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, not only of your sales and purchases, but also of wastage, theft, last minute cancellations and other losses
- you need to know how the business is doing at any time - well kept records will tell you
- to keep track of amounts owing from account customers and to your suppliers
- so you have an accurate record of which bookings have to be fulfilled along with a comprehensive description of the booking, including time, venue, menu requirements, number of staff needed, number of place settings and so on
- if you deal with other businesses you will need to keep an accurate record. For example, you may decide to offer a comprehensive wedding service, whereby you are in effect the wedding planner rather than just the caterer. You would then have to co-ordinate with different businesses such as limousine-hire firms, florists, photographers and so on
- you need to be sure that untrustworthy staff are not stealing from you. Be especially careful if you are not able to supervise staff on a day-to-day basis
- you need to keep up to date food hygiene records so you can prove 'due diligence'
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.
If you take any goods from the business for your own personal use you should keep a record of these.
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.
As a food business you will need to have documented food safety procedures based on 'HACCP' principles. Good record keeping is an important aspect of HACCP. Your records should include 'prove it' records to show how and when you checked your safe working methods, and a food safety diary. You can find out more about HACCP and food safety on the Food Standards Agency website.
For traceability purposes all food businesses are required by law to keep certain records of food and drink supplies that they purchase. You need to keep a record of your supplier's name and address, the type of product and the delivery date. You must keep a record of non-perishable food and ingredients for five years, and a record of perishable food for six months. In many cases an invoice from the supplier is sufficient.