By Tina Sims, CPA
The Controllership Group, Inc.
Have you ever taken a weekend to clean and organize a closet or the garage at home? Not only is using the closet or garage much more enjoyable once it has been organized, but you save a lot of time and frustration looking for things when everything is in its proper place. The same can be said for a well organized back office. While the year is still young, now is a good time to set aside a few hours to get organized.
To get started, make sure you have plenty of filing folders and storage boxes or filing cabinets – no more shoe boxes or shopping bags. Most original documents, such as bank statements, payroll records and cancelled checks need to be kept for seven years. There are some documents, such as audit reports, tax returns and year-end general ledgers, that should be kept permanently.
Once you have your list and know what you need to keep and what you no longer need, it is okay to start shredding. For small offices, an office shredder purchased at a local office supply store will suffice. For larger offices with larger volumes of paperwork, hire a commercial shredding service to come to your office and shred your paperwork. Remember, this information does not go in the trash. After you have gotten rid of the loads of paperwork that has been bogging you down, it is time to organize what is left. Different filing systems work for different companies. The main thing is that you get a filing system in place. Consider filing previous years’ paperwork by year; for example in a filing cabinet, keep a drawer for each year.
Within that drawer, file all accounts receivable (receipts), accounts payables (payments) and tax returns separately. If you choose to use storage boxes instead of filing cabinets, use a separate box for each year. It is important to label each drawer or box appropriately. This makes it much easier to identify items that are ready to be shredded once their retention period expires.
For those who want to go paperless, the same type of filing system can be set up electronically by scanning paper documents and destroying the originals. If you do choose to file documents electronically, you still need to have a filing system in place. Do not just scan documents and save them all in the same huge file. Also make sure that a backup is made! Now that all previous years are in their place, it is time to set up your office for the current year.
If there are companies out there still keeping their bookkeeping transactions on paper, it is time to consider converting to an electronic system. There are a variety of user-friendly, computerized accounting systems available for different size companies. Talk to your accountant when trying to figure out which application would best suit your office.
The key to a well organized back office is to keep financial transactions current. This means entering deposits, payments, invoices, and other transactions as they come in, reconciling bank statements on a monthly basis and reconciling prepaid expense accounts, inventory and fixed asset accounts, debt accounts and payroll liability accounts on a monthly or at least quarterly basis.
Monthly analysis reports are very valuable tools for business owners, but are only as good as the current information. Accurate record keeping is essential to a successful business. Business owners make better business decisions when they can rely on accurate financial information.
If the task of keeping transactions current and general ledger accounts reconciled seems overwhelming to you, perhaps it is time to get help. Many small business owners start out doing their own bookkeeping/accounting work. However, as the company grows and the owner realizes their time is best spent growing and nurturing their business, they usually hire someone to do this for them. Some companies hire someone internally, others hire an outside firm that offers an outsourced bookkeeping/accounting services. The key is this function is being done in a timely and accurate manner so the business owner can maintain profitability and capitalize on new opportunities.
A well-organized office and financial system can be as refreshing as a recently organized and cleaned out closet or garage at home. It is much more meaningful, useful and prevents a lot of frustration when the need comes to compile documentation for an audit, bank financing, year end tax issues or next year’s budget planning.
Tina is a partner with The Controllership Group. Her firm provides outsourced accounting services to business owners, including bookkeeping, tax, controller and CFO level services. She can be reached at 317-572-1229 or carlk@lthecontrollersh
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