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Your monthly P&L (Profit & Loss statement, also called an Income Statement) shows whether your business made or lost money during a given period.

Key lines to know

• Revenue / Income. Total money your business earned from sales or services.
• Cost of Goods Sold (COGS). Direct costs to deliver your product or service: materials, subcontractors, direct labor.
• Gross Profit. Revenue minus COGS. What you have left before overhead.
• Operating Expenses. Day-to-day costs: rent, payroll, software, marketing, insurance, utilities.
• Net Income. Gross Profit minus Operating Expenses. The bottom line, meaning what you actually kept or lost.

What to look for each month

• Is revenue trending up, down, or flat compared to last month and last year?
• Are expenses growing faster than revenue?
• What are your largest expense categories? Are any unusually high?
• Is your gross profit margin consistent? A declining margin often signals pricing or cost problems.

A good bookkeeper reviews these numbers with you and flags anything unusual. If a line looks wrong, ask before assuming. Sometimes a timing difference explains it.

The balance sheet is a snapshot of your business's financial position on a specific date. It always balances: Assets = Liabilities + Equity.

Assets: what your business owns

• Current assets. Cash, bank balances, and accounts receivable (money clients owe you).
• Fixed assets. Equipment, vehicles, furniture. Shown at cost minus accumulated depreciation.

Liabilities: what your business owes

• Current liabilities. Credit cards, accounts payable (bills you owe vendors), and loan payments due within 12 months.
• Long-term liabilities. Business loans, SBA loans, and equipment financing with terms beyond one year.

Equity: what the business is worth to you

• Equity equals Assets minus Liabilities.
• It grows when you earn profit or put money in. It shrinks when you take draws or run a loss.
• For sole proprietors this is owner's equity. For LLCs and corporations it may include retained earnings and paid-in capital.

Healthy signs: cash is positive, liabilities are manageable relative to assets, and equity is growing over time. If equity is consistently negative, the business owes more than it owns. That is worth a conversation.

If you are self-employed or your business earns income without tax withholding, you are generally required to pay estimated taxes four times a year to avoid underpayment penalties.

2026 due dates

Next up: Q3 is due September 15, 2026.

• Q1 (January through March income): April 15, 2026
• Q2 (April through May income): June 15, 2026
• Q3 (June through August income): September 15, 2026
• Q4 (September through December income): January 15, 2027

What to have ready

• Estimated net profit for the quarter. Your P&L helps here.
• The prior-year safe harbor: paying at least 100% of last year's tax (110% if your adjusted gross income was over $150,000) generally protects you from penalties.
• State estimated payments too. Check your state's schedule, because the dates often differ from federal.

How to pay

• Federal: IRS Direct Pay at irs.gov/payments. No account required.
• Or mail a check with Form 1040-ES to the appropriate IRS address.

The exact amount to pay is a tax question, so confirm it with your CPA or tax professional. Clean monthly books make that conversation take minutes instead of hours.

Use this checklist to wrap up your books and get ready for your tax professional without the usual January scramble.

By December 31

• All bank and credit card accounts reconciled through December 31
• All loan balances verified against year-end statements
• Inventory counted and recorded, if you carry it
• Large or unusual transactions reviewed, with receipts on hand

By January 15

• W-9s collected from every contractor you paid this year (required at $2,000 or more, but collecting one from everyone is the safe habit)
• 1099-NEC forms prepared (due to contractors and the IRS by January 31)
• Payroll year-end reports finalized (W-2s due to employees by January 31)

Before sending to your CPA

• Fixed asset list updated: additions, disposals, and the depreciation schedule
• Owner draws and capital contributions recorded accurately
• Accounts receivable reviewed, with uncollectible balances written off
• Prior-year adjusting entries from your CPA applied, if any
• Final P&L and Balance Sheet exported and reviewed

This is exactly the work we do for clients every December and January, including coordinating directly with your CPA so you are not the messenger.

Receiving a letter from the IRS is stressful, but most notices are routine and manageable if you act promptly.

Step by step

1. Don't panic. Most IRS notices are not audits. Many are simple requests for information or math corrections.
2. Read it carefully. Note the notice number in the top-right corner, the tax year it references, and the response deadline.
3. Loop in your bookkeeper and tax professional before calling the IRS. They can often explain what triggered it.
4. Do not ignore it. Ignoring a notice lets interest and penalties compound, and things can escalate.
5. Respond by the deadline with all supporting documentation.

