Best Practices: Record keeping and filing

Having good record keeping practices and organized files makes running any business easier.  It is always wonderful if you start out with good habits, but you can still start afresh if you find yourself in a mess right now!

You should always have one file or binder or box labeled Permanent Files.  Whether to use a file or binder or a box depends on the size of your business.  You will probably start with a file and move to a binder or a box as your business grows.  The Permanent File should contain your LLC Articles of Organization or partnership agreement, your Operating agreement, your FEIN paperwork, your Seller’s Permit and any other paperwork from the State, copies of your insurance policies, any patent or trademark documents.

The next file or box you need is for your tax documents. You will want a file or folder for the current year and then a box or drawer for prior years.  Your tax file will contain your Sales tax forms, your Usage folder if applicable (you put any bills that may need usage tax calculated on them in here for your tax preparer or accountant to review), payroll tax forms, estimated income tax forms.  You will also put any correspondence from tax authorities in this file after you send a copy to your accountant or tax preparer.  Correspondence from any tax authorities should be brought to your service provider immediately. 

You will want some filing system for your customer information.  Names, addresses, phone numbers, key contacts, account numbers, any contracts or agreements will all be filed for each customer you have.  If you collect sales taxes and a client has a WI Exemption Certificate, file this in the customer file. 

A final filing system is needed for all your vendors and suppliers (people or companies who bill you for products or services you buy).  This is usually done by Vendor name which is the easiest way to file and to search.  It is also the best way to file should you be audited for Sales tax compliance.  Some people like to file their bills by type: utilities, services, etc.   This method is acceptable, but isn’t advisable should you find yourself subject to a sales tax audit.  A way to compromise can be to color code your file labels for type (red labels are utility providers; green labels are inventory vendors, etc.). Make sure you have a W9 on hand for all service providers who are not Corporations.  You will need the information from the W9 to file 1099s at the beginning of each year.  You will keep this information by year so have one box or cabinet for the current year and
other drawers or boxes for prior years. 

One final note on record keeping and filing is whether all this is done with real paper and files or virtually.  More and more government filings and bill paying is done online so these documents start in the virtual world.  Anyone who keeps receipts knows how quickly they fade so scanning them into a cloud based system is a good idea.  You can scan and file/store all the above information into a virtual file cabinet at the start of each year and then you will only have the current year in paper form.  Some businesses transfer the information into the cloud monthly rather than yearly.  If your virtual cabinets and folders are well organized, you can access the information as easily as if they were in paper and you need a lot less space.