September 11, 2018 | Dear CFO | No Comments
I am an accounting manager at small injection molding company. I’m also over the IT administration. Many of our employees complain they can’t find files in the system when they want them, myself included. I also have concerns about the security of some of the files. I am wondering if there are tips for filing best practices in a small company that might make this easier.
Can’t find it, Detroit
That has a familiar ring to it. In the small company I ran, finding files and information was a common problem until we established standard file naming conventions and filing procedures. The search for files and sorting through misinformation cost our company time and money. While establishing file naming conventions and filing procedures didn’t fully eliminate the problem, it did mitigate the costs substantially.
Looking for files is an insidious time waster; some estimates put this cost at $2000 to $6000 per year (and that sounds low to me). The estimated cost doesn’t include the frustration, poor decisions based on less-than-full information, or the reproduction’s variance from the original document.
Creating Folder Naming Conventions
Included in the process of setting up the file structure and file naming conventions is addressing the question of limiting access. We used Windows Small Business Server (now known as Windows Server Essentials) and were able to establish a hierarchical definition of the electronic file structure based on the roles of individuals.
Our directory structure cascaded security like this:
Executive – President only
Finance – President & Finance only
HR – President & Finance only
IT – Above plus outsourced IT
Sales — President, Finance and VP Sales only
Accounting – Above plus Accounting Clerical
Service Provider – Above plus Sales team members
Customer Communications – All team members, including temps and interns
Under each electronic folder were organized various subfolders adapted to our business. We created a clear definition of the types of information in each folder.
Depending on the size of your organization, this filing structure could be adapted to a department head and those under him or her, with filing organized by roles. So, if the Controller had a larger department with Accounts Payable, Accounts Receivable, and Cash Management working under them, the folders would be identified and secured by role.
When deciding on the file structure, consider internal controls, data protection requirements (especially if you are international and covered by GDPR or medical under HIPAA) and the level of transparency your company follows. In my company, most information was distributed on a “need to know” basis, but this may depend on your company culture among other factors.
To define your filing folders, first define what needs storage in the folders and by whom. It’s important to be specific when you create folder names as well. Filing Excel files in a folder called Excel and Word documents in a Word folder is unacceptable. Also, filing under individual names, on C drives, or memory sticks is verboten – keep your electronic files housed in a place where they’re regularly backed up.
A good method of defining the subfolders involves identifying the process-generating data, its form, and appropriate access (whom and how). The size and type of your business will also have an impact on the folder naming methods, as will the sophistication of your systems.
For example, let’s say you run a service company and your dispatcher needs to know if a customer has past due balance. In a sophisticated system, the past due balance might appear in the form of a red light on the screen with an amount to collect. In a smaller system, the dispatcher may have to access the customer’s account to find the past due balance, or to follow up with a copy of the invoice if the customer has further questions. A walk through of the needs in each process helps to frame the requirements.
The system capabilities drive another aspect of the filing. In the invoice example, does the system generating the invoice drop a single file for each day’s billing and simply place the dollar amount in the customer’s account (i.e. no drill-down capabilities to the invoice)? In that case, file the invoices into folders by day or month, not by customer name. If you generate a small number of large invoices manually, you may file them individually into a customer folder.
A word of caution on the folders: one of my bad habits is filing too deep. I used to have a folder with 4 or 5 levels of sub-folders. Unfortunately filing this deep results in misfiled documents, as well as too much “clicking” to get to the file you want. I would suggest instead, you create subfolders no deeper than 3 levels. If you still feel you need more categories, develop a better umbrella category and move the relevant folders to a new main category.
Establishing File Naming Conventions
Establishing file naming conventions requires thought as well. What is the best grouping for files: by date (year, day, month, time), by customer, by address or…? The choices for file groupings are endless. It’s important any files regularly accessed by multiple team members follow the defined file naming conventions.
However, choosing the right file naming conventions accomplishes these objectives:
- The file naming groups common references together (customer, invoice, legal documents, etc.)
- The file names are sequentially logical
- The file naming convention is consistently followed
Grouping Common References Together
Common references mean items you would commonly seek together. If you were seeking information on a customer account, again depending on your systems and departmental structure, possibilities include:
Where the customer is the most important point of reference:
Customer number_YYMMDD_Name of document (ex INV 556325)
Customer name_YYMMDD_Small claims court lawsuit
Customer number_YYMMDD_Notice of past due account
(Note: this date format is always sortable in date order by year within the customer number of name)
Where the system generates a file for invoices each billing date:
(Note: Even if the invoices were always put in a folder labeled billing, I recommend including a description in the file name; if there is a slip of the “click” the file is still identified as a billing file. If your system generates more than one file on a date, it’s often useful to have the invoice numbers identified on the file. For systems where invoices are stored within the system itself, obviously, there is no need for saving the files in a second location.)
Files for items like invoices for asset purchases depend on the type of business and type of asset. Cars and Trucks may use a VIN number and description, while large pieces of equipment may have serial numbers and descriptions. Furniture, on the other hand, may only require descriptions. In some systems, the invoice for asset purchase attaches to the original transaction within the system.
Larger companies with a high volume of equipment may put asset tags on all the equipment to identify it. Frequently the accounting department maintains the records. A key element of the file identifier is the date purchased, as the date of purchase drives tax reporting.
Examples of Assets by Date:
YYMMDD_Asset number_2Ton Crane
YYMMDD_VIN number_2018 Ford Explorer
YYMMDD_Steelcase Executive Desk
(Note: keep away from naming that might change, such as “Bill’s desk,” or “NE Corner Crane.” If you have multiple cranes or desks, consider tagging those assets)
File Names Are Sequentially Logical
What is the sequence you’ll most like search for: customer by date or date by customer?
Beer vendors, for example, use location as their key – there is always a bar at the location, even though the ownership might change– not the customer. Hence, much of their file naming is conventions include location. Within that file naming convention, there are still variations (12390 Greenfield Rd Waukesha WI or YYMMDD_WI_Waukesha_Greenfield_12390). This type of file naming convention is helpful if, by chance, you need to report all new locations in the state by the city as part of your annual reporting to the BATF.
The File Naming Convention is Consistently Followed
Everyone one needs to follow the rules. Period.
Remember your file naming conventions are only effective if they’re followed by everyone in the company, every time. This may mean you need to delegate responsibility to the department heads or another party who will quickly identify and raise the red flag if file naming starts running off the rails.
While the concept of implementing file naming conventions is somewhat “old school,” it is still a highly effective way to manage your document storage. Following company-wide file naming convention best practices will save you stress and headaches in the long run. The new paradigm of file storage and search that doesn’t rely on file name has cost well-beyond what most small companies are willing to spend.
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