Organize Your Files
The best way to organize files is to take into consideration how you need to access your files. The system implemented will vary greatly depending on your function in the company. If you are setting up files for an accounting function, the file system needs to address your specific needs. For example: Accounts Receivable, Accounts Payable, etc.
Create new file folders each year for individual customers labeled as follows: “20xx A/R – XYZ Company.” That folder should include all transactions for the customer for the year including invoicing and payments received, which should be stapled to the original invoice and filed chronologically. If you have very little Accounts Receivable, I recommend setting up a more generalized folder labeled as: “20xx – Accounts Receivable.”
If you have a large payroll, create file folders for each payroll processed, weekly or bi-weekly depending on your processing schedule. For example: “20xx – P/R Week Ending 01/15/xx.” If you have a small payroll, it would be sufficient to set up a quarterly folder that could be labeled, “2013 – P/R – 1st Quarter.”
Set up a new file folder for each year labeled: “20xx – Banking – Ckg Acct #704” or “2013 – Banking – Savings Acct #256.” Use this folder as a holding folder for deposit receipts and then discard those receipts when you verify the bank has processed your transactions properly. Print copy of bank reconcilation and place in the file folder chronologically.
To reiterate, file folders should be set up to best meet the need of each personnel function, but at a minimum files should be set up fresh at the beginning of each year. Also, I recommend planning to keep the previous year’s folders easily accessible for at least three to four months so they can easily be referred to for research of tax preparation purposes. A general rule of thumb is to purge receipts that are not needed for tax purposes after reconciling bank statements. This can be done monthly, quarterly, or even on an annual basis.