The Schedule C is the IRS version of a profit and loss statement. You need to buddy up to it, especially when starting a business.

In the Schedule C tax form, unincorporated solo practitioners can find nearly everything necessary to meet tax obligations, while ensuring they pay no more than necessary. Understanding Schedule C’s categories helps you track and account for reportable income as well as expenses and deductions that reduce your tax liabilities.

“It’s the end game,” Intuit’s Fred Grant says. “If you start at the end and work backwards you may better set up your system.”

It’s best to categorize your business’ income and expenses upfront, whether you use a shoebox for receipts or a computerized accounting system. Judy Slack, an enrolled agent certified to represent clients before the IRS, recommends that new entrepreneurs closely scrutinize every nickel.

“Most people live their small business,” Slack says. “Almost everything they do involves getting their business off the ground.” To deduct every possible expense, Slack advises, “Think, ‘Is there any legitimate way I can tie this into my business.’”

The Schedule C is the categorizing standard for the IRS. It’s the tracking tool for bad debts, insurance, fees, travel and other expenses. Slack recommends using it as the basis to track profits and losses monthly.

“I highly recommend people categorize at least on a big 13-column pad and put the general categories across the top. Then once a month write down all the expenses so they can see how much they spent and where it’s gone and compare it to income. It’s amazing how many [clients] I get that discover they’re spending more than they’re making.”

The Schedule C categories aren’t only “nice for tax purposes,” she explains, “but the bottom line is you need to know how much you have going in your pocket after taxes.”