Everybody works differently. You should do what works for you. As for me, I have 3 drafts that come before my "First Draft". It's odd, I know, but it works for me. Here they are:
- Storyboard - Sort of an outline where I tell story in present tense. (He does this. She does that. This other thing happens...)
- Rough - This is the first draft that resembles a story. It has action and dialog.
- Draft - I back fill the Rough copy with description, smooth dialog, look for places I can "show" rather than "tell", look for passive sentences, superfluous adverbs and prepositions, etc.
Up to this point, I keep each chapter in a separate document (yes, that's 3 documents for each chapter), but after Draft, I stitch them all together into what I call my First Draft. This is the first time I consider it as a whole novel. At this point I look for things like plot holes, unresolved conflict, unresolved subplots, and so forth. "Story"-type stuff. I give the completed First Draft to my beta reader.
I work in all three versions at once. I'll work a few chapters ahead in Storyboard and then go back and write them in Rough, then clean them up in Draft. If I get too far ahead in Storyboard, sometime the story that in Rough diverges too far and I need to rewrite subsequent Storyboard chapters.
Now, it doesn't always work out this way. Sometimes my writing is going so well, my Rough is actually my Draft. That's okay. I don't HAVE to go through all 3 stages. But I find that if I don't break it into separate functions, I tend to just sit and look at the screen, rather than writing.
As I said, this isn't for everyone, but I'm a computer programmer in real life, and it helps me to break things into separate functions. I also find that the longer I do it, my Rough drafts become more like my Draft drafts and my Drafts are more like First Drafts. So perhaps someday, I may be able to abandon this process.
I've written two novels this way, and it works for me. Do whatever works for you.