Refining Your Filing

By Administrator | March 21, 2016

If you are like most small businesses, you have two sets of files going through March. Last year’s files are still in your cabinets and you’ve started creating this year’s files. For many the system is one that has been developed, changed, honed, tweaked, changed again, tweaked again, and again and again until you’ve found the perfect system for you. If you are 100% satisfied, and have your filing system humming then you’re good, no need to keep reading this post. Go back to your normally scheduled day.

However, if you are a new business owner/freelancer/sole proprietor, or just haven’t found your system yet then let’s talk about filing.

Now I’m sure you’re thinking why is a bookkeeper talking about filing? Well your filing system goes hand in hand with your accounting & bookkeeping. You need to be able to retrieve the back up (invoices, bank statements, receipts, purchase orders, estimates, letters, and the list goes on) to the transactions in your records if needed. Without a filing system that works and makes sense to you, you may not be able to produce what is requested when requested.

There is no “one size fits all”, standardized, “right” way to set up your files. It is a combination of what makes sense to you, the space available, the time available, and who else may need to access the files along the way…think assistant, bookkeeper, etc. Also, this can pertain to electronic files as well. Personally I’ve found that I need far fewer paper files than I did when I started my business nearly 11 years ago. Many of my files are now electronic…but my filing system hasn’t changed. It has just moved to my computer or the cloud instead of in a filing cabinet.

Here are the more popular ways I’ve seen filing systems set-up.

  1. Alphabetical – Every vendor & customer has a unique file, and they are organized in alphabetical order. Often vendors are in one drawer, and customers/clients in another. This works well if you receive a lot of paper into your office, and have the space to maintain these files. New files are only created when a new vendor or client is on-boarded. These files continue to grow as each year goes by, unless the files are periodically reviewed and archived somewhere else.
  2. Monthly/Calendar – Files are labeled by the month or quarter. So your bills & receipts are intermingled. This works well when you don’t receive a lot of paper bills, but have a larger amount of receipts. New files are created every year, and the old ones are reviewed, items that do not need to be kept are discarded and the pertinent information is archived.
  3. Category – Files are labeled by category or account, for example: Utilities, Banking, Supplies, Leases, etc. Then all items pertaining to that category are filed accordingly. Like the alphabetical system, this one can be cumulative, if you don’t take time every year to review and archive the information.

One note on filing, if you have employees, you should ALWAYS separate these files from your other business files and keep them secure. Social Security numbers, birth dates, potential banking information and other personal information appear on most personnel/payroll documents and you want to make sure as an employer that you are doing all you can to protect your employees’ identity and security.

So you may be thinking that this is very simple and somewhat general knowledge. But you’d be surprised. I am often asked the best way to set up files, how should paper and data be kept. My personal filing system is a combination of all three systems right now. That doesn’t mean it won’t get adjusted somewhere down the road, but for now it is what works for me and my business.

Use what makes sense, don’t use what doesn’t. Setting up a filing system the way you think a business “should” set it up, and not the way that works for you and your business will lead to piles of papers (or electronic documents) in no particular order. That will cause frustration and stress down the road when you need to put your hands a specific item.

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