Set Up Bookkeeping Filing

Let’s talk about filing, both physical and digital. The way you set up your files will depend on your particular business and the volume of paperwork or data that you have.

I would dearly love to have a paperless system, but have never figured out how to do that entirely and still be able to retrieve specific items. So my system is a combination of both.

Paper files that I have are:

Vendors-you may need separate files for each one if you have a lot of paperwork, any info on your vendors that you might need, but not their bills

Accounts payable-bills that are not yet paid all of them in 1 file

Clients/customers-separate for each one to keep their invoices that they owe

Bank/credit card statements-a bradded folder to thread the paper so it stays in order and I file by date, newest goes on top, 1 file for the year

Checks/deposits-a bradded folder and newest item goes on top, I keep deposit info on the left side and check info and paid bills on the right side, all in date order to make finding an item easier and efficient, 1 file for each quarter of the year

Jobs-separate for each one to keep contracts, contact info, billing info, tax certs, insurance certs

401k-everything about it including payroll deduction amounts for each employee

Payroll-any info that pertains to it, timesheets, copies of paychecks, payroll tax deposits, 401k deposits, 940, 941, State unemployment returns, W2’s, 1099’s, 1 file for each quarter of the year

Sales tax-everything about it including sales tax reports

Journal entries-I usually type these in Excel when they are complex and file those here, usually they are done on a set schedule so I need a way to find them easily

Bookkeeping Software-any info on it, passwords, user info

Company-legal documents, tax numbers, owner info

Year end-keep anything that relates to it

Assets-purchase info, sale info, asset schedules

Employees-all employment docs, applications, W4, I9, raises given

Proposals/bids-this is for the ones that do not turn into a job or project

Misc forms-that I use

Large envelopes

Extra file folders

W9’s, insurance certs, sales tax certs-that I receive from others

Notary-all info on it and my notary logbook

If I didn’t say it was a bradded file, then I just put the papers in the file loose and not in any particular order. I generally put things on top so I always know if I’m looking for something older, it will be near the bottom of the file. I have a 2 hole punch that I use for the bradded filing.

My system is that nothing is filed until it has been handled and/or entered. I initial paperwork when it has been entered in the bookkeeping, so I know what is entered and what is not. I keep the things that I am working on or still need to do on top of my desk. I have a horizontal paper sorter and have designated slots for particular items. I have slots for filing to be done later, current work, work that will be done later, and extra printer paper. Set up whichever of these files you think you will need right from the start and use them! If you don’t think you’ll need some of these, then skip them. The point of it is to know where to find information when you need it and easily. With bookkeeping, you will find you need to keep up with your filing because you will have to find those documents for reference and it is a hassle to look through a big stack of unfiled papers.

Digital folders that I have are:

401k statements

Company letters-like form letters

Payroll-tax reports, W2, 1099

Pay apps

Templates

Forms

Contracts

Insurance policies

Software backups

Employees

Most of mine are very specific to the companies I work for, so I only listed here the ones that you might need. One thing I finally got into the habit of doing is scanning documents and saving them on my pc so that I can quickly find them and send them to other parties. I get asked for the same ones over and over by different parties. Most of them are legal company docs or payroll tax returns or company tax returns. That way I don’t have to dig through physical files which may be packed away in a box. If you have more than one company then be sure to keep everything together for each company under that company’s name.

I try to avoid printing as much as I can so if I get something digital that is lots of pages, I will save it on my pc. There are things you will have to print, such as bills that you get in an email. You will need to be able to prove all of your expenses, if you are audited. And no, it is not enough to show a bank statement with an online bill payment to Office Depot as proof of an expense because it doesn’t indicate what you purchased there. You can certainly scan and save all of your bills if you want, but be sure you have the details of what you purchased included. Every single expense. Also you will need detailed information on your income. Both what you billed your customer for and the details of their payments to you. Assets must be tracked and you will need proof of all acquisitions and disposals. Your CPA will need that information too in order to figure depreciation.

You will need to keep your company files for the most recent 7 years. You may need them for information on your assets or for an IRS audit. After 7 years you can destroy them. I pack up last year’s files in boxes that are labeled with the company name and year and most recent year goes on top for easy access. You would not believe how many times I have to access last year’s physical files. So be organized in the way you pack them up.