Taming the Paperwork Monster
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As a business owner, you understand that maintaining accurate records is essential to the health and well-being of your business. But unless you have unlimited space, it is also likely that you wrestle with keeping your papers organized while maintaining day-to-day operations. You may also worry you may discard vital records in an attempt to clear away clutter. Fortunately, there are solutions to the dilemma of out-of-control paperwork in the form of hardware, software, and plain old common sense organization.
Hardware and Equipment
You may have seen those television commercials for a scanning system that converts documents and business cards to searchable records on your computer. If you have the funds in your budget, hardware like this can be a lifesaver. But if your resources are more limited, you can maintain order by separating your records into what Amber Kostelny, a Chicago-based Certified Professional Organizer and owner of Amber’s Organizing calls “action” and “non-action” files, and dealing with them accordingly.
For business owners, “action files” consist of three categories: records for current clients, information on prospective clients, and records relating to the day-to-day operation of your business, according to Kostelny. Those files should be maintained in folders or files, on or within easy access to your desk or workspace. Kostelny suggests keeping systems for categorizing business related files as simple as possible.
“Maintaining separate files for every vendor is too time-consuming and tedious unless you are working on a long-term project (for a particular client). It’s simpler to store records by month or match them with bank and credit card statements,” she said.
In/out baskets and labeled file folders can help prevent the cluttered look that often results when loose papers are scattered across a desk, Kostelny explains that non-action records can be stored in binders, filing cabinets or in other less-accessible locations away from your desk. Free-standing shelving units or wall-mounted shelves are also suitable for storing records that you don’t use on a daily basis. Kostelny also stresses that it is essential to keep personal and business records separate.
“The DMV for your Honda is different than the contract and paperwork for a client. You shouldn’t get bogged down with distractions with your personal paperwork (during working hours),” she warned.
Software and Electronic Records
Back in the day, the only way to maintain records that weren’t on paper was on microfilm or some similar old-school medium. Today, computers, Smartphones and tablets are ubiquitous. Electronic records also represent a potentially invaluable means of getting a handle on that mountain of paperwork that threatens to take over your office.
One way to cut down on paper is to scan essential documents into electronic Word or PDF files. Kostelny also suggests retaining emailed receipts, invoices, and other electronic documents as proof of financial transactions rather than hard copies whenever possible. As long as the email messages list the essential elements of the exchanges – including contact information for the vendors, along with the amount of the transactions, they should satisfy any inquires made by the Internal Revenue Service.
What, How, and How Long to Retain Tax and Personnel Records
Of course, some records really should be maintained in hard copy form. Contracts, real estate records, and basically any document that bears one or more signatures should be maintained in hard copy and retained indefinitely, although making secondary electronic copies is also a good idea. However, many other records that you are afraid to throw away can actually be discarded at some point without worry. The following list provides a general guideline for business operators concerning which files should be retained, how they should be retained, and how long to hang onto them.
Keep Until Reconciled or Relevant Documents are Filed
- Last Pay Stub of the Year – paper or electronic (until following year taxes are filed)
- Mortgage payments and statements – paper or electronic (until paid off)
- Bank Deposit Slips — paper or electronic(until bank account is reconciled)
- Utility Bills – paper or electronic(until payment is processed and account credited)
Tax Returns and Related Records
- Personal or business-related tax returns; assuming no fraud or deliberate underpayment is involved – paper or electronic (3 years)
- Adjustments – paper or electronic (3 years after original return or 2 years after amended return paid; whichever is later)
- Records supporting worthless securities or bad debt deductions – if signed, paper, otherwise paper or electronic (7 years)
- Employment and employee related tax records – paper if signed, otherwise paper or electronic (4 years after due date or date tax was paid, whichever is later)
Long-Term Records
- Cancelled checks, front and back images — paper or bank-issued electronic copies (7 years)
- IRA contribution records – paper or electronic (indefinitely)
- Contracts – paper (indefinitely)Real estate records — paper (indefinitely)
What Can Be Tossed
- Old utility and other bills – paper or electronic (once proof of payment has been recorded)
- Old pay stubs — paper or electronic
- Quarterly statements from 401(k) or similar plans – paper or electronic (once annual summary is received)
- Receipts for out-of-warranty or discarded items — paper or electronic (unless needed for tax purposes)
Keeping on Top of Paperwork
Once you have devised a system to categorize your records and have figured out what to put where, the key is to sort through those piles systematically. You didn’t build up that chaotic mess overnight; you shouldn’t expect to clear it away in an hour. But once you have an organizing system in place, you will soon find that you spend less time looking for important documents, and more time actually staying on top of leads that can attract new business, Kostelny stated.
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