Having identified what bookkeeping is, and many of the accounts that are used, here are three essential tips to effective bookkeeping.
**1. Keep Track of Absolutely Everything
And I mean, everything.
Noting all transactions allows you to keep comprehensive accounts in order to glean those essential financial insights. These will help you make effective strategic decisions.
What’s more, if you retain proof of your transactions and are audited or taken to court, you’ll have concrete evidence that you’ve done no wrong.
**2. All Money Should Flow Through the Business Account or Petty Cash
If you don’t do this, things will get complicated – fast.
You might forget to record money received or spent. Or, you simply won’t have the proof of the transaction should you need it.
Neither is good.
Pay any money you receive directly into your business account or petty cash account before you spend it.
**3. Always Keep Business and Personal Finances Separate
This is a no-brainer, but it can be easier said than done for small businesses or freelancers.
If you’re using a bank account for business and personal use, you may be tempted to spend money that you need for upcoming outgoings.
Plus, personal purchases might get confused with business expenses.
The best thing to do is to have completely separate accounts for your business transactions. Then, simply transfer money into your personal account (as wages) to make personal purchases.
This will keep your account transactions tidy and easy to understand.
Now let’s look at some tools.