Got a pile of financial paperwork that you’re not sure what to do with? Should you keep it? Toss it? Make it digital? Staying on top of the paper clutter is HARD and you’ve got stacks and stacks of financial paperwork and need HALP!
I’m breaking down what financial paperwork you need to keep in your business, for how long, and the best way to keep all of that stuff organized! This is all about helping you to get more organized so you can feel like the ultimate badass about your financial paperwork.
Watch the video below to get the whole shabang or check out the recap under the video. Let’s get started!
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Receipts and Bills Received (2:52)
The first type of financial paperwork that we’re talking about are receipts and bills received. These are records of expenses that your business incurs. These can be hardcopy receipts that you get when you go to the store or digital receipts that you receive via email.
Contrary to popular belief you don’t have to keep these items for seven years. Not true.
You only need to keep these items for three years. Which is super exciting because if you’ve been in business for more than three years and you have files upon files of receipts bulging out of your filing cabinet, you can get rid of them.
Let’s say you have a bunch of receipts from past years that you just need to get organized. Start by sorting everything into tax years. After you have everything sorted out into these yearly buckets, file and separate your receipts into 12 piles by the month.
The reason we do it by month is that if you ever had to go back and get those records for that the month, you wouldn’t have to wade through a sea of receipts from the entire year (which leads to episodes of wanting to throw EVERYTHING at the wall- because paper clutter- UGH).
After you’ve divided your receipts by month, you can file these receipts in one of two ways. The first is by using a filing cabinet. Put each month in its own envelope and then, once everything separated into its own envelope, just put the envelopes in a file folder for that year.
Another way to get organized is by using a digital filing system. This will help you get rid of all the paper clutter. A digital receipt filing system is basically using an app. It can be an app that’s built into your bookkeeping program or a standalone receipt scanning app. My favorite standalone app is called Foreceipt because it syncs with Google Drive and actually backs everything up into your own Google Drive (ah- systems!).
You can also scan your receipts and file them on your computer or take pictures of your receipts with your phone and save it to Dropbox or Google Drive yourself. The overall idea is that you move in a digital direction and start processing the receipts on a weekly basis.
But what about digital receipts? Create a folder in your inbox called Business Receipts 20XX. Every time you buy something, drag and drop your receipt in there right away. Just making it a habit of filing those away as soon as you get them will make keeping up the receipts SO MUCH easier.
ATM Receipts & Deposit Records (11:57)
Let’s move on to deposit records and deposited checks. We live in a glorious time of mobile deposits and we can just take pictures of our checks with our bank’s app. But what do you do with those checks once they’ve been deposited?
And then there are deposit slips from going to deposit money at the bank in person. Or if you go to the ATM and deposit your checks via the ATM, you also receive a receipt. There are SO MANY SLIPS!
So, how long do we need to keep all of these pesky slips? Well…
You only need to keep mobile deposited checks up until the moment it clears the bank. Once it’s posted in your bank and it hasn’t been returned, you can shred the checks. Personally, I think the best practice is to wait two weeks and then shred the checks.
Let’s talk about deposit records. Again, you only need to keep these deposit records for three years. The IRS has a list of documentation that it considers supporting documentation for your taxes and your business. These are items like receipts and deposit records. These are all under the list of supporting documentation.
Let’s talk about getting organized with deposited checks.
Here’s what I do. When I deposit a mobile check, the first thing I do is write a D to say that I deposited it and I write the date of the deposit on the check. Then I put it in an envelope in my desk drawer. Every couple weeks I go to that envelope and I shred checks that have cleared the bank. If you’ve been holding onto a bunch of deposited checks- go shred them NOW!
In terms of your deposit slips or ATM receipts, I like to staple every month’s deposit records and ATM receipts together and file it in the same folder or envelope as your expenses- that way you have all your income and expenses in the same place.
With most banks the ATM and tellers will let you e-mail yourself a record of your deposit slip. At that point you could simply drag it into a Business Income 20XX folder in your e-mail inbox. This way you won’t lose it. It is so easy to lose tiny little pieces of paper which is why we’re trying to move into a digital direction. Once it’s digitized, it’s pretty much backed up and easy to find.
Bank and Credit Card Statements (16:51)
These are all the monthly statements that you receive from your various bank accounts.
You only need to keep bank and credit card statements for three years. If you have any bank and credit card statements older than 3 years, it’s shredder time!
Okay- that was a throwback.
Anyway, If it’s a lot of paper, you can take it somewhere like OfficeMax and they’ll shred it in bundles by the pound. You don’t just want to throw these documents away because most bank statements have your whole account and routing number on it.
Let’s talk about how to stay organized: switch to e-statements. It’s a lot easier to have the banks send you a statement in your inbox every month than it is for you to get your statement from the bank in the mail, open it, and stick it in a place that will pile up. At that point you’d still have to remember to shred it. That’s a lot of steps where you could just have your statement pop into your inbox and drag and drop it into a folder on your computer.
Tax Returns & Documents (20:38)
Now, let’s talk about the big guns: Tax returns and documents.
This is where things start to shift a little bit. When we say tax returns and documents, we’re talking about all the things that are related to your taxes. These are going to be your 1099s that you both send and receive. We have our W-2s, our annual return, and any other tax documentation that you receive in the mail that says ‘Important Tax Document Enclosed.’ This also includes the returns you file with the federal and state government.
The length of time that you will keep these for is different than what we’ve reviewed with the other types of documentation. You need to keep your tax returns and supporting documentations for six years. Let’s talk about how to organize past tax returns and documents.
Staple all the tax paperwork that you receive to the return that you filed. This includes all your W-2s and 1099s as well. You’ll want to do this for every single tax return you’ve gotten in the past six years. Make sure each tax year gets its own file folder in your filing cabinet. If you don’t have a filing cabinet, you can buy an accordion folder with six or eight pockets that has those expanding folders. You can just create a tab for every year.
If you want to start organizing now, make a folder for all the current tax documentation that is coming in to your mailbox. Every time you get something in the mail, put it in that folder even if you don’t have time to open it.
This helps you to have everything in one place so you’re not scrambling around trying to find this one thing when you really need it. After you read this post, find a folder and write ‘Current tax documents’ on it. Put it somewhere that’s easy to access and put all of your tax documents in there. It’s going to keep you really organized for the filing part of your taxes.
What do you do after you’ve filed your taxes? The same thing as before! Staple all of your documentation and place it in your folder. Then file your folder away in your filing cabinet or accordion file and relish in a carefree life without paper clutter. If you’re somebody who receives digital returns from your tax preparer, save it as a PDF in a file folder named ‘Tax Documents’ with the year.
It’s so much easier to manage your business finances without all that icky paper clutter. The best way to make the process of organizing these documents easy is to create a system. Want a cheat sheet so you don’t forget how long you should keep your documents?
Download the paper clutter cheat sheet. It’s a one-page chart of everything you need to keep in your business finances, how long, and with storage best practices. Enjoy!