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Business Filing System Categories to Organize Your Records

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If you are wondering what fundamental business filing system categories are, you are at the right place. It’s simple math: the more complex an organization’s finances, the more paperwork they will have, and it will be more overwhelming to organize them for later reference. In conclusion, your overall files should be manageable. This is where the business filing system categories come in to make the overall task easier.

What are Business Filing System Categories?

In layman’s terms, business filing system categories can be understood as the sections to organize your files to make the task of storing and managing them less overwhelming.

Here is an example of the business filing system categories for a small business that guides its clients with operations and procurement:

Categories

File Description

More Information

Clients

A file for each client(Last Name, First Name)

Operations

Standard business files, such as legal information, website, marketing, financial information, etc.

Vendors

A file for each vendor that supplied products(Name of Vendor Company)

Events or Classes

A file for each event or class per year(Event Name, then Year) the newest year toward the front of the drawer

Education Topics

one file for each topic to educate a client about(Topic) filed alphabetically

Let us understand why a fundamental knowledge of business filing system categories is important for an accountant, small business owner, or business manager. Moreover, we will explore the major categories for business filing systems. Lastly, we will guide you with file organization tips for small businesses. Alright then, let’s begin.

Importance of Business Filing System Categories

Business filing system categories exist for one simple reason – to make the organization of paperwork and documents easier. However digital your accounting system and financial reporting get, you will always have to deal with the task of organizing them into the right categories.

If you do not keep these financial documents, receipts, invoices, etc. organized, you will end up getting frustrated when you carry out operations such as filing tax returns and preparing financial statements.

Moreover, this also gives way to inaccuracy and blunders in financial statements and tax returns. Without accurate and reliable record-keeping and financial reports, there will be no way to track the cash flow or calculate the profitability of the company. These give rise to issues like inefficiency, incompliance, increasing risks, and a decrease in productivity and growth.

What are the Different Types of Business Filing Systems?

There are two types of business filing systems: paper and paperless filing systems. Let us look at paper and paperless filing systems to understand the key differences between the two.

 

Paper Systems

Paperless Systems

Paper systems use physical cabinets and shelves to store physical folders.Paperless systems use computer filing systems to store hard drives or cloud servers.

Pro

 

The benefit of the paper filing system is that it is not dependent on the internet and is not prone to data corruption or cyber threats.

Pro

 

Paperless systems are more beneficial as they do not need large spaces for storage and are easy to transfer, share, and allow cloud accounting.

Cons

 

They can be easily damaged or lost and need too much space and manual labor for storage and organization.

Cons

 

Data saved on local storage and online servers is prone to cyber threats, malware attacks, corruption, etc.

How to Create Business Filing Systems Categories

The business filing system categories depend on the requirements of the business. Moreover, once the business grows and the transactions and paperwork increase, the categories can be split up into subcategories or folders.

Let us look at the common business filing system categories that are important for bookkeeping and accounting.

1.   Company Information

The company information section stores all the documents for business, such as registration documents for the official name and business type, such as if you registered the company as a limited liability company.

When the company undergoes major changes, you might need to update this information every financial year.

2.   Bank Statements and Reconciliations

The category for bank statements contains all the bank accounts, reconciliation reports, and bank statements. If you have more than one bank account, store the documents for reconciliation and bank statements in separate dividers. Moreover, each divider for a bank account should have a separate section for monthly/weekly statements and monthly/weekly bank reconciliations.

3.   Credit Card Statements

Depending on your preferences, you can keep the credit card with the bills or create a separate section for them. In this section, you keep all the information on them, such as credit card bills, documents, etc.

For bookkeeping purposes, the bookkeepers can enter the credit card as a bank account, reconcile them similarly to a bank account, and pay them off as regular bills. An alternative is listing your credit card as a creditor and listing each transaction on separate lines. This also allows them to pay them off as normal bills.

4.   Payroll and Employee Information

The payroll category for business filing systems contains all the employee and employer information.

You can divide this category for business filing systems into two subsections. You can keep the payroll taxes and reports in one section. In the other section, you can keep all the employee records, such as job applications, resumes, tax/pension forms, personal details, etc.

5.   Correspondence

Traditionally, the correspondence section used to have a substantial amount of paperwork. However, as most of the correspondence today takes place via email, there is rarely much to keep in this category. Remember to keep the recent data at the top for the data you store here.

However, this increases the need to organize your inboxes and probably set a filter to categorize your inboxes as per the requirement. You can also print the documents and bills that arrive via email and keep them on the right shelves they belong to.

6.   Tax

As the name suggests, the category contains all the tax information, documents, and previous year’s tax returns. However, the business needs to handle many types of taxes, such as payroll, income, sales, excise, etc. Therefore, you must divide the section into respective subcategories and file the documents and company information in the folder they belong.

7.   Assets

You must store the documents for anything valuable that you consider an asset, such as equipment or vehicle that the company possesses. This includes the invoices, which you also store a copy of in the creditors folder and other supporting documents that you may have.

8.   Creditors (Unpaid Bills and Paid Bills)

This section contains the bills for your creditors that might be unpaid or paid already. For the same reason, you must divide the category into two subsections – unpaid and paid.

Place the unpaid and paid bills in the respective sections. Moreover, organize the paid bills into monthly folders and unpaid bills in alphabetical dividers.

9.   Debtors (Unpaid Sales and Paid Sales)

In this section, you store all the invoices that you produce. Like creditors, you should divide it into subsections – unpaid and paid.

Place the unpaid and paid sales in the respective sections. Moreover, organize the paid sales into monthly folders and unpaid sales in alphabetical dividers.

You can also organize the invoices numerically on the basis of the invoice number.

File Organization Tips for Small Businesses

Although the business filing system categories are the only thing you strictly need to know, these tips will make the whole work easier. Go through the file organization tips for small businesses listed below:

  1.  Use color coding to make the organization work much easier, fast, and error-free. For this, you can use colored files and folders and decorate or label different shelves with different colored materials.
  2. Another great technique to use for organizing your small business records is digitizing. This makes your business filing paperless and reduces the space you need for them. Moreover, many software has invoice tracking and other tools that make storing and organizing much easier and less time-consuming.
  3. You must have an expiration date for your files, such as five or ten years after that, and they must be moved to a storage room or something. It is important to optimize your records and light to make it all less overwhelming.
  4. If you have many departments, you can ask for separate documents to organize the relevant files and store them in individual cabinets or shelves. This will reduce the total workload and time and streamline the process. You can use office wall holders to make the work easier and transfer department files in bulk to the shared storage area.
  5. Organize your file regularly, such as biweekly or fortnightly, to prevent losing track of the data. Moreover, remember to store the files in terms of their importance and give important files more priority.

Final Words

The above article will guide you in creating business filing system categories. This is one of the essential things you must carry out for bookkeeping and accounting. Some other crucial aspects of bookkeeping and accounting include getting the right software and hiring controller services to oversee the operations.

However, in-house bookkeeping is less efficient and has little contribution via insights and financial reporting to aid cash flow, financial management, and company growth. Moreover, the in-house accountants and bookkeepers come with the added cost of hiring and human resource management, infrastructure, and employee benefits. This is why most small and mid-sized businesses outsource the accounting operations to a specialized firm.

We understand that it can be a hassle to find the right service provider. Therefore, we invite you to take a free trial of our accounting and tax advisory services. Dial +1(800) 580-5375 now and Speak to our advisor.

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