March: Taxes Done; Set Up Financial Files


“We’ve been trying to achieve the mythical paperless office for decades. It’s the business equivalent of the 1950’s chimera, the flying car that we were all going to have by now.” – Steve Brown, “San Francisco Business Times”


Once taxes are completed, pack away last year’s papers and start your files fresh. Set aside an hour or two to simplify next year’s taxes and make life easier every day.

Fresh Files Annually

• Dedicate a file drawer or file box for finances using hanging folders clearly labeled. If your bills are simple, an accordion file with 13 pockets may work. The IRS audits randomly or when they see red flags on a return. If your records are clear and accurate – no problem!

• Create a folder for each vendor bill, insurance and brokerage account. File bills chronologically, most current on top. Some prefer a folder for each expense for categories that correspond with the tax return, such as office supplies, insurance, medical, etc. You’ll still need files for banks, taxes, credit cards, income, etc.

• Separate business and personal finances. Two checking accounts, two credit cards and two sets of bill files using different colors makes accounting cleaner. Have those colored folders on hand so you can make a new file when needed.

• Create a folder for each revenue stream, ie. business income or payroll stubs, investments, inheritance or pensions. Have social security and payroll deposited directly into your account to save time.

• Create a permanent file for important financial documents which live here forever.

• Keep credit card receipts and cash receipts separate. Minimalists discard credit card receipts once they’ve checked the statements. Set up a simple petty cash system for your business since these receipts are the only record for deductible cash purchases.

The Bill Pay System

• A computerized accounting system automatically categorizes and creates reports. I like QuickBooks Pro for business and Quicken for personal finances.

• Hot files in front of the files work well. Create a bright color folder for “Bills to Pay” and a “To File” folder so paid bills don’t get lost if you have no time to file that day. Be sure to file those monthly.

• Pay bills electronically and set up auto-payments for predictable recurring bills like utilities or cable. Monitor when those payments are taken and deduct them from the balance in your check register.

• Log due dates on your calendar. Pay bills weekly or twice a month. When you pay, record amount, date paid and confirmation number on it. Simple!

• Pay on time to avoid costly late charges. With the money saved, buy yourself a reward for good financial management.

Pack Away the Old Year

• I recommend storing backup files for seven years, especially for a business. Consult with your accountant. Keep the actual tax returns forever. Home purchase, mortgage docs and other major purchases are kept forever or until you sell. 

• Pack last year’s bills into a box labeled Taxes and Year. Confine it to deep storage as it need not be accessible.

• Finally, discard files of the oldest year in storage to make room for 2010. Shred critical documents with account numbers, signatures, passwords and confidential information to prevent identity theft.

As always, I’m here if you need help.