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Blueprint for Establishing an Effective Financial Record-Keeping System

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Document Organization

In both personal and professional finance, maintaining organized records is crucial for accountability, contingency planning, and compliance with legal obligations. However, without a structured approach, the process of managing financial documents can quickly become overwhelming. This article outlines key strategies for building an efficient, secure, and sustainable financial record-keeping system.

Identify Essential Records for Retention

The first step in creating a robust record-keeping system is identifying which documents need to be retained based on legal requirements and potential future needs. For individuals, this may include tax returns, bank and investment statements, pay stubs, medical bills, insurance policies, receipts for major purchases, and personal contracts.

Businesses, on the other hand, must store documents such as financial statements, general ledgers, accounts receivable/payable reports, payroll records, W-9s, 1099s, and other tax-related forms. Regulatory standards or audits may also require organizations to retain these records for specific periods, making it essential to stay informed about compliance guidelines.

Develop a Logical Organizational Structure

Once you’ve determined which records to keep, the next step is to create an intuitive organizational structure. Establishing primary categories—such as Banking, Taxes, Assets, and Insurance—can make sorting documents easier. For each category, you can further organize by year or specific subtopics.

Incorporate this same structure across both physical and digital records to maintain consistency. Physical files may be sorted into color-coded folders for quick access, while digital documents can be stored in well-labeled folders on cloud platforms or external drives. The key is to design a system that makes retrieving any record easy and efficient.

Prioritize Security and Controlled Access

When managing financial data, safeguarding sensitive information should be a top priority. For physical documents, consider storing them in a locking file cabinet or safe. Digital files should leverage cloud storage systems that provide encryption, multi-factor authentication (MFA), and role-based access permissions to protect against unauthorized access.

Regular backups are also essential to prevent data loss. Use automated cloud backups or external hard drives to ensure that critical financial information remains recoverable in the event of hardware failure or cybersecurity incidents. Implementing security protocols protects both personal and business interests, maintaining the integrity of your records over time.

Implement Efficient Filing and Retrieval Processes

After creating the framework for your record-keeping system, focus on integrating efficient processes for managing incoming documents. Set up a designated area or bin for new physical documents and schedule regular filing sessions—weekly or monthly—to prevent backlogs.

For digital records, mobile scanning apps offer a convenient way to upload documents in real time. Automating uploads to cloud storage platforms or setting up email filters to route invoices and statements directly to designated folders can further streamline operations. These processes keep the system running smoothly and minimize the time spent on administrative tasks.

Establish Clear Record Retention Policies

Knowing how long to retain certain records is critical for staying compliant and organized. Tax-related documents, for example, may need to be kept for three to seven years, while loan agreements, property deeds, and contracts might require longer storage.

Develop a retention schedule outlining how long different documents should be kept and when they can be safely disposed of. At the end of each year, conduct an archive session to move older records to storage or dispose of documents no longer needed. For sensitive materials, use secure shredding or permanent deletion methods to protect privacy and prevent data breaches.

Evaluate and Update the System Regularly

No financial record-keeping system is static. Changes in personal circumstances, business operations, regulatory requirements, or technology may necessitate adjustments. Periodically assess your system’s effectiveness to ensure it remains aligned with current needs.

Introducing new tools—such as upgraded scanning software or more secure cloud storage—can improve efficiency. Likewise, staying informed about changes in tax laws and compliance standards helps you maintain a system that meets both personal and professional obligations. Regular evaluations ensure that your record-keeping framework continues to serve its purpose effectively.

Benefits of a Well-Organized Record-Keeping System

While creating and maintaining a financial record-keeping system requires an initial investment of time and effort, the benefits are substantial. An organized system saves time during tax season, facilitates smoother audits, ensures compliance, and provides easy access to critical documents when needed. For businesses, efficient record-keeping also supports better decision-making and financial management, helping to avoid costly mistakes or missed deadlines.

