How to Organize an Office Filing System
Make your paper documents accessible in 5 easy steps
Learning how to organize office filing systems is crucial for any business that handles a lot of invoices, receipts, and other documents. Paperless offices sound great, but the reality is that many small businesses still need to store easily retrievable paper documents.
It's important to know what files are most important, who needs to access them, and how they can be retrieved easily and efficiently.
Receipts and Invoices
Filing receipts and invoices properly is one of the most important things a small business needs to do. A nonexistent or messy filing system can add days of extra effort at income tax time as you don't want to miss out on tax deductions because of missing receipts. If your business is ever subject to an audit and you are unable to produce the required documents in support of your expenses your claims will most likely be rejected and your tax return re-assessed.
As a small business owner, you need to be able to operate at your desk swiftly and easily. Though setting up a paper filing system sounds difficult, it is a relatively easy task that can be made easier through a few filing tips and tricks.
5 Steps to Organize a Filing System
To get yourself and your business on the right track, follow five steps to make sure papers are easily accessible and easily identifiable.
- Assess personal and office habits: Think about which employees need access to files, where they work, and what will make the most sense based on their work stations. If you are the person who is most in need of access to papers, think about how you use your workstation. If that filing cabinet to your right instinctively makes sense, that's probably a good starting point. If it is someone else, get their input—what works for one person won't always work for another.
- Decide on a filing system: What you do as a business will determine, to a certain extent, whether you choose to file numerically, alphabetically, or some other way. For example, do you search for customer information by name or account number? Do you file paperwork by category, such as expenses, financial, marketing, etc.? This is a critical step, as it will determine how you will lay out your filing system. Do this before you buy anything for your filing system.
- Calculate storage needs: If you have a large number of files that you access daily, they should be at your fingertips. If you access them less frequently, you might not need them at your workspace, but you still might need them close by. There may be a combination. Some files might be needed daily while others can be filed in long-term storage further away. Allow for growth when looking at filing cabinets—buy something to accommodate twice the files you think you will have now. This will limit the number of times you will have to reorganize your filing system.
- Invest in a good labeling system: Being able to read file labels sounds obvious, but clarity in labeling will save you more filing time than you can imagine. Most companies who make labels provide templates that integrate with the most popular word processing software. You may want to consider one of the small label-making systems that also can print out individual mailing labels. Items that perform double duty are usually a wise investment.
- Purchase file folders: The best investment is to purchase colored hanging folders with plastic label tabs and plain manila file folders. Colored hanging folders are easily available and easily recognizable. For example, if you put all of your client files in yellow hanging folders, financial information in blue folders, and anything related to marketing in red folders, you easily can see roughly where you should be searching for a particular file.
Simple Is Best
The KISS principle—Keep It Simple, Sweetheart!—applies to setting up a filing system that is easy to use and easy to grow with. Broad subject categories will allow you to easily add new files as you grow and will eliminate the need to upgrade or reorganize your filing system regularly.
Keeping it simple also will make it easier to integrate your paper and digital files as part of your overall document management system.
If you are trying to green your business and make the shift to a "paperless office" you can scan expense receipts and store them with your other digital accounting information. Some cloud-based accounting software applications facilitate this by having mobile apps that allow you to take a mobile phone snap of an expense receipt and record it on the fly.
Reviewing Tax Laws
The IRS and the Canada Revenue Agency (CRA) both accept digital images or paper copies of scanned items including:
- Cash receipts
- Bank statements
- Canceled checks
- Pay stubs
- Credit card statements
The copies must be clear and legible. If not, the IRS or CRA may demand to see the original paper documents during an audit or routine request for documentation, so keep originals for the prescribed period of time.