A Guide to Storing Business Documents

A Guide to Storing Business Documents

No matter what kind of business you run, one thing is certain: managing and storing business documents is a fact of life. From day-to-day invoices and bills to tax documents that you reference only once a year, business owners are responsible for keeping track of a large amount of paperwork. 

Those just starting out may find that they can get by without a proper document storage system. With only a few invoices a month, it’s easy to locate the one you need. Using memory alone, you can recall exactly where it’s saved on your desktop. 

As time goes on and your business grows, continuing forward without a document storage plan becomes a risky game for business owners. If you ever find yourself under audit from the IRS, for instance, you’ll be asked to produce all kinds of documentation to back up your previous tax returns. More common scenario is that you’ll simply notice that the more documents you have in an unorganized system, the more time your team wastes trying to locate them. 

The best time to set up a document storage process? Today. Right now. The earlier you start, the more efficient you’ll be as your business grows. Here are some tips to get you started on the right foot. 

Documents Business Owners Should Keep On Hand

First things first, make sure that you know exactly which business documents you’ll need to keep. This may vary depending on the industry you’re in. Medical businesses, for example, have more regulations to abide by than landscaping companies. In addition to industry-specific requirements, here are some general documents you’ll want to hang on to. 

Tax Documents

“Tax documents” is a catch-all term here for anything you’ll need to file your business taxes. This can include financial statements and payroll documents, which we’ll cover in more detail alone, but the majority of your tax documents will likely be receipts. 

The rule of thumb for tax documents is that they should be kept for at least 3 years after the return was filed, since that is the standard time period in which an audit may be conducted. However, if there were serious issues with past filings (or you didn’t file at all), the IRS can come knocking well beyond that 3-year window. So the rule of thumb for tax documents is this: When in doubt, hang on to it. 

Entity Documents

It’s rare that you’ll need to pull out the paperwork you filed with the state to incorporate your business, but you should still know exactly where to find it. Same goes for your EIN number and your business plan, all of which are essential components of your business. When it comes to the business plan specifically, make a plan to review it annually and evaluate your goals. The easier it is to access, the more likely you’ll be to follow through on this. Your business will thank you. 

Financial Documents

Financial documents like invoices, bills, and monthly financial reports may required for tax filing, but they’re also key to day-to-day operations of any business. Need to follow up on an outstanding invoice? You should be able to reference it in a matter of minutes. The same goes for bills you’ll need to pay. To keep operations running smoothly, you’ll need to pay your vendors, software subscriptions, and freelancers on time. 

Financial reports like the income statement and balance sheet can also help business owners make important decisions. But in order to take advantage of all the information they offer, they need to be easily accessed. If not, they’ll be out of sight, out of mind. 

Leases

Whether you have one office or many, keep all information relating to your workspace in an easy-to-access location. If you have an issue with space, you may need to quickly reference your lease and refresh your memory on its terms. When it comes time to renew or renegotiate, you’ll also want to have that lease information on hand to reference. 

Human Resources Documents 

This is a big one. Your employee information is sensitive, and it’s imperative that you keep employee records well organized. Make sure that you have a system for collecting employee contact information, as well as past payrolls and 401k records. These will be particularly important for your financial records and taxes. 

This information is also highly sensitive, so you’ll want to make sure it’s stored somewhere well protected. Employees who don’t need access shouldn’t have it. 

Where to Store Business Documents

Some business documents may need to be kept in a physical location. Medical practices and law offices, in particular, might face regulations about storing physical documents. However, most can probably be stored digitally. The more paperless you’re able to make your business, the less risk you have of something getting lost. 

Here are some big do’s and don’ts when it comes to setting up a document storage system for yourself. 

DODON’T
Keep as much documentation in a cloud-based software application as possible.Wait more than 7 days after creating or receiving a document to file it.
Organize your documents into logical categories and folders. Rely on one hard copy. Instead, create physical backups and store them in a separate location. 
Use a consistent naming convention for digital files so that you can easily search for and locate them.Store documents in multiple software systems if avoidable. Instead, try to keep everything (except backups) in one centralized location. 
Back up your most important files in a secondary location, like a USB drive or portable hard drive. 

How to Keep Documents Safe 

Many of the documents listed above contain sensitive information, and these days there’s always someone trying to hack into anything that might prove lucrative. If your payroll documents are accessed without your permission, for example, you could be compromising social security numbers, bank information, and more. So when it comes to document storage, security needs to be a top priority.  

For physical documents, it can be as simple as putting a lock on your filing cabinet and as complex as requiring ID badges to get in and out of the building. The bigger your team grows and the more sensitive the information you keep, the stronger security measures you’ll need to take. 

When it comes to digital storage, the topic gets even more complex. With growth, security conversations may shift toward talk of private servers and backup servers. For small businesses, however, the conversation will likely revolve around finding a cloud-based solution that they can store all important documents in a secure setting. In order to maximize security for sensitive information, these small businesses should look for solutions that allow them to limit access for select users or share passwords only through secure connections like LastPass. 

An organized document storage system can have a huge impact on your operations and productivity. To learn more about storing important tax and accounting documents in ScaleFactor, click here

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