Bookkeeping is the day-to-day process of recording your business transactions so you can understand where money is coming from, where its going, and what your business actually earns. Its the foundation for everything else: tax returns, cash flow planning, pricing decisions, and knowing whether you can afford new stock.
1) Keep business and personal finances separate
This is the simplest principle and one of the most important. Use a dedicated business bank account (and business card if possible). It keeps your records clean and makes it much easier to track true business performance.
2) Record every transaction accurately (and keep proof)
Every sale, fee, refund, expense, and supplier payment should be recorded with the right date and category. Keep supporting documents like receipts, invoices, and order confirmations.
Good bookkeeping is:
- Complete: nothing missing
- Accurate: correct amounts and categories
- Traceable: you can prove each entry with a document
3) Be consistent with categories
Consistency is what makes your reports useful. If you sometimes record shipping as fulfilment and other times as postage, your numbers become hard to compare.
A simple, consistent set of categories might include:
- Sales income
- Cost of goods sold (COGS)
- Shipping/postage
- Platform fees (eBay/Amazon/Shopify fees)
- Advertising/marketing
- Packaging supplies
- Office/admin
4) Understand the difference between cash flow and profit
These are not the same thing.
- Cash flow is when money actually moves in and out of your bank.
- Profit is income minus expenses for a period, even if some bills havent been paid yet.
A business can be profitable but still run into cash problems if money is tied up in stock or customers pay later.
5) Use double-entry thinking (even if software does it for you)
Most modern bookkeeping systems use double-entry bookkeeping, meaning every transaction affects at least two accounts.
Example: if you buy stock, youre not just spending money youre converting cash into inventory. If you sell an item, youre increasing income, and youre also reducing inventory (and recording the cost of that item).
You dont need to be an accountant, but understanding this principle helps you spot mistakes.
6) Reconcile regularly
Reconciliation means checking that your bookkeeping records match your bank (and payment platforms). This is how you catch missing transactions, duplicates, and incorrect amounts.
A simple routine:
- Reconcile bank and payment accounts weekly or monthly
- Match transactions to receipts/invoices
- Check refunds and chargebacks carefully
7) Track accounts receivable and accounts payable
- Accounts receivable: money customers owe you
- Accounts payable: money you owe suppliers
Even if youre mostly paid instantly online, this still matters for things like supplier invoices, refunds, and platform payouts.
8) Close your books each month
A monthly close is a quick checkpoint so you can trust your numbers.
Monthly close checklist:
- Reconcile bank and payment platforms
- Confirm sales totals and refunds
- Categorise expenses properly
- Review inventory purchases and COGS
- Save/organise receipts
- Run basic reports (profit and loss, cash summary)
Final thought
Good bookkeeping isnt about being perfect its about being consistent and organised. When your records are clean, you make better decisions faster, and you avoid nasty surprises.
