The Ultimate Filing System or Paperless Office

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Don’t have time to get organized? I’ve been getting GREAT results using BILL.com to pay bills AND store documents!!! (Click to learn more.)

 

What are you supposed to keep (or throw away) on a day to day basis, and what should you do with all the papers that accumulate in your files or pile-up in other places throughout the year?

There is a simple way to organize it all so you have what you need when you need it. I first picked up these techniques while I worked at public accounting firms, where I learned a great deal about record keeping, record retention and best practices for archiving records. And I have never stopped following these rules in my day to day practice, as they really do work. I suggest you follow my general concepts, and if you ever need to refer to prior records in the case of an IRS or other audit, you will always thank me!

NOTE: All of these instructions can be easily converted to a digital office workflow by using digital documents and storing them within folders that are set-up on a computer or network drive in the same hierarchy as described below.

1. BILLS: Store your incoming, entered, and paid bills separately.

A) INBOX: As bills arrive in the mail or via email, they should be opened and date-stamped with the date received and placed in a “To Be Entered” tray or bin which will be your Accounting In-Box.

Anything that needs to be entered into QuickBooks should be placed in the “To Be Entered” or inbox bin, so that when you go to do your bookkeeping you can work through this first. When your Inbox is empty, it’s a simple way to know everything needed to be entered or done in Quickbooks has been entered or done.  You may with to leave  partially completed or pending tasks here until completed, or if you have a lot of transactions that are pending you may prefer to move these documents in a separate tray until complete. 

B) UNPAID BILLS: Once bills have been entered in QuickBooks, stamp them with an Entered stamp, and file in the Unpaid bills file.

Unpaid bills should be kept together until they have been paid. If you don’t get bills in the mail for certain expenditures like insurance policies or car leases that send all of your payment coupons in advance, this is where things like payment coupons or payment schedules should be kept. This UNPAID BILLS folder can be as simple as one file folder labeled “Unpaid Bills”  or you can get more elaborate with an accordion file with separate pockets labeled A to Z, or you can set up separate folders by vendor, or a combination of both…whatever your business dictates is the right way for your situation. You can keep the unpaid bills in your desk drawer or somewhere close to you because you will be continually adding and removing from it as you enter and pay bills.

To pay bills, I suggest running an Unpaid Bills” report within QuickBooks, circling the bills you want/need to pay and determine if you have enough funds by adding them up and checking your register balance. Or within QuickBooks, just navigate directly to the “Pay Bills” window. Set it to sort open bills by due date or by vendor,  and then you can proceed to check off the bills you wish to pay. When you have the correct payment account set, you will be able to see the projected register balance after the bills have been paid.

C) PAID BILLS (by year): After they are paid, you need to file away your bills in a PAID BILLS file. Your Paid Bills should be filed alphabetically by Company/Vendor or Last Names of individuals. The Paid bills file can be set-up from an A-Z accordion file or you can set-up file folders and labels by Alaphabet, Vendor names, or any combination of both. New PAID BILLS files will need to be started for every fiscal year. See more about archiving files below. A Binder can also work for your Paid bills files.

Either way, you need to set-up new file folders or binders and have them clearly labeled for each year. If you are filing for a company that uses a fiscal year, you should archive your paid bills by the same month the fiscal year ends, so your files represent the same 12 month period the income taxes are filed. If you are filing for an individual, you use a calendar year as individual taxpayers file their taxes on a calendar year-end basis. At the beginning of each new year, you will archive the records (see #8 below) and start new paid bills files for the new year. 

D) USE QUICKBOOKS CHECKS: QuickBooks “Voucher” style check stock with one check to a page are excellent tools to aid your record-keeping effort. After printing them from within QuickBooks, you may staple the check stub to your copy of the paid bill to create a payment record before you file the bill away in PAID BILLS. Or, you may prefer to keep your check stubs chronologically by check number as a hard copy of your QuickBooks check register. But I prefer to staple the stub to the bill as the check register is always visible/available within Quickbooks (by running a “Missing Check Report” under the banking reports sub-menu)

 

2. INCOME/DEPOSITS/BANK RECORDS: Document it and forget it!

A) OPEN INVOICES: You may wish to use QuickBooks tools to track open invoices, or you may prefer keeping Unpaid Invoices loose in a dedicated “Unpaid invoices” file by date and customer, until they are paid. When payment is received, you should attach to the deposit copy and file in the Cash receipts folder.

