If you’re like most people, you have no idea how to file your bills and records for the year. But, you need to. Here are some ideas to make quick work of it so you can get back to doing what matters most to you.
Take Immediate Action On Everything That You Receive, As You Receive It
Most people let papers pile up. Bad idea. Here’s what to do instead. You should take immediate action on everything that crosses your desk, or comes in the mail, immediately. Now, you don’t have to sit down and do anything with the papers you get.
You just need to file them. What that means is decide whether you need to take immediate action on something, whether you must save something for later, or whether you can safely throw something away.
For example, if you get something in the mail from joyelawfirm.com, it’s probably important, right? You’d want to keep mail of this nature. IRS? Same deal. But, if you get an offer from a mattress store or a car dealership, it’s probably not important. You can throw it away.
Seems easy, right?
It is. But, most people won’t do this. And, this is why bookkeeping turns into a huge nightmare.
Have a System For Keeping Receipts
if you keep receipts, good for you. Have a way to file those receipts. usually, this means keeping receipts in a filing or folder system. But, also be discriminatory about the kinds of receipts you keep and for how long.
For personal receipts, you can throw those away as soon as you’ve reconciled your bills and expenses for the month. One exception might be receipts for large expenses – you’ll want the ability to exchange or return them or get warranty service on them. And, most of the time, you need the receipt for that.
For business, you should keep your receipts for expenses for at least 7 years – long enough to escape an IRS audit of your books. Should you be audited, the IRS will want to see all of your receipts. And, if you pay for something using a credit card, this is usually not good enough for the agency. They will want to see receipts for all of your expenses to prove that you spent money on a business expense.
Use Filing Cabinets and Labels
Of course, the easiest way to keep track of everything is by using a filing cabinet. By using a filing cabinet, along with tabs, you’re able to easily sort and file almost everything.
You can keep a separate file for bills you need to pay and bills that have already been paid. You can also keep receipts in tabbed file folders in case you need them.
If you’re a business owner, you practically have to keep a filing cabinet of tax receipts for your own protection. Every business owner is afraid of being audited. And so, while a filing cabinet won’t prevent that from happening, it sure will make your life easier if it does.
Benjamin Shah is a self employed builder who has recently discovered his passion for personal finance and managing his money, rather than it managing him. The key is in organization. He shares his tips and tricks on a range of blogs, mostly within the personal finance niche.