If you're a small-business owner or self-employed, you'll acquire a lot of paperwork throughout the year. Though you might find yourself in a throwing-out frenzy, you should keep some items:
Financial documents—You might expect that you can toss items like taxi and parking receipts, but don't. Experts recommend that small-business owners keep supporting documents for business expenses for at least five years. It's a good idea to hang on to some documents indefinitely, such as tax returns and stock and investment statements.
"First, figure out which expenses affect your taxes and keep the related receipts in a specific place until they can be filed," suggests Darla Dernovesk, a freelance writer in Clinton, Wis. "It can be a file folder, a basket, or even a shoe box, but make sure you put these documents there immediately. Then when you have a slow day, or even a slow week, you can file them away for easy access at year-end. This frees you from the tyranny of daily filing while making it easier to tackle the task when you have time. It also allows you to explain your system to employees or other helpers who pitch in when you're out of the office or ill. Labeling the container used for this purpose is helpful, especially if others sometimes visit or use your office space."
Legal documents—Keep contracts, business licenses or incorporation papers, and critical correspondence with suppliers or customers—anything that could involve legal action.
"Always record and file invoices as soon as they are generated so you know how much is owed and how much has been collected," says Dernovsek. "This makes it possible to predict your cash flow as well as allowing you to send another invoice after 30 or 60 days to pursue late payments. Stay on top of this by placing the material in file folders and checking them regularly. This will also help you at tax time."
Personnel records—Hang on to employee payroll records, insurance documents, and performance appraisals.
Bids—Keep suppliers' bids until the job is finished. Retaining bids for a couple of years may come in handy to help keep track of pricing.
Miscellaneous paperwork—Everyone has a file of ideas and thoughts that could turn into something or may never mean anything at all, Dernovsek says. "Control this jumble of papers by putting it in a specific place. Then sort it regularly as time allows. This keeps you from saving papers that have no meaning while allowing you to retain ideas with merit," she adds.
Baskets, boxes, and files kept on your desktop or nearby shelves can be your friend as long as you recognize that they are temporary storage, Dernovsek says. She suggests you sort through file storage and decide what you must keep at least once a year. Then place everything you must keep for long-term records in permanent storage. This might be a file cabinet or carefully labeled boxes stored on basement shelves. The key is to sort it, label it, and store it appropriately.
You can recycle some items, but be sure to use a cross-cut shredder to discard items with personal or financial information, including credit card applications and job applications for people you don't hire, especially if they include Social Security numbers.
To help get your home office in even better shape, arrange storage for supplies that you use regularly, Dernovsek suggests. When you need a new ink cartridge or staples, for example, you usually need them right away. Creating a simple system for storing everyday items will help to reduce stress when you're under a time crunch.
Aim to go through your piles and paperwork thoroughly each quarter so you tackle it at least two or three times a year, encourages Dernovsek. "Once a year is simply not often enough to find the records required to take maximum advantage of expenses and track payments.
"When work or life becomes overwhelming, catching up on paperwork can be calming. You can't control the chaos everywhere else, but at least you can create the illusion of order on your desk."