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The Guide to Organizing Financial Documents Like a Financial Expert

Bookkeepers are the financial defense line of businesses. They are responsible for maintaining accurate and organized records to ensure that the organization remains compliant with tax regulations and allows for all employees of the company to locate critical company history easily. The efficiency in organizing financial documents, such as tax records, invoices, receipts, bank statements, and reports can make a significant difference on their own efficiency and success and the organization’s compliance. In this comprehensive guide, tailored specifically for bookkeepers, accountants, and financial professionals, we will explore a step-by-step approach to organizing financial documents.

Step 1: Establish a Logical Folder Structure

A well-structured filing system is the foundation of creating a sustainable and effective document organization method. Financial documents need to be kept in an organized and easily accessible way as they need to be accessed frequently. Accurate record keeping is also required by law. Canadians are required to store documents relating to their tax return for at least 6 years incase of an audit. Implementing and maintaining a folder structure to file these documents can feel overwhelming. Below is a folder structure method we recommend for bookkeepers:

  1. Create a dedicated folder for each client or business entity you work with. This ensures that each client’s folders and files are consolidated in an easily accessible spot.
  2. Within each client’s folder, create a folder for each tax year. This arrangement will simplify your tax preparation process.
  3. Categorize documents within their corresponding tax year folder based on the type of document they are. This will make it clear where documents should be placed or found in the future. Some documents type folders we recommend creating are as follows:
    • Invoices: Create separate folders for unpaid and paid invoices. Separating these will help you to track outstanding payments more efficiently.
    • Receipts: Create a folder for receipts and within this folder group receipts by expense categories (Office Supplies,Travel, Meals & Entertainment).
    • Bank Statements: Create one folders for the clients bank statements, within the folder create subfolders for each individual account if necessary.
    • Financial Reports: Create a designated financial reports folder, within the folder create folders to organize the reports by month, quarter, or year. Depending on how often the client creates reports.

Step 2: Optimize File Naming Conventions

Consistency in file naming conventions is important for creating a uniform and sustainable document filing system. Clear and standardized file names allow bookkeepers and business owners to quickly identify documents even if they have been placed within the wrong file. Implementing company wide naming convention guidelines will help you to maintain consistency in your financial information no matter how many people work on them. Below are a few best practices to keep in mind when brainstorming your file naming structure.

Client Name: It is smart to always include the client’s name in the file name. This ensures that you can quickly identify which client each document belongs to when searching through files. (ex: “ClientName_Invoice001.pdf”)

Document Type Abbreviations: Create and use concise abbreviations or keywords to make note of the document types, A few examples include “INV” for invoices, “RCP” for receipts, “BS” for bank statements, and “RPT” for reports. If you choose to use abbreviations, ensure that you are creating a standard list of these abbreviations and sharing them with your team members to ensure consistency.

Date Formatting: Incorporate dates in the YYYY-MM-DD format to ensure chronological sorting and easy reference.

Unique Identifiers: Include unique identifiers, such as invoice numbers or receipt numbers or date. This will help you to differentiate between documents with similar names.

Versions: If document versions are applicable, add version numbers (ex: “v1,” “v2”) to distinguish between different iterations of the same document.

Step 3: Implement a Document Auditing Schedule

Regularly auditing your files is an important step in ensuring that your file organization method is being followed and your documents are accurate and compliant. It will allow you to catch any inconsistencies or errors earlier before they become a larger threat to your filing organization, and it helps you to identify any documents that are missing or incorrectly filed. There are a few methods to tackle the auditing of your digital records.

Monthly tasks:

Allocate a few hours each month to review and categorize any new financial documents that have been missed. Ensure that invoices, receipts, and bank transactions are all scanned and accurately recorded in your document management and accounting software.

Quarterly:

Every quarter, put aside time to look through and reconcile bank statements and financial reports to identify discrepancies or errors. Take this opportunity to archive outdated or unnecessary documents.

Yearly:

Every year you should review your documents as you prepare for tax season. Verify that all financial documents for the tax year are complete and accurate and filed in the correct folders.

Backups and Security:

Regular backups are an important part of ensuring the safety and compliance of your financial data.Ensure that your files are being backed up regularly to a secure and password-protected locations or cloud storage. Be sure to encrypt any sensitive files for added security.

Step 4: Simplify Your Workflow with LedgerDocs

When it comes to financial document organization, LedgerDocs is your secret weapon. This document management software is tailor-made for bookkeepers, accountants, and financial professionals to address their unique needs. Here’s a few reasons why you should consider integrating LedgerDocs into your workflow:

1. Centralized Digital Hub:

Forget the clutter of physical files or scattered digital folders. LedgerDocs provides your team and your clients a central digital hub to store and collaborate on all of your financial documents. Each client or business entity gets their own dedicated space with customizable permissions that allow them to upload and retrieve their own documents.

2. Effortless Upload and Categorization:

Uploading and categorizing documents is simple when you use LedgerDocs. Easily scan, digitize and upload documents into the correct folders and easily organize them to suit your preferences, whether it’s invoices, receipts, bank statements, or reports. Notice a missing document? Send a document request directly to the person who needs to upload the missing information. Automate follow ups and reminders to make the process as hands-off as possible

3. Lightning-Fast Search:

Locating specific documents is a snap with LedgerDocs’ powerful search feature. You can find what you need in seconds using keywords, client names, or document types.

4. Security and Compliance:

LedgerDocs ensures the security of your financial data with password protection, regular backups and encryption options. This helps you to stay compliant with tax regulations by keeping your documents organized and audit-ready.

5. Simplify Collaboration:

LedgerDocs simplifies collaboration between your clients, and your team. It allows you to grant access to all who need access to files, and empowers them to have conversations right at the document level.

6. Document Accessibility:

Storing your files on the cloud allows you or your team to access your documents from anywhere they work. This opens the door for more work location flexibility for your employees or team members.

7. Integration with Accounting Software:

LedgerDocs allows you to streamline your workflow by integrating with your accounting software. This integration reduces manual data entry, saves you time and reduces the risk of errors.

Creating an effective organizational method for your accounting documents is essential for any business. With LedgerDocs, you can do that and more, saving time and money in the process. Our cloud-based platform makes managing and collaborating on business documents easy, eliminating redundant tasks and data entry, while boosting productivity. Get in touch with us if you have any questions – we’ll be happy to help.

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