After moving and combining our home and business office into one I had to come up with a better office filing system that would be easy for anyone involved to be able to access anything they need instantly and be user friendly especially if I was out of the office. Something that was not all “secret coded” just for me.
So, I decided before I put things back in the filing cabinet that I would spend the time now and go through the files and get rid of old bits of paper and start with fresh folders that represented clearly what was inside and inform every one of the new system.
As a bookkeeper I have worked in many offices, and everyone has their own way of storing papers, but the worse one to date was the office where the files simply had the letters of the alphabet. For example the folder “G” was for everything for Gord’s hardware down the road to government and tax stuff. I wanted something leaner and better. If I got a call from a customer or the government I had no idea where to look.
What Documents to Shred?
As you go through your files you can create a “document shredding pile” and a simple “recycling pile”. The trick is to know what should be shredded as not everything needs to go this route. As crazy as this may sound, it is harder for the recycling facilities to deal with shredded paper and it has to be processed separately and many areas want you to have it in separate blue bags from your other paper.
So my accountant advised me, that anything with your bank account, credit cards or government information should be shredded. Your address is public knowledge so you don’t need to shred everything simply because your address was on it. You can take that pile and rip it into pieces and put it in the regular recycling, this would be a good job for kids.
Old invoices do not need to be shredded unless you have client credit card information or they were confidential, otherwise they can be ripped a few times and recycled.
For most businesses you only need to keep 7 years of receipts and tax information (Canada). But check what the rulings are in your country or area. As you do your “business year end” take all the papers and files involved with that year and store them in a large plastic tub with a good fitting lid, keeping them in the labelled file folders so you know what is in them a few years from now. This gets the bulk of your paperwork out of your filing cabinets.
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Start Each Year with Fresh New File Folders
This way you can start with fresh file folders at the beginning of each of your tax years and know exactly where the previous years are stored if you are asked to prove anything to the government down the road instead of digging in over full folders trying to find them.
It just is a cleaner look. So, if you do this each year you will be ahead of the game. I basically go through our filing cabinet and take all the folders of expenses and invoices and small receipts that I kept in envelopes for that year, label them all with what they are and the year and put elastic band around everything and in the tub it goes.
By simply hauling the entire folders out of the cabinet it makes this a quick job and then I use fresh folders to start the new year. So, make this a habit, once you have started your new business year, take an hour or two to sort your filing cabinet. It can get out of hand very quickly if a lot of paper moves through your hands with your business. Those few hours it takes to organize your office files will be appreciated throughout the year with a leaner better running office.
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Important Files You Need Access To
Two very important files are the Accounts Payable and Accounts Receivable Files and they should be at the front of your cabinet where it is easy to get at. Once the customer has paid they can move out of the Receivable file and into the customer filing system you have setup.
After a year, you can then move those files into your tub for safe keeping with the rest of your year end files. Fit as many year ends as you can into one tub and label the lid so you know where to look. Once the tub gets past 7 years, take out the oldest set of files and start shredding documents with confidential information and recycle the rest.
The trick is to keep these files moving. As you move into your new business year you need to organize your office files to store the old ones, then take the oldest files at the 7 year mark and start shredding or recycling them. You can even send them to a document shredding service if you don’t want to deal with them yourself.
This way there will only ever be 7 years’ worth of business files and receipts stored at your home or office and you don’t get overloaded with paper or have to rent storage lockers to keep it.
Keep the current files lean, and make a point of once a year cleaning them out and moving them to the tubs for storage. If you keep this system up and make it a part of your schedule right at the beginning of your new business year, then you will know
where everything is when you need it. I was recently at an office where they couldn’t even shut the drawer anymore it was so full, and basically left it open and would fight to find a file or simply throw the file on a desk to pile up elsewhere.
So, now they would have to allow days to get this shredded or recycled, which means loss of productivity, so baby steps each month at that point would really help.
Office Filing Systems
Everyone has their own way, but I find if you keep the most important and used files at the front of the cabinet such as the bills you owe (accounts payable) the invoices that are waiting for payment (accounts receivable) and the government files, such as source deductions and payroll taxes and federal taxes you will stay on top of these.
Once you have paid your government taxes and they are for your year end, then move those statements into the tub with that year end and accountants statement so they are all together, so that these file folders are always current. There is no need to have bulging files that are hard to get at and simply look cluttered.