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  • Mark Howard

Organising Your Financial Paperwork


If you feel like you’re drowning under paperwork in your small business, you’re not alone. In a study, small business owners reported that they spend 1-3 hours every working day on administrative tasks, and nearly half felt like they had to work out of hours to get everything done.


Paperwork may be an unavoidable part of running a business, but a well-organised system can save you a lot of time and hassle, especially when you’re in a hurry and need to find something fast. Here are our top tips for organising your paperwork, so you can lay hands on any document you need.


What financial paperwork do you have to keep?


UK businesses have to store most of their financial records for at least six years, but the good news is that these don’t necessarily have to be paper copies. HMRC will accept digital versions of most financial documents, so you can store these on your computer without the need to keep huge filing cabinets full of paper in your basement. The exception is some tax documents - HMRC require you to store non-VAT tax documents in their original format, for example interest certificates or dividend vouchers. That means that if you received a paper dividend voucher, you’ll need to keep a paper copy as well as your digital backup. If, however, you received your dividend voucher in .pdf, you don’t need a paper copy, you just need to retain the original .pdf.


As for the kind of documents you’ll need to keep, these should include:

  • Invoices - all copies of invoices that you’ve sent to customers

  • Bank statements - copies of your bank transactions to show the money that’s come into your business and what’s been spent

  • Bills - copies of any bills or payments that your suppliers send you

  • Expense receipts - details of which items/services you’ve spent money on out of your own pocket

  • Tax documents - all correspondence with HMRC and tax-related documents

All of those documents in paper format can take up a lot of space, so definitely consider digitising your documents. You can do this by investing in an inexpensive scanner like a Doxie, then storing the files securely. It’s a good idea to keep at least one copy of everything in secure offsite storage, for example on a cloud storage service like Google Drive or Depositit.


Getting started

Want to get to a really good place with your small business finances? Sounds like you need a great bookkeeping system. Here’s a simple guide on how to vastly improve the way you manage your books and the good news is it will only take you an hour a week.


1. Take stock of your current finances

The first step is to review your current situation. Grab a pen and a piece of paper and make some notes about what your financial systems look like right now. Here are some things you should check:


Incomings and outgoings

Think about how often you keep track of what’s coming into your business and what’s going out of it – what have you earned and what have you spent?


Bank statements

Consider how often you check what’s actually in your bank account against what your books say is in your bank account. You’d be surprised how often these two figures are different things!


Security and backups of your business records

Make a note of how you store your business records and think about whether or not you’re confident that they’re safe and secure. For example, if you put all your paperwork into a file which you keep in the basement, what happens if the basement floods? Are you able you recreate the records and do you have backup copies of the paperwork stored elsewhere?


Organisation

Review how easy it is for you to find information. If you needed to find a particular piece of paper, would it take you a few minutes, or would it take you hours?

Invoicing and expenses

How often do you invoice your customers and how often do you track what you’ve spent out of your own pocket on business costs? If you don’t do this frequently you might forget important details.


2. Understand what a great small business bookkeeping system looks like

In order to improve your current bookkeeping method, let’s take a look at a few characteristics of a really great system.


You never have to enter the same information twice

In a great bookkeeping system, once you’ve entered a piece of information in one place it gets used everywhere. No need for duplicate entries!


Everything is easy to find

Because everything is in perfect order it doesn’t take long at all to find any information you need – no more hunting for hours to lay your hands on a particular document.


Useful information presents itself

One of the best features of a great business bookkeeping system is that after you’ve put information in, you automatically get really useful numbers back.


Your books run smoothly day-to-day

Managing your books in a great system should be really easy and it should be straightforward to put a little bit of information in and get a lot of information back out on a day-to-day basis.


Sensitive information is kept secure

You never have to worry about losing information because you’ve got backups of everything.


Your accountant is empowered

When you have good bookkeeping methods your relationship with your accountant is guaranteed to greatly improve. Instead of having to spend hours sorting out fiddly little problems, your accountant will be able give you helpful, proactive advice and become a really trusted adviser for you and your business.

3. Manage your time to make bookkeeping a habit

That’s what to look for in a great bookkeeping system, but how do you develop and maintain your own system? The answer is that you need to make it a habit!


How do you make a new habit?

Charles Duhigg in his book ‘How Habits Work’ says that habits are loops which are made up of three parts:

  1. The cue

  2. The routine

  3. The reward

For example, let’s imagine that you want to start going for a run every morning to get fit. The cue would be to put on your running shoes, the routine would be going out and doing your run and the reward is that you feel fantastic afterwards!


