How to Set Up a Filing and Records System for Your Business

It may be boring, but it has to be done. Find out how to put a good record-keeping system in place

How to Set Up a Filing and Records System for Your Business

When you started out in business, it probably wasn’t the prospect of reams of paperwork that excited you. Nevertheless, a good record-keeping system is a vital part of any business; access to information can give you a competitive edge over rivals, whilst cutting out wasted time looking for misfiled and misplaced information delivers an obvious benefit.

In this article, we examine all you need to know about the basics of record keeping, including how to organise your records, how to keep them secure, and how long specific types of record must be kept.

What is ‘family tree’ filing and how can it benefit my business?

Most good filing and records systems are built around what is known as a ‘family tree’ system; a unified system based on a graduated hierarchy of files. A family tree filing system allows people in your company to easily find the information they need without having to root through disparate systems.

In order to organise one, start by selecting the main categories for each filing system and give them a two-letter code. For example, assign ‘AC’ to accounting, ‘SA’ to sales and ‘HR’ to human resources. Have a catch-all project files (‘PF’) category to put information that falls outside the scope of the main categories.

After this, divide each category into smaller categories (for example, divide accounting into AC/tax, AC/overheads, AC/revenues and so on) and then further divide these into sub-categories. Keep branching out to whatever level is needed. For example, if you wanted to keep the CV of an applicant for a sales position, you could have HR/recruitment/applicants/sales/potential.

Store files accordingly in alphabetical order. Some businesses with particularly large or complex filing system use a number-based code system instead of a name (e.g. HR/2/1/1/2, with the numbers signifying different sub-categories).

How do I keep on top of managing my filing system?

Except in the case of small businesses with very simple filing systems, it’s normally essential to delegate the overall responsibility of record-keeping to one person. Impress upon them the need for relevant records to be accessible so people can carry out their jobs (with appropriate safeguards).

This does not mean that other people within your business are not responsible for the information they handle. Make all managers and employees individually responsible, and make sure they understand their responsibilities, when they deal with information in their job.

More generally, it is important to follow the right practice when indexing and titling files. Your system should be as accurate and easy-to-understand as possible so that anyone within your company will know where the file is they are looking for instantly.

In addition, it is important to put a clear tracking system in place for files, especially paper files, and ensure any files taken out are signed out.

Finally, remember to preserve the integrity of your filing system through good practice. Files around ongoing business projects should only be placed into the record system when the project is completed, and discourage staff from using personal filing systems.

How do I make my record-keeping system work?

Here are a few practical tips for ensuring good record-keeping.

For one thing, write file names on the sides of folders and ring binders. Ensure consistency in how you write them so all the titles on a shelf can be read quickly. Also, try using colour-coded files for ease of use. Use a different colour for each category, such as red for HR and green for sales. Separate sections within a folder with coloured dividers.

Another tip for keeping your system organised is to keep folders from becoming too fat. A sheaf of papers in a file will start to deteriorate if it is overstuffed. Create multi-part files in separate folders to avoid this.

Always make sure to store electronic files safely. Use cloud- or local server-based solutions to ensure that data is backed up safely in the event of hardware failure. And finally record one-off enquiries in a ‘general enquiries’ folder. You should keep sales enquiries for longer as they may be leveraged for new sales at a later stage.

When should I get rid of my files?

To avoid your filing system becoming cluttered and overstuffed, you should implement a disposal policy that dictates when you should get rid of old files, and which files you need to keep for longer.

Store old records in boxes to preserve their condition, and move them to a separate archive to keep your main record-keeping system lean.

If the volume of old files becomes too much to handle, consider using a records management company to deal with the overflow; such services are widely used in sectors like legal and accounting, in which companies deal with a lot of client records they need to keep securely.

What legal issues do I need to be aware of when managing my record-keeping system?

The Data Protection Act is the main piece of legislation you need to be aware of, as it covers how you use, store and handle personal information related to living individuals. Click here for a comprehensive guide on how to stay within the law.

Remember that some information needs to be kept confidential or restricted, so put the appropriate controls in place to keep outsiders and unauthorised people from accessing it.

In addition, you should put clauses in your employees’ contracts to the effect that they are forbidden from taking records with them if they leave the company – you don’t want a member of sales staff using your client list to set up in business themselves, for example.

What records do I need to keep by law?

Like it or not, there are some archive files that you must keep if you are to comply with legal requirements. These are accounting and tax records, pay records, VAT records, health and safety records and employers’ liability insurance certificates.

In regards to tax and accounting records, you must keep these for at least six years after the end of the tax year, assuming you are a limited company. This drops to five years for self-employed sole traders or partnerships. The same goes for VAT record, which need to be kept for six years.

Pay records must be kept for three years minimum after the end of the tax year. This includes records of benefits including sick pay, holiday pay, and maternity/paternity/adoption pay. Health and safety records must also be kept for at least three years. This includes records related to particularly hazardous substances, such as asbestos, must be kept forever.

Finally, there is no longer a requirement to keep employers’ liability insurance certificates, although you must still display them at your premises.

Although organising and managing your company records in such a detailed way may seem like it will cost a lot of valuable time, it’s vital to have these records on hand and  it will save you time long term.  For more information on bookkeeping, check out our’s bookkeeping and cashflow section here.

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