Whether managing personal finances or overseeing a business’s accounts, an effective record-keeping system keeps you in control, reduces stress, and fosters financial preparedness. In both scenarios, a well-organized framework allows you to respond quickly to unexpected events or information requests, ensuring you remain on top of your financial responsibilities.

Establishing a financial record-keeping system may seem daunting at first, but the rewards far outweigh the effort. By identifying essential documents, developing a logical structure, prioritizing security, and implementing efficient processes, individuals and businesses can maintain organized and secure records. Regular updates and adherence to retention policies ensure that the system evolves with changing needs and remains optimized over time.

Ultimately, an effective financial record-keeping system promotes accountability, compliance, and peace of mind. With a methodical approach, you can take control of your finances and position yourself for long-term success—whether in personal life or business operations.

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Accounting

FloQast aims to make CPE fun with Audit Jamz accounting music

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FloQast, an accounting software developer based in Los Angeles, recently debuted Audit Jamz, an accounting music album that provides an enjoyable way for CPAs to earn continuing professional education credit.

The album, which dropped in October, comes from FloQast Studios, which also produces the YouTube sitcom series PBC, featuring several former cast members of “The Office” working for an accounting department at a tech startup.

The Audit Jamz album includes a compilation of different genres on each track, inspired by the compilation albums of the late 90s and early 2000s, with CPE credit provided by FloQast’s FloQademy

FloQast office exterior

“The idea came as we were brainstorming creative ways to get CPE credits out there and make them more fun to get,” said FloQast CEO Mike Whitmire. “That’s really the purpose of our FloQast Studios group. A big part of it is to produce CPE content that’s a little more entertaining while educational at the same time.”

FloQast director of strategic planning Drew Carrick, also known on YouTube as The Rapping CPA, and FloQast Studios head Josh Sims teamed up on the project. 

“Josh Sims is an incredible musician, and he was able to come up with all the music,” said Whitmire. “We wanted to do an album where each song was from a different genre. Josh would create the music, and it’s amazing. You could just be like, ‘Hey, man, make a country song.’ And he could go and make a country song. You can say, ‘Hey, make a rock song.’ And he can make a rock song. We’re able to do all that internally. And then Drew Carrick from the FloQast Studios team went ahead and wrote the lyrics and did all the rapping and singing and all that good stuff.”

Last month, FloQast also debuted a new book, “Shift Happens,” co-authored by Whitmire and  FloQast accounting operations evangelist Stefan van Duyvendijk. Despite the jocular title, it takes a more serious professional approach than Audit Jamz.

FloQast CEO Mike Whitmire
FloQast CEO Mike Whitmire

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“That’s more about what we see in the industry today, and where we really think it’s going,” said Whitmire. “It’s about the rise of the operational accountant and the operational mindset, thinking really less about numbers and the derogatory beancounting type notion. It’s more about helping the organization drive more operational efficiency. What we found is accountants are really good at process improvement and workflow management, and if they can take that skill set and really drive it across the organization, they’re able to produce really, really big results. That’s more about the professional landscape, how we view the change going forward.”

Meanwhile, FloQast Studios is getting set to debut the third and final season of PBC, a sitcom whose cast has included Danny Trejo from “Machete” and Kate Flannery and Creed Bratton from “The Office.”

The final season is expected to be released by the end of the year, and there may be a wistful note as it concludes. “I would say it’s a very satisfying and melancholy end to the series,” said Whitmire.

He sees an educational role for the series, even though there’s no CPE credit. “On the PBC side, that’s an attempt to really highlight accounting, explain what we do from behind the scenes,” said Whitmire. “I don’t think there’s an actual good understanding of what accountants do on a regular basis, if you ask the average person on the street, and we’ve actually done this before. We sent Drew down to Venice, and we had him ask people what accountants do. The answer you get, time and time again, is taxes. And then the second answer behind that is kind of wealth management, which I found to be an interesting answer that we got on the street there. But the reality is, most accountants work inside corporations. They’re part of the team. They go through various struggles together. There’s a lot of team bonding, and I find that to be one interesting factor of accounting that’s really left out of the equation is how much it is a team sport. You really start to develop relationships with your team. You’re in it together, you’re trying to hit deadlines together. That camaraderie, to me, is one of the more rewarding parts of being in the profession, and that’s just not highlighted. And as you’re going through the series, you’ll see our accounting department going through all those trials and tribulations that a growing accounting department has to go through. It’s about really pulling together as a team to get through it.”