Turning bookkeeping into a habit

Using good cloud accounting software I think that spending just an hour a week managing your business finances can help you get to that great place with your bookkeeping. Here’s how the hour a week method works in terms of setting up a habit:


The cue: set aside an hour a week to devote to your business finances

By scheduling an hour a week in advance you’ll be creating a weekly habit. Pick an hour in your diary when you know you’re usually going to be available and block that time off. Then set reminders and alarms so that you know you’ve got to do your hour a week and stick to to it!


The routine: work out what you’ll do in your hour a week

The best way to do this is to go through a checklist. Here’s one we recommend:

  • Send invoices to your customers

  • Check your bank statements

  • Make sure you’ve paid any supplier bills that you owe

  • Check the profitability of your projects

  • Check your cash flow


The reward: learn something new about your business

You’ll be surprised by how much you learn about your business by spending regular time going over the books. You’ll also become more proactive, for example, when was the last time you reviewed your prices? Or, when was the last time you checked to see if there was an important anniversary coming up? Has somebody been a customer for 5, 10 or 20 years and could you give them a little gift as a thank you?


Creating a daily habit

Previously we looked at the benefit of blocking off time to spend an hour a week on your business bookkeeping, but it’s also a brilliant idea to spend just a few minutes a day on managing those fiddly little tasks. For example, when you buy a train ticket you could take a photo of the ticket then and there, saving you from having to take the ticket back home in your wallet. You could also track your working time as you go.


4. Organise your paperwork to keep your books simple

There’s often so much paperwork involved in running a business it can be difficult to know what to keep and what to discard. Here are a few items that we would highly recommend keeping hold of:


  • Invoices

  • Bank statements

  • Bills

  • Expense receipts

  • Tax documents


Sometimes there’s a legal requirement to keep pieces of paper, but mostly you’ll be able to use digital storage devices.


Storing your information digitally

If you want to keep your business records digitally it’s important to invest in a scanner. It’s also a good idea to use an online backup service to store your bookkeeping files in the cloud so that you know they are always there.

Tips for keeping organised

Whether you’re storing your bookkeeping documents on paper or digitally you’ll still need to keep them organised in order to save you time. Here are a few tips to get you started:


Keep a file for each year

If your business is small a yearly folder should be more than enough to keep all your financial records.


Divide each year into categories

Within each yearly folder you should have a subfolder for each different category of your paperwork, such as invoices, bank statements, bills, expense receipts and tax documents.


If necessary, divide each category into subcategories

If your business is a bit bigger it’s likely that dividing into year and category might not be enough. In this case, you might benefit from dividing each category into subcategories. For example, within the invoicing folder you could organise by date, by customer, by number – whatever’s going to make it easy for you to find the paperwork quickly.


The advantage of organising digitally

If you’re storing all your paperwork digitally you’re at a great advantage when it comes to searching. Try adding a unique reference to each file name – for example, the customer name and invoice number. This makes all your files really easy to pick out from the others.


Staying organised

When you’ve got to this really great place with your bookkeeping method, how do you make sure that you stay there? Think again about forming habits using the cue, routine, reward method.

Determining the cue

Think carefully about what would make a great cue; what’s going to make you stop what you're doing and start bookkeeping? You have to be honest about this, if you set a reminder on your calendar would you really take much notice of it? Maybe it would be better to set a reminder on your mobile phone or to get a friend or colleague to remind you.

It might also be really helpful to piggyback your bookkeeping habit onto an existing habit. For example, if you have a habit of replying to emails between 9am and 10am on a Monday morning, why not then try to do an hour of bookkeeping between 10am and 11am?


Developing the routine

The easier you make your routine, the more likely it is that you’re going to stick to it. An idea could be to keep a weekly in-tray that you fill up during the week, then when you do your hour a week you work through the in-tray until it’s empty. However, this is just an example – everybody works differently so the routine is something that you just have to develop yourself.


Establishing the reward

Having your books in order is going to feel absolutely fantastic! That’s going to be a really good reward for you in itself – your books are all in order and you’re getting this really useful information out of the business books. If this isn’t enough you could always treat yourself, for example, putting a bit of money aside every week and buying a treat every month. Be strict with this though – no bookkeeping means no reward!


5. Keep going!

The real key to forming a habit is to make sure you do it regularly. If you miss a week don’t quit! Pick yourself up and start again from next week. If you find that you’re really struggling you could always bump up the reward. Whatever works for you to encourage you to keep a regular plan in place.

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