If you've been writing for a reasonable amount of time, you probably know that most first drafts, with the very rare exception, are not ready to be tossed into the public eye immediately upon completion. The road to a complete manuscript is a long, arduous process. So how does a manuscript go from first draft to spit-shiny and ready for publication?
The following is a very broad, minimal skeleton I follow when I edit. I edit in at least two phases with each novel.
Phase 1: Search for Big Picture Issues
Plot holes, character discrepancies, or two very similar conversations happening chapters apart from each other will expose the rawness of a manuscript if not unearthed. In almost everything I've written, I can remember a plot hole or two that I completely missed upon first completing the novel. By sitting down with my manuscript and read it in one sitting, as much as that is possible, these mistakes are more likely to be found and done away with earlier on instead of popping up in print.
These edits can be done either on the computer or by hand, whichever is preferred. Usually, I do first edits on the computer to save paper because it has no effect on if I find plot holes or not. I also usually wait at least a month or two after completely finishing a first draft before beginning this process.
Phase 2: Copy Edit
During this phase, I advise printing out the manuscript, sitting down with a red pen, and marking it up. Typos will be found, even if you thought you found them all during Phase 1. Other big picture issues may arise that were missed in the previous edits. Don't beat yourself up over it. Just fix the error and move on. It is not mandated that each phase is contained within itself. Rather, the focus is on the chosen phase each time, but if you happen to see things that should be changed for the secondary phase, don't hesitate to fix it.
I recommend editing by hand in this case because there seems to be something about reading your work on paper that gives it a finality, and makes it easier for those pesky errors to be found. It may kill a few trees and red pens, but it's worth it.
Again, this is just a bare skeleton for the overview of editing. There are other posts I have about editing that go more into detail, but this is an idea of where to start!