You are probably familiar with the saying “time is money,” but you may not really understand how true it is. Studies show that the average executive wastes an hour of work time each day looking for missing information. The Small Business Administration reports that many small businesses cannot properly serve their customers because of disorganized paperwork.
By contrast, an organization that is both efficient and effective is an organization that delivers the goods and services its customers want and need in a timely fashion and at prices they are willing to pay. The time, effort and money spent maintaining well-organized operations are a good investment in the profitability of your company.
Disorganization Can Be Costly
As a small business owner, time is often at a premium. You may recognize the value of being organized but believe that you’re just too busy keeping your business running to devote the time necessary to getting organized. However, this sort of thinking fails to take into account the costs that your business is likely suffering due to lack of organization.
According to a 2011 Hiring Trends survey conducted by Express Employment Professionals, management level employees lose as much as nine work hours each week because of excess clutter on their desks or in their offices. Translated into dollars — this means that a manager earning $50,000 annually costs the company more than $11,000 each year due to disorganization. That’s hardly pocket change.
Disorganization can lead to lost revenue in other areas. Lost files or equipment must be replaced. Cash flow is often critical in small businesses. Disorganized records often lead to delayed invoicing, and resulting delays in receiving payments.
Disorganization also has a negative impact on current or potential clients. Rightly or wrongly, clients perceive disorganized operations as being unprepared to handle their business. Your company’s finished product may be spectacular, but you may never have the opportunity to demonstrate that excellence if would-be customers perceive your company as unprofessional.
Keeping Crucial Documents and Files Organized and Accessible
An essential element to the smooth operation of your business is ensuring that crucial records are readily accessible. Such records include current contracts, banking information and financial reports. The key to maintaining ready access to crucial records is creating an efficient categorization and filing system. Bear in mind that many documents can be scanned into electronic files to reduce paperwork and for easier transmission among employees and clients alike. The IRS accepts scanned documents, including receipts, for tax filing purposes.
The specifics of your company’s filing system will of course be unique to your business circumstances. However, there are several features common to most effective organization and filing systems — both paper-based and electronic.
- Uniform filing procedures – alphabetical, chronological, geographical, etc.
- Controlled access – either by physical security or electronic password
- Clear, logical categories, including cross-referencing of files and documents as necessary
- Expandable and flexible to accommodate changing conditions
- Systematic purging of obsolete records
One frequently-overlooked aspect of records organization associated with hard copies is establishing a means of keeping track of files in use. The absence of such a system often leads to “missing” files that often turn out to be on top of someone’s desk. One option for keeping track of files in use for a paper filing system is to post a sign-up sheet by the filing cabinet or other storage area that lists the file being used along with the name of the person using the file.
Employing the KISS Principle for Efficient Operations
While retaining crucial records is important, unnecessary duplication of records and the resulting clutter represent significant hurdles for efficient operations. Employing the KISS Principle (Keep It Simple, Samuel or Susan) can make a significant impact on helping your business run more smoothly.
You may hesitate to undergo a purging process due to an understandable fear of discarding documents that are actually important or necessary. The following list provides a good guideline for which documents should be retained, along with how long they should be retained. Specific questions pertaining to document retention should be addressed to your company’s accounting department or a certified public accountant:
- General income tax returns – three years from date of filing or two years from date of payment, whichever is longer
- Employment tax records – four years after tax is due or paid, whichever is later
- Deduction for bad debts or worthless securities – seven years
- Business assets – until period of limitations expires after disposal of the property
- Business ledgers, annual reports and similar documents – indefinitely
- Invoices, accounts payable, expense reports – seven years
- Cancelled checks – seven years
- Bank account and credit card statements – seven years for annual statements, one year for monthly statements
- Documents for potential or ongoing litigation – consult your company’s attorney(s)
Human resources files are among the most important for every business besides solo proprietorships. The recommended retention rate varies according to the type of file involved:
- Employee files – seven years after resignation or termination
- Files for job applicants not hired – three years minimum
- Workers compensation files – four years after case conclusion
- Benefit, pension, profit sharing records – indefinitely
Organization as a Sales and Marketing Tool
It should be apparent that there is significant intrinsic value for your company to get organized and stay organized. However, organization can be both a sales tool and a marketing tool for your company as well. The key is to communicate the value for money benefits provided to your customers due to your company’s efficient and effective organization. An annual email or blog post allows you to outline specific achievements — such as rapid response time to customer requests — that remind your customers of why you deserve their business.