How’s your filing system?
Paperwork everywhere? A few different filing systems on the go? Okay in theory, terrible in practice? There’s no right or wrong when it comes to filing. As long as you have a filing system that’s going to work for you and stick to it, you should be okay.
You may not consider filing to be that important. After all, it doesn’t earn you any money so shouldn’t you be concentrating on marketing and customer service? Like many administrative tasks that happen behind the scenes, a good filing system can mean good things for your productivity and profitability by keeping your documents organised and easy to find. Here are some reasons why a good filing system is vital to your business:
- You need quick and easy access to your financial records in case you have an audit or need to verify some information.
- A good filing system allows you to see where your finances are including open contracts, and unpaid invoices and bills.
- Filing will make you more conscious of information that you really may not need to keep, or information that you should definitely keep.
- Your clients expect you to keep their information secure. A good filing system will allow you to store client information securely.
- A good filing system will allow you to quickly and easily find information when you need it.
If you can’t decide what filing system is best for you, you’re not the only one, so don’t panic! There are two basic ways to file your records, either paper or electronic.
- Lever arch folders with dividers for each month.
- Manila folder for each month.
- Handing files.
- Large envelope for each month.
Ensure your folders and envelopes are labelled so they can accurately identified. Be consistent in your labelling – use a label printer with the same font size and style, and place the labels in the same spot and direction on each folder.
Filing by date gives a logical sequence, and means that your end of financial year archiving isn’t a big task. This means that you have a folder for each month. Within each monthly folder, file your documentation alphabetically. This means that if you need to locate a document later, it’s a lot easier to find.
Have a folder for your expenses for each month, or each quarter if there’s not much in each month. Also have separate folders for things like bank statements, BAS statements, payroll reports, insurances, etc.
It’s a good idea to have a separate folder for items of capital expenditure that you’ve purchased. This will make it easy to locate information at end of financial year for your accountant. File your original invoice in alphabetical order in your monthly or quarterly folder, and make a copy for you ‘Capital Expenditure’ folder which is one folder, contents filed alphabetically, for the year.
Advantages of paper filing
- People may find it easier to physically see a file or folder to logically know where a document should be files.
- Paper filing systems are generally less complex, which means they’re easier for people to use and less training is required.
- Not easy to send information to others – would need to be copied and mailed, or scanned and emailed.
Disadvantages of paper filing
- Information isn’t available outside of the physical location of the records.
- Can take up a lot of physical space.
- Information can be lost in fires or floods.
- It can take a long time to access information, particularly if there are a lot of files to go through to find the information you’re looking for.
- It’s easy to misfile something, making it difficult and time consuming to locate information.
Here’s the system that I recommend:
- Create a folder on your computer for each year, and subfolders for each month.
- Think about when you’d file your information into a paper system. In an electronic system, this is when you’d scan your documents and save them into your folders (refer below to ‘Setting up your filing system’.
- Don’t forget to scan in your bank and credit card statements into a separate folder. Refer below to ‘Setting up your filing system’ to see how you would file this information.
- Remember to have your data backed up, preferably remotely.
I recommend getting a good scanner so you’re not waiting a long time for things to scan (I hate waiting for my computer), and set it up so that documents are saved as small files, so they don’t take up too much space on your computer.
Advantages of electronic filing
- Information can be available from different locations.
- No physical space is taken up so you can use that space for other things, or not need it at all.
- Sensitive information can be password protected.
- Information can be backed up in more than one way which means if one backup is corrupted, you’ve got a further backup.
- Information can be quick to locate.
- Information can be easily shared with others.
- If something has been misfiled, you can do a search of the folders to locate the document and easily move to the correct location.
- A document could be stored in more than one place and coping the document into two folders is quick and easy.
Disadvantages of electronic filing
- You will need a good back up system in place to ensure documents don’t get corrupted or lost.
- Information on a network can be assessable by unauthorised people so protections need to be in place.
- Data can be compromised by hackers or viruses.
- Electronic filing systems can be quite complex which requires more training of staff and the potential for things to be filed incorrectly.
Consistency is the key to every good filing system! Consider all of your paperwork and map out the system on paper first. Then you’ll know where you’d file things so it’s easy to locate things later. If you have other people in the office, use your procedures documents to ensure everyone is filing records using the same system.
