How to Store Electronic Files so You Can Find Them When You Need Them

Many companies have transitioned from storing documents in filing cabinets to storing documents electronically. The process has both positive and negative repercussions. On the positive side, filing cabinets take us space, and as the number of documents grow the documents must be put into storage boxes, labeled, and then stored somewhere. For paper heavy companies, the physical space dedicated to document storage can be huge not to mention the time in moving documents from the filing cabinets to the storage boxes and then moving the storage boxes to a storage facility then destroying the stored boxes some years down the road.

However electronic filing of documents posses some problems. Unless a logical system is used for filing electronic documents, it can be difficult to find files, and folders can become “messy.” Below I lay out my system for organizing electronic documents. You may have a different system and your system may be as good as mine, or even better. But if you don’t have a system, or your system isn’t quite doing the job, maybe my system can be of use. Also, my system is designed from the perspective of accounting and corporate governance. You may have some other system for the needs of other departments such as marketing or production.

First, I like to split my electronic files into two groups. Group one is what I would call transactional, like an invoice from a supplier. Once the invoice is processed and paid, most likely you will not have to access the invoice again, unless perhaps for audit or reference purposes. Group two are what I call permanent records. These are documents that you might have to refer to for a host of reasons such as audit, compliance, legal, review or other purposes. An example would be something like a five-year building lease.

For those documents that I call transactional I begin with a folder named for a year. So as an example, 2021. Then I build subfolders below that folder for major business functions, such accounting, marketing, production, and so on. Under accounting, I would build subfolders for major accounting functions such as accounts payable, accounts receivable, payroll, inventory, debt, fixed assets, bank, credit cards, revenue and other major income statement and balance sheet sections. Obviously, these need to be customer tailored to your business.

The next task is to determine how the information in each one of these sub folders is to be organized and stored. Let’s go through a few to see what sub folders could be set up. For accounts payable, you may want to set up folders for each vendor. Within that vendor folder you may want to set up a folder for invoices and folder for payments. So, let’s say the vendor is AT&T. You have just received the invoice for November’s services. You go to 2020>accounting>accounts payable>invoices>AT&T. That is where you would store the invoice for AT&T.

Now you need to determine what label you will give the AT&T invoice. The key here is to be consistent. You can’t label it “AT&T phone bill October 2021” one time and then “AT&T Telephone Bill 2021 10” the next time. You need to be consistent and use exactly the same words in the file label each time, changing perhaps the date for each month. Also, its nice to develop a naming system so that the files, when you open the folder, sort in date order. Here is what I suggest for an AT&T bill dated October 12, 2021: AT&T Phone Bill 2021 10 12. The next month the label would be: AT&T Phone Bill 2021 11 12. Now if you created these two files and put them in a folder you would see that they appear in date sequence.

The key is that for any given vendor, the name must be typed exactly the same, and the date must be typed in the same date format. Also, I recommend adding to the vendor’s name a couple of words about what the invoice is for. Sometimes this might be obvious, but often it is not. With some vendors it may make sense to also include an invoice number. If you do, the files will sort by invoice number which could certainly help when looking for a specific invoice. However, some companies (like phone companies and utility companies) don’t have an invoice number on their statements just a customer number, so using the date works best for these types of vendors. Remember the key is to make sure you keep the formatting consistent for each document you file.

If you receive documents by email, or download them, these documents may already have file names from the company supplying those documents. It is best to change the files names so that names are consistent with your company’s naming system, as each one of those vendors may have their own naming methodology that may not make sense when you file it. As an example, electronic vendor invoices often have the name of the customer (that’s you) in the file name. You don’t need documents in your system that are labeled with your company name, you want them to have the vendor’s name.

Keep in mind that you don’t want any one folder to contain too many documents. If your organization is a larger enterprise, you might get hundred of documents from one supplier. If that is the case, open a folder under that supplier for each month of the year and then only put one month’s worth of invoices in that folder.

You probably get the idea from my description above and can extend what I have said to other transactional folders such as accounts receivable, debt, bank info. But what about group two, the more permanent documents? First, establish a folder called “permanent documents.” Then again set up subfolders. The subfolders will vary based on your organization but could include labels such as lease agreements, rent agreements, licensing agreements, distribution agreements, intellectual property, board minutes, and so on. Whether or not you need subfolders for these folders will depend upon the number of agreements in each folder. If you have two or three lease agreements, then one folder is fine. If you have twenty lease agreements then you probably want subfolders that could be labeled based on the name of the leasing company, or the asset you are leasing. I prefer using the asset name as opposed to the vendor name but whatever you do be consistent.

Finally, when you label any documents be sure to include in the document name the name of the other party to the document, the purpose of the document and the date. Again, be consistent in the use of names and dates. So as an example, let’s say you leased a Honda Accord from GMAC Leasing in December 2021. I would label the document something like this: GMAC Leasing Honda Accord 2021 12. You don’t need to include your company name in the document because your company is a party to all the documents in the permanent folder.

Here are a few other hints to keep your folders organized and your documents easy to find:

  1. Keep all documents under one master folder.
  2. Make sure the drive where you store the documents is backed up.
  3. Watch out for “orphans.” These are documents that accidentally get saved outside of a folder.
  4. Review folders periodically for any document that is misnamed.
  5. Remember that one of the purposes of good electronic file management is so others can find documents easily. Have someone else review you files for ease of use.
  6. File documents “as you go” as opposed to saving a big pile of documents, scanning them, and saving them. You get more consistent results with the save as you go approach.
  7. Review periodically for missing documents.
  8. If you have more than one person saving documents, make sure everyone abides by the document saving protocols.

At some point someone in your organization is going to want you to pull out historical records. I know from experience that can be an absolute nightmare. By adopting a proper document naming system, and adhering to it, you will make reviews, audits, due diligence, and analysis easier for everyone, including the person who will sit in your chair when you move on to the next opportunity.