Over the years, I’ve often met with friends or clients who have decided to strike out on their own in business. We meet for coffee and I proceed to tell them about all the mistakes I’ve made over the last twenty years in the consulting business and how they can avoid them!
After discussing technology, marketing, how much to charge (popular!), and billing for their work — I always bring up the subject of filing bills and payments. Filing? What’s the big deal? You put stuff in folders. Right?
It sounds simple, but it’s hard to do. You always fall behind because it takes too long. It’s a pain.
So I’ve come up with my own system that works very well for me. And I always share it with the newest members of the “independent” business world.
The objectives are straightforward:
- Has to be fast and simple so you’ll do it without fail
- Have to be able to find a document quickly when you need it
- Should be inexpensive
My system works on all three counts.
Here’s what you’ll need:
2 hole punch
Clipboard
Manilla folders with fasteners
Step-by-Step
STEP 1. I’ll assume you’re paying your bills using an application like Quickbooks or Quicken*. After a payment is made, punch holes in the top of the invoice and check stub (if you have one) and place the paperwork on the clipboard. Just put them on top without regard to what you’re paying. It might be a phone bill, a vendor, credit card bill, etc. Doing it this way will ensure the paperwork is filed contemporaneously, with the most recent payments on top.
Step 2. When the clipboard is full, transfer the entire contents to a new manilla folder. Write on the front of the folder to identify what’s inside: begin/end dates, begin/end check numbers.
Step 3: Put the folder into a box or container for the calendar year.
Finding Things
If you ever need to locate filed paperwork, just go to your computer and search for the payment in Quickbooks/Quicken. Once you find the payment date, it will be quick work to find the right folder.
Just punch, file and find. That’s it!
*Revised 3/1/11
I’ve given up on Quicken for Mac due to the never-ending lack of support from Intuit. I converted 20 years of historical accounting data to iBank from IGG Software on January 1, 2011. iBank is a Mac-only software application. I’ve been satisfied with its performance so far.
I was introduced to this system almost ten years ago. While it seems overly simple, it worked out great for someone that tends to be disorganized and procrastinates. Absolutely invaluable for those that are self-employed.
R.
I like this system, but I am curious. Why use this system over a file for each customer?
-Is it that each customer will require different amounts or paperwork making it unwieldy?
-Is it that putting everything into a specific folder for each customer every time will incurr procrastinantion and poor filing?
-Is this the best way to keep data by quarter and year for taxes?
-Would this work for anything other than bills? Project files, research, etc?
Jason, Those are good questions!
As you I’m sure you know, there are many filing methods… and I’ve tried a lot of them over the years. But I would always have a stack of paper/receipts “waiting” to be filed. So to answer your specific questions: other methods could work, but procrastination always got the best of me! My contemporaneous 2-hole punch method is so simple and fast that I never have anything waiting to be filed… I just punch and add to the top of the clipboard stack.
In practice, I have a couple clipboards that hold different broad categories of paperwork. One for business, one for personal, and a third clipboard that holds certain tax-related paperwork that I know I’ll need when it’s time to file my taxes.
I try to minimize client-related paperwork when possible by relying on electronic files when I can. This, of course, makes it easier to search for items on my computer. And as I’ve focused on electronic documents, I’ve made a real effort to establish a good backup routine, which I documented in another blog post: http://bit.ly/8u2qNN
Hope this helps!
@Jason: The reason this system works is that it’s really an indexed system, but the index is “hidden.” It’s hidden in the sense that it’s a chronologically based system – the beginning/ending dates of each folder. So, down the road, if you need to refer back to something, you’ll find it by looking for the approximate time frame, which should lead you to the right folder. Additionally, if you use a personal finance program like Quicken etc…, an additional index is created – the check number used to pay the bill. In that instance, you could do a text search in Quicken, for example, to find all mortgage statements paid to [BankName], which will then give you the check numbers for each payment. Once you have the check number, you can easily find each individual statement. (Just an example; not sure why you would want to, but you could).
Thanks, Mike – I’m going to try that! About iBank… I’ve been getting frustrated with Quicken too. Are you able to download your statements directly into iBank, the way you can into Quicken?
Yes, iBank does offer direct downloading of (many) bank statements. You can check the supported list on this page: http://www.iggsoftware.com/ibank/ofx_info.php
What’re your views on data retention? 20 years of electronic accounting data is easy and cheap to store but how about the paper files?
The answer is: It depends.
Here are the specific recommendations
Better solution: file electronically and backup to the cloud. Save paper, metal, floor space, fingers.