How to Keep Records – Get Organized
The first and foremost important task in bookkeeping is keep paper trail. You need to be able to retrieve a piece of receipt, customer order, and easily find out when and where you purchased what, in a fast and efficient way. So organizing your file system is important, but often post challenges to new bookkeepers and new small business owners.
There are a few common ways to keep records:
- by date
- by category / chart of account
- by customer name
- by vendor name
It is very self explanatory. By date means sorting by date. This is the most used with professional bookkeepers. Bookkeepers prefer this method because their focuses are on making correct and accurate journal entries, so that at the end of the day they can generate meaningful business reports for the business owners to make decisions, and tax filing. Sorting by date is the easiest and fastest, but it is the most troublesome to retrieve records if given a search criteria not by date.
Sorting by category is the most preferred for small business owners. Categories often closely resemble the chart of account. In business terms, they are their categories. E.g. Different bank accounts, invoices, sales receipts, capital and different category for expenses such as automobile, rent, furniture and so on. These categories are more in tune with business owners and managements; especially when they need make decisions by looking at reports that are filtered by these categories. It also more in tune with tax filing. This method takes the most time to sort. For each receipt the bookkeeper needs to sort by each category or subcategory, and also by date. It also uses the most file folders depends on the number of categories. For large amount of receipts, sometimes monthly separators are also used in each category. It is easier to retrieve receipts since everything is categorized. Most of the time the business owner can go fetch their receipts without going through a bookkeeper to look for the any reference number.
Sorting by customer and vendor name is also common a method business owners like to use. Assuming every time the business sell something, it is selling to a customer; every time the business purchase something, it is being purchase from a vendor. This method is suitable for business that requires constant retrieval of customer files, e.g. Doctor office, Financial Advisors, Lawyers, etc. These kinds of businesses often require a face-to-face meeting or a direct phone call with the clients where all the information for the clients is necessary to be retrieved on the spot. This method poses the same problem with the sort by date method, which is difficult to retrieve if given other search criteria than names. However, this method is sometimes necessary for a business.