How to set up your filing system
- Decide the format of your filing system – electronic or paper. If paper, decide on folders, envelopes, hanging files, pouches, filing folders, filing cabinets, etc.
- Analyse your information and decide the best way to sort it – alphabetically, chronologically, by project?
- For paper filing systems, label your files clearly and in a way that makes sense to you. For example, supplier bills, creditors, accounts payable – they’re all the same thing, so what makes sense to you? Your files could be in separate cabinets, or colour coded for ease of locating.
- Map out your filing system and separate your files into categories – accounts, administration, human resources. Decide what information will be filed and where. This forms part of your map and will help you in later steps.
- For paper filing, this means a separate file for each area. For electronic filing, this means a top folder (accounts) and sub-folders (each month).
- Paper files, sort supplier information alphabetically within your monthly folders. That means that you have a folder for each month, and the documentation within the folder is filed alphabetically.
- Electronic files automatically save in alphabetic or chronological order. If you’re creating folders for the month, your electronic system is automatically going to order them alphabetical, but ideally you’d like them sorted by date. For example, this is how your folders would be seen if purely alphabetical:
- May …
- This isn’t ideal for quickly finding information. Instead, label these numerically starting with the year, then and number of the month, then the month name. That means the monthly folders will be listed chronically like this:
- 2015 – 1_January
- 2015 – 2_February
- 2015 – 3_March
- 2015 – 4_April
- 2015 – 5_May …
- The information within your paper files should be filed alphabetically. For your supplier files where there is more than one invoice in the month, file those by date order. For example in the paper system:
- Bunnings (1st invoice date)
- Bunnings (2nd invoice date)
- Bunnings (3rd invoice date)
- For electronic filing, start with the supplier name and then the invoice number for quick identification. For example:
- Autobarn, X-2597
- Bunnings, 12112589
- Bunnings, 12112597
- Bunnings, 12112608
- Energex, 89321-003
- Telstra, P903-8874445-853B
- Don’t forget to scan in your bank and credit card statements into a separate folder. You’d have a top level folder for ‘Bank Statements’ and a folder under that for each month. Within each monthly folder, save each of your statements by the account name, or something you can easily identify.
- Considering the folder for your bank statements, what other folders would be appropriate? Insurance policies, tax returns, employee folders, etc.
- Create a ‘filing tray’. This is where you documentation goes ready to be filed if you’re too busy to do it immediately. The most efficient method of course is to file immediately. If that’s not possible, have a central location where all ‘to be filed’ information is stored and ensure that it’s filed on a regular basis to stop it getting out of control, and to keep the integrity of your filing system.
- This is the case whether you have a paper or electronic filing system. To file electronically you will scan the document to your computer. Set up a ‘scans’ folder which is the document ‘landing folder’. This is effectively your filing tray. After you’ve scanned the document, go to your Scans folder, open the document, name appropriately and save in the relevant folder. Then delete the document in your Scans folder. Filing is done!
- Be mindful of how you destroy the information that’s been scanned and filed electronically. Some information may need to be shredded.
- Test your filing system. Make sure you can find everything easily and that it makes sense.
- Train your staff. Explain how the filing system works and the importance of following the system.
- For electronic filing systems, ensure you have a good backup in place.
- Archive information annually around the financial year. This is extra important for paper filing systems due to the space they take up. Electronic files can be archived by creating a folder for the year, and moving all the existing folders for that year into the annual folder. Then start again with folders for the near year so all the current year months are viewable. For example:
2014 – 1_January
2014 – 2_February
2014 3_March …
2015 – 1_January
2015 – 2_February
2015 – 3_March …
- Paper files could be removed to archive boxes numbered and labelled with the contents. Archive boxes can be stored onsite or offsite at a secured document storage facility.
- Create an Archive Register showing archive box number, contents, date information can be destroyed.
A final word on filing …
Consistency is really important! I’d recommend you consider all of your paperwork and map out the system on paper first. Then you’ll know where you’d file things so it’s easy to locate things later. It’s also great if there are more than one of you in the office so that you are all doing things the same way!
Did you know Miss Efficiency Bookkeeping can help you organise your office and set up your filing system – ask us about it today!