Now that you have you own business, how do you organize your paperwork? Well, the secret is not to do any of it yourself - just organize and delegate.
The objective of organizing your paperwork is to be able to retrieve it at a moment's notice. You want the right document in your hand now! Anything else is called a mess and causes stress! It is causes stress because it is unfinished business.
Is this a lot of work? The answer is no - just a slight change in your habits! It will take some time to set up and will save you at least 50% of the time each day you take looking for things and handling your paperwork numerous times. Some modifications will be required to adjust to your style and size.
Let us do it right the first time so that it leaves your brain time to do the important things rather than looking for it. It is like baking a cake. First you need the ingredients, then the recipe and then the action. Miss any one of those three, you have a mess in your hands. So let us get the ingredients to keep your paperwork clean. Here are the items you need:
- Filing Cabinet
- Stapler
- Letter size File Folders
- Pen and a Marker
- Envelopes - small and large
- Dividers for your filing cabinet.
- In Basket
- Pending basket
- Garbage Can
Let us understand the roles of our desks or kitchen tables - they simply represent the work area to sort our paperwork. Filing cabinet is a storage device that works as a retrieval system when it is appropriately referenced. A lot of the offices that I walk into have one common problem. They confuse a desk with a filing cabinet and their in/out trays. So let us start with the desk. You desk should be clean except for the in/pending tray. When you come in or anyone else wants you to read something, put it in your in-tray. This way you can deal with it when you want to. Make it a point to deal with everything in your in-tray at least once per week. Every piece of paper should be handled only once - respond to the request, throw it in the garbage, or file it! The exceptional piece of paper can make it to the pending tray. Next is your filing cabinet. Your filing cabinet should be divided into 4 sections.
1. The first section should be forms. You should have some of the following file folders:
- Estimates given to customers
- Credit Application forms
- Credit Check forms
- New Customer / Client interview forms
- Customer invoices
- Expense Report forms
- Staff application forms
- Time sheets if you have staff
2. The second section is permanent information. You would have the following folders:
- Invoices for Equipment purchased and warranties
- Insurance Policies
- Loan - Mortgage funding documents
- Equipment purchase
- Properties - one file for each property
- GST Remittance file
- PST remittance file
- Payroll deduction files
- Corporate tax files
- Financial statements and tax returns
3. The third section is your lead generator. This depends on how you get your customers or work. Contact us to help you set up a customized system for you.
4. The last section is your accounting information. You will need folders for each of the sections. If you have multiple businesses, you should have a separate section or cabinet for each business. These folders should be replaced for each year.
a. Customer Files - one folder per customer unless they fill up should contain
- Paid Customer invoices
- Customer payment vouchers - cheque stubs or credit card payments
- Quotations
- Correspondence with the customer
- Other information as required
b. Supplier files - one file per supplier is preferred and should contain. Remember, when your corporation reimburses yourself or your staff you are considered a supplier and hence should have a file. The same is true of your credit card statements
- Paid Supplier statement with supplier invoices attached to the statements
- Quotations
- Correspondence with suppliers
- Other information - Throw away all fliers that you think you may need - it
c. Unpaid supplier invoices - Once approved, file them in an Expanding file folder by letters.
d. Unpaid customer invoices in an expanding file folder.
5. Bank statements, cancelled cheques and deposit slips
a. Go through the bank statement each month to make sure the bank did not make an error
Identify deposits that are not sales, write on the statement the source of the money - loans of any kind - you may not remember the source of the money and CCRA will take the position that the money was sales and you will have to pay GST, PST (if applicable) and income taxes!! For example you got a loan from your father in law - get a copy of the cheque before you deposit and attach it to the bank statement
The last section is the action plan.
6. The first section is paperwork that you carry to / from your car or your suppliers. Keep all paper work in your wallet or have file folder in your car with elastic bands so that it does not go all over the place. I do not like using brief cases because your car will have a tendency to get broken into. You can use small boxes to gather the paper work in your car. Make sure you empty the paperwork from your car or your wallet to your in tray daily or weekly at the most.
7. All your paperwork is collected in your intray. Depending on the volume of paperwork you are handling, clear your intray daily or weekly. If you have a computerized system, enter the information to your computer and then start filing. Take all your unpaid supplier invoices and place them in your unpaid bills folder. Do the same with your customer invoices. File away your quotations. Respond to your correspondence where possible by sending a fax on the document that came with a query and file it. Once you start working on your in-tray - do not stop till all the paper is gone. Avoid putting much in pending unless you are depending on someone else to get information for you. All other "nice information" goes for filing or garbage. It is okay to have to look for something again if your threw it away in the garbage.
8. Pay your suppliers once per month. Start in your letter "A" of your expanding file folder, reconcile your supplier statements and pay them - preferably with a credit card so that you can collect "air miles or other bonuses" Attach all your supplier invoices to the statements and them transfer them to a paid file.
9. Follow up with your customers once per month especially if they have not paid you. With some customers, it is a policy of "squeaky wheel gets the grease" As you get payments from your customers, move the invoices to paid customer invoices.
At the end of the year, here is how you prepare yourself for your trip to your favourite accountant (preferably me - if I say so myself).
1. Start new files for your customers and suppliers. Take the previous years paid files, put them in a box and label the box so that you can retrieve it if you need to.
Here is what you need to send to the accountant:
2. If you have a computerized system, enter the closing date on your computer so that you cannot change the previous years data (it will cause errors on the information filed with CCRA). Back up your disk, give it to the accountant with the password.
- Gather all the bank statements, cancelled cheques, cheque stubs, deposit slips and bank reconciliations for all your banks
- GST Returns
- PST Returns
- Corporate tax instalments
- Copies of insurance policies - just front pages
- Copies on invoices for equipment / properties purchased
- Copies of loan and their repayment terms
- Any questions that you need to ask your accountant
1. Any questions that you need to ask your accountant
Once the information comes back from the accountant's office, put your permanent information back in the permanent section of your cabinet.
Well lets take a look at the key components of this system:
2. Have a way of getting your paper work to your in tray (you cannot delegate that)
Hire a person to sort your in tray and empower them to take one of the follow actions:
- Throw it in garbage where possible
- Pass is to the bookkeeper or accountant
- Send a quick note on the paper and fax it to the recipient
- File the paper away
Leave it for you to deal with - no more than 20%
Now if you get audited, simply gather the information required and send it to the accountant and let them deal with it. If you are applying for another mortgage, simply go to your file and give the information to the mortgage brokers.