How to Organize an Office Filing System

Steps to creating a filing system that works

Man searching in a filing cabinet

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An effective office filing systems is crucial for any business that handles invoices, receipts, and other records, whether on paper or digitally. Even for businesses that don't deal with much paperwork, staying organized and efficient will help keep operations running smoothly.

Office filing systems come in all forms, from the simple cabinet drawer, to complex assortments of digital servers. In order to create a system that works for you, it's important to know what files are most important, who needs access, and how they can be retrieved easily and efficiently. Here are the key factors.

Why You Need a Filing System

Filing receipts and invoices properly is one of the most important things a small business can do for its financial health. A nonexistent or messy filing system can add days of extra effort at income tax time, and you don't want to miss out on tax deductions because of missing receipts. If you are ever subject to an audit and unable to produce the required documents on time, your claims can be rejected and your tax return re-assessed.

Depending on your industry, you may need to keep records to be compliant with state or federal regulations, sometimes for years. Law offices are required to keep case files for three years. Accountants and tax prep businesses need to keep tax returns on record for seven years. Construction companies, medical offices, schools, and more all have hefty record-keeping responsibilities.

Most people aren't thinking about the labor they'll save when investing in filing systems, but by some accounts, the total amount of time companies spend searching for misplaced files amounts to six weeks per year.

If your business is fairly simple, your record-keeping may be limited to payroll and accounting, but you still need to be able to operate at your desk swiftly and easily.

5 Steps to Organize a Filing System

To get yourself and your business on the right track, follow five steps to make sure papers are easily accessible and easily identifiable.

Assess Personal and Office Habits

Think about which employees need access to files, where they work, and what makes sense based on their work stations. If you are creating a system for yourself, think about ergonomics, the flow of your workday, how you move around your office space, what you can reach from your desk, and what information you need regular access to versus info that can be archived long term. If you are creating a system for someone else, get their input—what works for one person won't always work for another.

Decide on a Filing System

What your business does will determine whether you choose to file numerically, alphabetically, or some other way. For example, do you search for customer information by name or account number? Do you file paperwork by category, such as expenses, financial, marketing, etc.?

Space is not a major concern with digital systems, but for paper systems, it's important to allow for growth when looking at filing cabinets; it's advised to buy something to accommodate twice the number of files you have now. Broad subject categories will allow you to easily add new files as you grow and will eliminate the need to upgrade or reorganize your filing system regularly. Keeping it simple also will make it easier to integrate your paper and digital files as part of your overall document management system.

Calculate Storage Needs

If you have a large number of files that you access daily, they should be at your fingertips. Those accessed less frequently don't need to be at your workspace but may need to be close by. There may be a combination. Some files might be needed daily while others can be filed in long-term storage further away.

Don't overlook the importance of accessibility for employees or future employees who may have special mobility needs. Very tall cabinets, for instance, may be difficult for some employees to access safely and effectively.

Invest in a Good Labeling System

Being able to read file labels sounds obvious, but clarity in labeling will save time. Most companies that make labels provide templates that integrate with common word processing software. You may want to consider one of the small label-making systems that also can print out individual mailing labels. Items that perform double duty are usually a wise investment.

Purchase File Folders

User-friendly and durable folders are a smart investment. Colored hanging folders are easily available and easily recognizable. For example, if you put all of your client files in yellow hanging folders, financial information in blue folders, and marketing in red folders, you'll save time when searching or filing with easily identifiable visual clues.

Going Paperless

Many businesses have already shifted to the paperless office, or close to it. With online, cloud-based storage systems, and digital transactions replacing cash, paperless may be the new normal.

Even government agencies are getting onboard. The IRS now accepts digital images or paper copies of scanned items including:

  • Cash receipts
  • Bank statements
  • Canceled checks
  • Pay stubs
  • Credit card statements

Digital records must be clear and legible. If not, the IRS may demand to see the original paper documents during an audit or routine request for documentation.

If you are still operating the old-fashioned way, but interested in going green, you can transition to paperless over time. There are many services and software applications that scan old expense receipts and store them with your other digital accounting information. 

Frequently Asked Questions (FAQs)

How Do You Set Up an Electronic Filing System?

Electronic filing systems can be as simple as files in shared networks, like a Google drive or on sophisticated software or servers. The same best practices that apply for paper systems apply to electronic systems: establish naming conventions, a filing order (alphabetical, chronological, etc.), and a well-organized structure.

What Filing System Do You Use to Protect Confidentiality?

For paper filing systems, documents should be under lock and key, with personnel controls. Since digital files have more flexibility in sharing, copying, and editing, you'll need to establish appropriate permissions levels and access. Depending on the stakes, your company may need private servers as opposed to cloud-based systems.