B) CASH RECEIPTS: You should keep a copy or scan of every deposit you make, in a separate folderor binder for for each bank account labeled by year such as “2013 CASH RECEIPTS – WFB Acct -123”. If you deposit cash, document the source of the cash here to be clear whether it is income or not.

C) BANK STMTS/RECONCILIATION REPORTS: You need to keep a file by year and bank account for bank statements and reconciliation reports, but conceivably this can be kept within the same file or binder as above.

D) A NOTE @ BINDERS…Binders work really well for bank account statements and records. And binders work well for paid bills files too. But remember that you will need to purchase a new binder for each year just like file folders, as the purpose of archiving these documents is to be able to retrieve them quickly if/when needed. (I prefer to keep Unpaid bills loose in regular files because you may look at them several times and it isn’t practical to hole punch and file them until they are paid.

3. INSURANCE POLICIES:  Most individuals and businesses have several insurance policies.

  • Insurance policies typically have a lot of documentation — it is crucial to keep this organized to be able to find important information when shopping for renewals, making a claim, and when reviewing or changing your policy or coverage.
  • I suggest keeping permanent policy information & documents in a Binder labeled “Insurance” with tabs for each policy. You may need separate binders for Business & Personal insurance.
  • As policies renew or expire they should be purged from the binder and replaced with the new policy. Copies of any previous applications & workers comp insurance audits should be kept together so they can be referred to in the subsequent yearly audit or when completing subsequent applications.
  • KEEP IN MIND THAT ALL INSURED ASSETS SHOULD ALSO BE THOROUGHLY DOCUMENTED FOR INSURANCE PURPOSES!

4. PERMANENT FILES for ASSETS/ REAL-ESTATE are NEVER PURGED or ARCHIVED:

  • For Assets, Major Equipment or Property Acquisitions, purchase receipts or escrow/sales documents, as well as any record of repairs, upgrades, remodels or additional investments should be kept in Permanent files or binders by asset.
  • Permanent files are never purged or archived until the asset is sold, liquidated or otherwise disposed of.
  • After disposing of the asset, the corresponding files should be archived with records from the same year in which it was disposed in.

5.   CREDIT CARD ACCOUNTS, LOAN APPLICATIONS, FEDERAL, STATE & GOVT. AGENCIES – PERMANENT FILES:

In addition to Major Assets (above), “Permanent files” should be set-up for any kind of account where you filled out an application, set-up an account etc. The “Permanent” file is for storing the account administration and other permanent information about the account itself, like contracts, documentation, copies of your application, id numbers &/or log-ins, but note that this is separate from the paid bills, which will still go into the Paid bills file that will be purged/archived by year.

If you have employees, you may have had to fill out applications to set-up accounts at state tax agencies. If you collect sales tax, you have had to fill out an application for a resale number.  If you have a revolving charge or a bank account, you had to complete an application and you were provided with contracts, agreements, documents, etc etc. This is the type of information that needs to be stored within “permanent folders” that you don’t purge until the account is closed and you no longer need it.   If there are passwords associated with online account log-ins, you can keep them in this file. If you set-up your business as an LLC or Corporation, you can set up one folder for it to store all the various documents you should have received from various federal and state agencies, such as the irs, the dept of corporations, the secretary of state, &/or the franchise tax board from state you incorporated in. 

Another file I suggest setting up as a permanent file is a “Credit Cards” file with a front/back  copy of every card you use, to be updated as cards expire and replacement cards are issued.

And I also suggest keeping copies of all completed credit applications in a “Credit Applications” file that can be referenced when filling out future credit applications.

6) HR/PERSONNEL FILES: There are many laws concerning Human Resources policy/files that must be maintained for your employees which I won’t go into here — but many workers comp insurance policies now come with free tools to help business owners comply with the Federal/State laws that impact them. But at the minimum, you must set-up/keep a confidential file for each employee with their hiring documents, benefits and employment history that no other employees (other than the HR department or owner) can access.

7) TO BE FILED: You must keep a “To be Filed” bin to hold documents in one place that have not been filed. This way, there will only be one place to look if the document you are looking for is not already filed.

