Bookkeeping for startups: what to keep, what it costs, and when to outsource

By Solomon Wiesen, editor. Updated October 2026. Editorial standards | How this site is funded

The IRS expects you to keep the records behind each tax return for at least three years after you file it, and payroll records for four. Meeting that standard takes a separate bank account, a ledger tool that costs between $0 and about $140 a month, and one reconciliation a month. Paying a service to do it starts at roughly $100 to $400 a month.

What a year of outsourced bookkeeping costs

Annual cost at each service’s published starting price, October 2026. Tax returns are billed separately.

Pilot Essentials$99 a month, cash basis

$1,188

Wave Advisors$149 a month

$1,788

Bench$199 a month, revenue up to $250k

$2,388

BooksTime$295 a month billed annually

$3,540

Bench$399 a month, revenue over $250k

$4,788

Bookkeeper360$399 a month, monthly close

$4,788

$0k$1k$2k$3k$4k$5k

What to keep and for how long

The IRS list of records a business should keep comes down to proof of each number on the return: invoices and deposit records for income, canceled checks or card statements with the matching invoices for purchases and expenses, purchase and sale documents for equipment, and every employment tax record.

How long depends on the period of limitations for the return the record supports:

• 3 years in the ordinary case.
• 6 years if you left out income worth more than 25% of the gross income shown on the return.
• 7 years if you claimed a loss from worthless securities or a bad debt.
• At least 4 years for employment tax records, counted from the date the tax was due or paid, whichever is later.
• Indefinitely if you never filed a return, or filed a fraudulent one.

I’d keep everything for seven years and stop thinking about it. PDFs take no room, and seven years covers every case on that list except the last.

New York has its own rule if you collect sales tax. Tax Bulletin ST-770 requires vendors to keep sales and purchase records, including each exemption certificate tied to the customer who gave it, for at least three years from the due date of the return or the date it was filed, whichever is later. Electronic records have to be in a commonly used format the Tax Department can read. If an auditor finds the records inadequate, the state can estimate what you owe.

One more thing the ledger has to do: total what you pay each contractor. Starting with tax year 2026, the Form 1099-NEC instructions set the reporting threshold at $2,000 per payee.

Cash or accrual

Cash-basis books record income when the money arrives and expenses when it leaves. Accrual books record income when you earn it and expenses when you incur them, so unpaid invoices and bills you owe show up before any cash moves.

Tax law seldom forces a startup onto accrual. C corporations, and partnerships with a C corporation as a partner, generally can’t use the cash method, but IRS Publication 538 describes an exception for those whose average annual gross receipts over the prior three tax years fall under an inflation-indexed ceiling. For tax years beginning in 2026 that ceiling is $32 million, set in Revenue Procedure 2025-32. Tax shelters are shut out regardless of size.

Investors are the ones who force it. Venture financing documents commonly give investors the right to annual and quarterly financial statements, with an officer certifying that they were prepared consistently with GAAP, as Morrison & Foerster’s summary of information rights describes, and GAAP means accrual. Cash basis is fine while you are self-funded. Once a priced round is in sight, switch your books, and check what your service charges for it: Pilot’s $99 plan, for example, is cash-basis only. Changing the method on the tax return itself generally needs IRS approval, so choose deliberately in the first year.

The minimum setup

1. Open a business checking account and run every business payment through it. IRS Publication 583 tells new owners to keep the business account separate from the personal one.
2. Pick a ledger tool from the table below and connect the account, so transactions import instead of being typed.
3. Reconcile once a month: the ledger’s ending balance should equal the bank statement’s, and each transaction should have a category and a receipt or invoice behind it.
4. File the source documents as PDFs by month, so the seven-year archive builds itself.

What the software costs

These are list prices per month from each vendor’s own pricing page as of October 2026.

Wave’s free plan works for a pre-revenue company with a few dozen transactions a month. Xero’s $27 plan stops being usable at the 21st invoice. Before you choose, ask whoever will prepare your tax return which product they work in.

What a bookkeeper costs

Published starting prices from five services that take small companies, as of October 2026:

A year of outsourced books for a small company therefore runs from about $1,200 to $7,200 before anyone prepares a tax return. Returns are billed separately: Bookkeeper360 lists business tax from $1,000 a year and Pilot lists C corporation returns from $2,450. For firms that do both, see the list of accounting firms for startups.

One caution about subscription bookkeepers. Bench told customers on December 27, 2024 that its platform was no longer accessible, and Employer.com agreed to buy it three days later. It is selling under the Bench name again, but the episode is the reason I’d export the ledger and statements every quarter from whichever service you use.

When to stop doing it yourself

For a pre-revenue company with one bank account, software and a monthly reconciliation are enough. I’d hand the books to someone else at the first of these four points:

• Investors are owed accrual statements every quarter.
• You are more than two months behind. Catch-up is billed by the project, from $1,000 at Bookkeeper360, on top of the monthly fee you will pay anyway.
• You run payroll and also collect sales tax, each with its own filing calendar and record rules.
• You are about to apply for financing or claim an R&D credit, both of which depend on records you can produce on request. The credit is covered under tax breaks for startups.

Where to go next

General information, not legal or financial advice. Lender terms change; confirm them with the lender before you apply.