bookkeeping mistake filingThis is part of a series of the Top 10 Bookkeeping Mistakes Small Businesses make.  To read the others, click here.

This bookkeeping mistake is one of those that is either a result of some of the other mistakes – or the cause.

First, before we even address how to have better paper filing systems, consider skipping filing altogether.  By this we mean an online accounting system.  There are many startup businesses these days that haven’t filed a paper or printed out anything in months, if ever.  Everything is done online, on the cell phone, and filed swiftly and easily.  The best way you can prevent inadequate filing systems is to do away with them entirely.

However, if you do have to keep paperwork of some kind (perhaps even just a pile of receipts or invoices), here are a few tips:

Keep it clean.

Musty, dusty, or even moldy paperwork is a complete disaster. I only wish I were joking about this – too many businesses simply file away paperwork and never look at it again, even if it rains in that corner of the office.  Keep the area where your paperwork lives clean, tidy, and organized.

Make it colorful.

Some of the best filing systems are organized by color.  Red for unpaid invoices, green for paid ones, blue for outgoing invoices, yellow for expense receipts.  Whatever system you use, make it consistent throughout the whole business. (You can even color-code files on your computer.)

Keep your filing simple.

If your filing system can be understood by your six-year-old, you’re doing very well.  Clear, obvious titles; large print; capital letters; labeled boxes and folders and files.  Test the system on someone who doesn’t know anything about it – or about you, or about your business. If they can understand it quickly, you’ve done well.  (This works particularly well if you’re going to be hiring someone to help with the admin, bookkeeping, or other day to day tasks of your business.)

Archive the old files.

Yes, you do need to keep old filing – but you don’t need to keep it in a place you can reach at any moment in time.  As long as you’re still keeping things clean, colorful, and simple, feel free to file away old boxes in a storage room.  (Make sure it’s checked up on regularly so the mice, or rain, or other elements don’t get in and ruin everything.)

Throw things away.

You may be surprised to hear an accountant saying this, but you do not need to keep everything.  Naturally you want to keep your tax returns and supporting documentation until the statute of limitations runs out, but that doesn’t mean you have to keep the pen you signed the tax return with, or the triplicate copies you made of a letter you sent to the IRS.   Some people just gather clutter around them naturally – if you’re one of these people, be ruthless.  (Just make sure you check with us before you start tossing boxes out the window.)