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 if you have kept good records, not only of your fee income and purchases, but also of fees written off, discounted and so on
- you will have to keep good time records for each client as well as details of external consultants engaged, disbursements, expenses, fees billed and received and so on
- you will need to keep certain records to comply with authorisation to carry out audit, probate and insolvency work, consumer credit and investment business
- members of a professional accountancy body must keep certain records under that body's Client Money Regulations
- the Money Laundering Regulations require you to keep records to make sure your practice is not used for money laundering purposes
- you need to know how the business is doing at any time - well kept records will tell you
There are many computerised record-keeping packages on the market designed specifically for accountancy practices.
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.