I enjoy filing my paid bills and find organizing my files is very relaxing because it means I am all caught up with my work. I suggest you have fun with it, as there are many options available these days besides plain old Manila file folders or labels to color code your files by type, company &/or year. The easiest way to set-up your paid bills file folder labels is to print your Quickbooks Vendor list onto Avery or similar file folder labels, and this can all be done within Quickbooks too.

8) ARCHIVING / PURGING FILES BY YEAR: Every year you need to archive the prior year’s Paid Bills and Banking files, as well as any permanent files for fixed assets that have been sold or liquidated. Archiving means you inventory the files, place them in a well-labeled storage box and store it out of the way until the records are no longer needed.

 

These are my basic suggestions to organize your office — but setting up the files or binders is just the foundation. You must keep up your filing current in order to reap the full benefits of an organized office.

If you want more information on what records you need to keep and for how long, check out this information about record keeping basics — and consider hiring us to help you organize your records, or create a paperless record keeping system.

 

 

  2 comments for “The Ultimate Filing System or Paperless Office

  1. Tim
    November 21, 2013 at 10:49 pm

    I just stumbled across this post and want to thank you for putting out this thorough guide for filing. I’ve been searching like mad trying to find a detailed overview of the workflow with office filing. You’ve touched on points i haven’t seen elsewhere and it has really shined a light on how to file certain documents.

    I am trying to setup a paperless system adopting the workflow you’ve outlined and wondering what your thoughts are on that and dealing with hard copy documents digitally (for example; how would you “staple” cheq stubs to paid bills)

    Look forward to reading more of your site.

    • Ultimate Bookkeeper
      December 4, 2013 at 10:10 pm

      You are very welcome, Tim. Thanks for your positive feedback. I am pleased the article helped you start to get your virtual record-keeping system organized.

      Currently I am setting up a paperless office for a very disorganized client, and am finding that in the case of check (or cheque) stubs, it’s most important to keep the invoices filed by payee (or vendor) that allows you to recall them anytime if/when needed. In this particular case, the client pays most of their bills online so there are no check stubs at all. (This is becoming increasingly common among many clients I work with, too.)

      We are using QuickBooks Online version which allows users to upload and store related documents such as invoices and bills directly within QuickBooks Online (aka QBO) as the record is entered or created.

      With no reference number such as a check to assign to payments, when I pay the client’s bills and QBO asks for the starting check number I am using reference numbers in lieu of a check number consisting of the date followed by a dash and a 1, then I let QBO assign the consecutive check numbers in the same manner only instead of a 1 on the end, the consecutive payments have a 2 or 3 or 4 etc. (ie check numbers in QBO for the payments I sent out thru PayPal today appear as “1204-01”, “1204-2”, “1204-3”, etc.)

      Since we are storing a pdf copy of the actual bill as we enter vendor bills in QBO, everything will be linked up automatically. Should anyone need to examine the actual bill all they need to do is view the QBO vendor history, select the invoice they want to view, and open the attachment.

      In the absence of QBO, I would still store the virtual records in virtual folders by payee, employee, project &/or customer, carefully noting the invoice number and date. In the absence of any reference numbers on a document you can have a back-up system to insure everything without a reference number gets indexed consistently. At a different start-up I had worked with for two years, when employees submitted expense reports I used a system to number them comprised of the first three digits of the employees last name followed by the date ending of the expense report (ie for employee Johnathan Phillip’s expense report covering November 1 to November 30, I named it PHI11302013 both when I entered it into the company’s General Ledger then filed it in Jonathan Phillip’s folder in that company’s “Employees” virtual folder subset. When this company was seeking investors, we had all the records they needed for their due diligence at our fingertips because of the impeccable record-keeping.

      Another option is to use database software such as Filemaker Pro to store your documents, which comes with free templates you can use to set up a virtual document storage system in minutes. Filemaker Pro is highly scalable, can be networked and/or hosted remotely, and offers layouts for ipad and iphone as well.

      Whatever method you choose to store your digital documents, a little extra planning at the start of setting up a virtual record-keeping system can go a long way in keeping it organized, as well as easy to use and most effective.

      Thanks again for your feedback, and best of luck!!!

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