Why record-keeping is important
It is essential that you keep very good records of all your business transactions. This is important for several reasons:
- HM Revenue & Customs (HMRC) requires you to keep certain records for inspection for six years and may check your records from time to time as part of their compliance procedures. There is an HMRC guide to business record keeping for the self-employed on the Gov.uk website. The guide explains which records you have to keep, how long you have to keep them, and what to do if they get lost or destroyed
- if HMRC decides to investigate the business it will be of real assistance to your accountant if you have kept good records. You should try to keep good records of discounts or special offers
- you need to know how the business is doing at any time - well kept records will tell you
- you need a record of when cars are booked in for - a bookings diary or similar
- to keep track of amounts owing from account customers
- to know when you need to reorder your stock of valeting materials
- you need to keep details of collection and delivery arrangements for customers' cars if you offer this service
Make sure that you note down all income the business receives, and all the money that is spent, even if it is only small amounts. You should be able to show from your records how all income received by the business can be traced through until it is either spent or banked. Ask yourself if you would be satisfied that the records would reveal any dishonesty if they were written up by an employee.
Your accountant will be able to give you advice on how best to keep records. You might decide to go for a computerised system, which will help your accountant to draw up your accounts at the end of the year. Don't forget that under HMRC's Making Tax Digital (MTD) initiative you'll need to keep your VAT records digitally if your taxable turnover is above the VAT registration threshold. You can find out more about MTD on the Gov.uk website.