| One thing I always stress with my clients is to keep good records. Documentation is critical for providing back up for many areas of the business, including financial, taxes, human resources, and insurance. As anyone who has been audited knows, good records are critical. Incomplete or missing records can open the door for further inquiries, as well as result in fines and penalties to the business. However, it doesn't take long for these paper documents to start piling up.
Even if you have a good paper filing system, soon you have drawers, then cabinets, then boxes and eventually rooms full of paperwork....talk about overwhelming!
The good news is that in recent years, it has become much easier to convert records to electronic formats and many businesses are moving away from paper records altogether. Even the IRS accepts electronic copies of most business records and will often request that documentation be submitted electronically for audit and tax purposes. Electronic records save on the cost of paper and document storage; they also makes it easier to share information through email and the internet. Here are some suggestions for getting started with an electronic filing system for your business:
Download bank and credit card statements electronically: Even if you opt to have a paper statement mailed to you, you can also save a pdf version of the statement to your computer. Most banks and credit card companies only keep statements available to you for about a year, so be sure to download the statements promptly, before they are no longer available through their web site. Utilize electronic documents whenever possible: Many accounting software packages allow you to create and email electronic copies of invoices, statements, purchase orders, sales orders, etc. By opting for electronic delivery, you can save the cost of paper and mailing these forms, as well as provide your customers with an electronic form for their files. On the flip side, ask your vendors to provide you with electronic copies of invoices and statements for your files in addition to, or instead of, the paper copies. Sign up for electronic billing for things like telephone, cell phones, utilities, etc. Consider paying employees via direct deposit and providing employees with electronic check stubs (see article below for QuickBooks ViewMyPaycheck feature). Scan and archive documents: If you don't have a scanner, invest in one. An all-in-one printer is a good choice, as it gives you the option to print, scan, fax and email all from the same machine. Once you have the electronic copy created, you can shred or destroy the scanned document (except for critical business and personal documents, such as articles of incorporation, wills, real estate deeds, etc.) Consult with your lawyer or tax accountant if you are unsure whether it is OK to shred an original paper document. NOTE: If you would like to scan some of your older existing paper documents, first decide if the cost and time involved are worthwhile before undertaking this step. You may decide to just start scanning documents going forward and retain the paper documents as needed for historical purposes. Designate a secure area on your computer or server for storing these electronic documents and make sure they are backed up regularly. The electronic files can be organized any way you want, although I usually find that chronologically works best. If you create a folder for the current year, then you can create sub-folders for each month and/or type of document. When it comes time to shred the old paper documents, you will still have the electronic version for back up and you can keep those files as long as you want on your system.
Remember you don't have to jump into the deep end of the pool - start slowly and build your electronic files as time permits or as your comfort level with electronic files increases. And keep in mind that you'll be "going green" by saving paper and delivery costs.
If I can be of any assistance in reviewing your current filing system or assisting you with developing an electronic filing system for your business (or personal) records, please contact me at Tracey@FirstTierAccounting.com.
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