Basic Bookkeeping and Accounting for Small Businesses (Philippines)
A practical guide to starting and managing basic bookkeeping and accounting for your small business in the Philippines while avoiding common BIR penalties.
What you’ll learn in this basic bookkeeping guide
This basic bookkeeping and accounting guide for small businesses in the Philippines covers how to set up your books, record transactions properly, and avoid common BIR penalties.
To connect your books with compliance, also see our BIR Business Registration Guide, Mandatory Books of Accounts Guide, and Digital Tax Filing & Payment (eBIRForms) Guide.
For day-to-day encoding and simple reports that support your bookkeeping, you can also try our free BIR Book of Accounts Tool to help keep your records aligned with BIR requirements.
1. Register Your Business
To keep your books compliant and avoid penalties, make sure your business is properly registered before you start recording transactions.
- Register your business with the Bureau of Internal Revenue (BIR) and secure a Barangay Clearance and Mayor’s Permit.
- Obtain your Tax Identification Number (TIN) and register your books of accounts and authority to print official receipts.
- Pay the annual registration fee of PHP 500 on or before January 31 each year to avoid penalties.
2. Set Up Bookkeeping Systems
Separate Personal and Business Finances
- Open a dedicated business bank account for all business income and expenses.
- Avoid mixing personal and business transactions in the same account.
Create a Regular Recording Habit
- Record all financial transactions promptly and consistently—daily, weekly, or at least monthly.
- Keep clear, organized records of sales, purchases, expenses, and income.
- Retain receipts, invoices, and proofs of transactions for at least ten years.
3. Use Proper Accounting Methods
For many small businesses, a simple method like cash basis accounting is enough, especially when starting.
- Under cash basis, record income and expenses only when money actually changes hands.
- Use bookkeeping software or spreadsheets suited for Philippine tax and business practices to automate recording and reconciliation.
4. Comply with Tax Obligations
Good bookkeeping supports proper tax compliance.
- Stay updated with BIR tax rules including deadlines for income tax, VAT, and other applicable taxes.
- File tax returns and pay taxes on time to avoid penalties, which can include a 25% surcharge on unpaid amounts.
- Consider registering as a Barangay Micro-Business Enterprise (BMBE) if eligible, to benefit from income tax exemptions and reduced fees.
5. Avoid Penalties by Staying Organized
Stay on Top of Deadlines
- Maintain a compliance calendar with all key filing and payment deadlines.
- Conduct regular internal reviews to verify accurate reporting and timely filing.
Get Professional Support
- Consult a Certified Public Accountant (CPA) or tax expert periodically to ensure compliance with evolving tax laws and regulations.
Build Healthy and Compliant Finances
Following these steps will help maintain good financial health, keep your small business compliant with Philippine regulations, and reduce the risk of unnecessary penalties.