Common notices

• CP2000. Income on your return does not match what was reported to the IRS, often a missing 1099. Usually requires a response or an amended return.
• CP501 / CP503 / CP504. Balance-due notices at escalating urgency. Review with your tax professional.
• CP11. The IRS changed your return and believes you owe more. Review carefully, because sometimes they are wrong.
• LT11 / Letter 1058. Final notice before levy. Act immediately.

Keep every IRS notice. Do not throw them away. And if you are a True North client, send it to us right away. We will help you figure out what it means and what to do next.

Mixing personal and business finances is the most common mistake small business owners make, and one of the easiest to fix.

Why it matters

• Clean records mean faster, less expensive bookkeeping, which saves you money
• Commingled accounts are a major red flag if you ever face an audit
• You can finally see your true business profitability
• It helps preserve the liability protection of your LLC or corporation
• Lenders require it when you apply for a business loan or line of credit

How to set clean boundaries

1. Open a dedicated business checking account and use it only for business income and expenses.
2. Get a business credit or debit card. Stop using personal cards for business purchases.
3. Pay yourself formally. Sole proprietors take owner's draws, recorded as transfers from business to personal. S-Corps pay salary plus distributions, coordinated with your CPA.
4. If you accidentally pay a business expense with personal funds, reimburse yourself from the business account and document it.
5. Never pay personal expenses directly from the business account.

If you are not there yet, no judgment. It is very fixable. We help clients sort through the history and set up clean going forward all the time.

How you pay yourself depends on your business structure, and getting it wrong can have real tax consequences. Here are the basics in plain English.

Sole proprietor / single-member LLC (taxed as sole prop)

• You take owner's draws. There is no salary.
• You pay self-employment tax, roughly 15.3%, on most of your net profit, whether or not you actually draw the money out. (Technically it is calculated on 92.35% of net profit, and the Social Security portion stops above an annual cap. Your tax pro runs the exact number.)
• Draws are not tax-deductible business expenses.

S-Corporation

• You must pay yourself a reasonable salary through payroll. The IRS requires it.
• Payroll taxes apply only to the salary portion.
• Additional profits can be taken as distributions, which avoid payroll tax.
• This structure can produce real tax savings, but your CPA must help set the salary correctly or it can backfire.

C-Corporation

• Salary is a deductible business expense at the corporate level.
• Dividends are taxed at the corporate level and again personally, which is the double taxation you have heard about.
• Less common for small businesses.

Always talk to your CPA before changing how you pay yourself. What we do is make sure whatever you choose is recorded correctly in the books, so your reports and your reality match.

If your business pays contractors, you may be required to file 1099-NEC forms each January. Missing the deadline comes with penalties, so here is what to know.

Who gets a 1099-NEC?

• Any individual or unincorporated business paid $2,000 or more for services during the calendar year. (This threshold was $600 through 2025 payments; it rose to $2,000 starting with 2026 payments and will adjust for inflation in future years.)
• That includes freelancers, subcontractors, and consultants. Attorneys get one even if their firm is incorporated.

One caution: paying someone as a contractor does not make them one. If a worker looks more like an employee, that is a classification question for your CPA or attorney, and it is worth asking before year-end.

Who you do NOT file for

• Payments to corporations, with exceptions for attorneys and medical providers
• Payments made by credit card or PayPal. Those fall under the payment processor’s reporting rules (Form 1099-K), not yours, so you do not file a 1099-NEC for them.
• Rent paid to a property management company. They handle it.

Before the first payment: collect a W-9

• Ask for a completed W-9 before writing the first check.
• You need their legal name, mailing address, and EIN or SSN.
• Without a W-9 on file, you may be required to withhold 24% backup withholding.

Key dates

• January 31. Send 1099-NEC copies to contractors AND file with the IRS. The same deadline applies whether you file on paper or electronically. If January 31 falls on a weekend or holiday, the deadline moves to the next business day.

Collect W-9s when you hire, not in January. For our clients, we track contractor payments all year and prepare and file the 1099s. It is one of the services we offer.

Enter your loan details to see your monthly payment, total interest, payoff date, and the full month-by-month schedule. Everything stays in your browser. Nothing is saved or sent anywhere.

Tip: if your books show a loan balance that does not match your lender's payoff amount, that is a very common cleanup item. We fix those all the time.

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Fixed costs are the bills that come no matter what: rent, insurance, software, base payroll. Variable costs rise with each job: materials, fuel, subcontractors, processing fees.