that is not the business account.
What Not to Worry About Yet
Being straight about this, because new owners often over-engineer.
You do not need a large chart of accounts on day one. You do not need accrual accounting immediately for a small proprietorship. You do not need to register for GST before you cross the threshold or have a reason to. And you do not need an in-house accountant at this stage.
What you need is a separate account, a clean invoice series, and documents that are findable. Everything else builds on those three.
Frequently Asked Questions
Do I need a current account, or will a savings account do?
A business should operate through a current account. For a company or LLP the account has to be in the entity’s name.
Can I use a spreadsheet instead of accounting software?
Early on, yes. It stops working once you have GST returns, multiple bank accounts or meaningful transaction volume, and migrating later costs more than starting properly.
Are photographs of receipts acceptable?
Generally yes, provided they are legible and complete. Blurred or partial images are the ones that cause problems.
How long do I keep records?
Work to the longest period that applies to your entity, which for a company is generally eight financial years.
What if I have already mixed personal and business transactions?
Common, and fixable. Separate the accounts now and get the earlier period classified properly before it grows.
Do I need GST registration immediately?
Only if you cross the turnover threshold, sell interstate, sell through an e-commerce operator, or have another specific trigger. Registering without a reason creates obligations you then have to meet.
References
- Companies Act, 2013 — maintenance and retention of books of account
- Income-tax Act, 1961 — books of account and retention requirements
- CGST Act, 2017 and CGST Rules, 2017 — tax invoice requirements and record retention
⚠️ Retention periods, invoice requirements and registration thresholds change through amendments and notifications, and vary by entity type. Confirm what applies to your business before relying on any of the above.
Related Reading: Setting Up Your Books Properly the First Time · Your First Year: What a New Indian Business Actually Files · How Long to Keep Books of Accounts in India
Call or WhatsApp: +91 7448200422 Email: info@taxkitab.com See our Accounting & Bookkeeping service, or get in touch if you would rather have this set up properly from the start.
Related Reading
Need help with this? TaxKitab handles Accounting & Bookkeeping for businesses across India and overseas. You may also find our Managed Compliance useful. Talk to us.
