Chauffeur accounts are not glamorous, but they are essential if you want to be a success. They’re an important focus if you want to grow a business. Most people who own a car are aware of the running costs. If you run a chauffeur vehicle however, those costs escalate. The mileage increases, legal conditions exist and other associated bills appear. You still need to make a wage too. That wage covers holiday pay, sickness, pension and other costs.
In the simplest sense, chauffeur accounts track your income and outgoings. They compare weekly, monthly or even yearly performance. It should be simple to see if you are making (or losing) money. Scrutiny is required but on the whole, once figures are collated it is a straight forward process. One thing I have learnt over the years is, anyone not keeping a record of their figures will eventually find themselves in trouble but not understand why.
The Start-Up Chauffeur Accounts
For a new chauffeur business, making accurate predictions will be tricky. Without trading history, there is no way to accurately predict what the income and outgoings will be. If the income is greater than the outgoings however, there should be a profit – and that is what counts. So where do you start with accounts? Well, it depends how long you have been trading. If you are pre start-up, then begin with the most obvious cost of the car (or minibus). This is likely your biggest capital item.
Some people will have a lump sum to invest (such as a redundancy package). Others will need a loan. Either way, the costs for purchasing and running a vehicle will need calculating. How else will you know what price to charge? Before you can decide which vehicle to purchase, you should research your market. The specific chauffeur will have as little competition as possible. To help with vehicle calculations you can download this Excel Spreadsheet.
Once you decide the target market, you are one step closer to deciding which vehicle to purchase. When I started out, insuring my first executive car was a costly exercise. It really dawned on me how much more expensive it would be than running a normal car. Again, it will depend on your trading history but a new insurance policy for hire and reward will not see much change out of £3,000. Over time it may drop below £1,000.
Once you have decided which vehicle(s) to use, you can log numbers. You could use an accounting package but to start off, a spreadsheet might be easier. A typical spreadsheet will have months across the top of the page. Below this, each month can then show the breakdown of any income. This could be account work, card payments and cash jobs. These can then be totalled for each of the months, like the example below:
Looking at the totals can be good. A growing turnover always looks encouraging. As people say though, turnover is vanity and profit is sanity. Therefore the only way to know if you have made a real profit (or a wage) is to deduct the costs. It will help if items are purchased using a debit card. This will keep an accurate record on the (online) bank statement. Data can be exported to a spreadsheet or (automatically) to accounting software.
Keeping costs under control is key for a healthy business. It is important to identify what you are spending in chauffeur accounts. It can also help spot small purchases (that might not seem much at the time but) which accumulate as one big cost without being obvious. So what costs will a chauffeur incur? Again it is best to list them in the spreadsheet and analyse them to make comparisons. The table below shows just how many there can be:
Once the income and outgoings are logged it is a simple exercise to calculate what is left. Using the examples from above will look like this on a spreadsheet:
These may look good figures. However, there is time required to complete all the research, driving, preparation, admin and marketing. A wedding will typically demand half a day to prepare a car. It may take lots of time in emails or phone calls before the job. Then there is the time driving to and from the occasion. In total there could be around fifteen hours required. Likewise enquiries which do not result in bookings will consume time.
It is feasible that a chauffeur only spends thirty hours a week in their car. Another thirty hours might be spent working on their business (which is largely invisible). The hours may be unsociable too. Therefore, the profit will not suit everyone. What you are paid (in comparison to the financial risk) may not be worth the effort. The area you have chosen as a specialist (such as weddings or airport transfers) may be a seasonal business too.
The Growing Operator
If you find a successful niche, you will probably need help. Your growing turnover may even require VAT registration. Over the years, DrivenByQ have hired people to help with IT support, web design, employment law and marketing. These result in fees being paid. From time to time there are other one-off items to purchase such as a mobile phone or a laptop or even things like a torch.
A larger operator will incur more outgoings. Just some of the costs may be consultancy fees / subscriptions / marketing / meeting rooms / training / entertaining / charity / gifts / networking fees / IT support / hardware upgrades / web hosting fees / software / wages / stationary / ink / accommodation and many more. If you decide to be a Limited Company there are more fees for annual returns and other accountancy costs.
Depending on your customer base it may be beneficial to register for VAT before reaching the £85,000 threshold. If you are dealing mostly with the general public it may not help but, if you are dealing primarily with corporate customers, an extra 20% on your invoice will not make any difference. For chauffeur accounts two VAT schemes exist. One is regular VAT where you claim back 20% of your vatable costs. The other is a simplified version known as the flat rate scheme.
If a company is at this stage then it is likely an accountant will be advising them. Just to give an example of how the scheme could be beneficial, here is something to consider: If your turnover is £50,000 and you add 20% VAT, of the additional £10,000 collected, you can keep £4,000. You can also claim all of the VAT back on any purchases of £2,000 or more. That means a vehicle costing £36,000 new is now only £30,000.
Chauffeur Accounts Conclusion
Consulting an accountant is essential. Not only will they supply advice on what suits your situation, they will advise what is the most tax efficient. At start-up chauffeur accounts are often an afterthought. In hindsight they should be the focus at the outset. Correct analysis gives better direction. Consulting an accountant with figures can help choose the right bank; which accounting software to adopt or maybe which dispatch system to use, especially if you register for VAT.