FloQast has also been advancing its software, taking it beyond the close management features it originally highlighted. The company recently showed off its latest offerings at its Take Control user conference. 

“We got to unveil all of our new products that we’ve put out in the last year,” said Whitmire. “2024 was a really heavy year for product investment for us, and we were able to unveil a lot of that at our user conference. The big shift we’re making is we started out with month-end close management, and that was sort of the focus upfront. And we think with the platform that we built out and a lot of the automation capabilities that are now possible because of AI, we’re at a point where we can really help transform accounting departments at large, and so we have broader positioning now. We call ourselves an accounting transformation platform, and our goal is to really help automate a lot of the mundane work and drive big operational efficiencies within an accounting department.”

He sees a significant role for AI in the program. “We think AI is a great tool for automating a lot of this mundane work and puts accounting and accountants in a position to really help close the work-life balance, take care of some of that mundane work and hopefully elevate them to do the more interesting stuff that we really learned about in college when we were taking these accounting courses,” he said. “It’s more the technical side of it, less of the rote work side of it.”

Advanced technology is needed as accounting firms and departments have more trouble filling open jobs amid the shrinking talent pipeline, which is one of the subjects of his book. 

“I do think it’s a really dire situation,” said Whitmire. “We actually are going down in the number of accountants that are able to do this job on a year over year basis, and the demand for accounting is going to continue to go up. So we have to close that talent gap somehow, and we believe technology is the best way to close that talent gap. And so the idea of the talent gap is one of the big discussions within the book. Not only are we going to be losing people in the profession, there’s going to be more standard accounting work to be done, and our role is going to shift to drive more efficiency. And so to do all of that, you simply have to lead with technology, and the people who are able to make that change and adapt to the new technologies that are coming out are really going to be the people who are effective and successful going forward. And that’s one of our goals at FloQast, is to build technology that accountants can leverage to automate their own work. We really want to put the power in the hands of the accounting department, because we think they’re best suited to take a look at how they can optimize and automate their own work.”

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Intuit and H&R Block fall on report of ‘DOGE’ interest in tax app

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Intuit Inc. and H&R Block Inc. shares fell on Tuesday, after the Washington Post reported that the leaders of President-elect Donald Trump’s “Department of Government Efficiency” discussed creating a new way for Americans to file their taxes.

H&R Block fell as much as 8.7%, dropping to its lowest since August, while Intuit slid as much as 6.8%, erasing much of an advance that had come in the wake of the election. 

Intuit, the maker of TurboTax, and H&R Block dominate the US tax preparation industry, earning billions of dollars a year providing digital and in-person services. The DOGE discussions follow the rollout of a pilot program from the IRS for taxpayers to file their returns for free online as part of the Biden administration’s Inflation Reduction Act.

Intuit TurboTax packages at store
Intuit TurboTax packages at store in Brooklyn

Eilon Paz/Bloomberg

Jefferies wrote that the selloff in Intuit was “unwarranted,” as an app is “unlikely to be a high priority in a long list of initiatives” to reduce government waste, while the IRS pilot program “had little success.” 

However, KeyBanc Capital Markets wrote that given investor debate around growth in Intuit’s consumer segment, such headlines would continue to weigh on the stock.

The Washington Post report, which cited people familiar with the conversations, said that a “DOGE” panel discussed creating a mobile app for Americans to file their taxes for free. A post from “DOGE” said that the tax code had gotten too complex and “must be simplified.”

Separately, Bloomberg Intelligence wrote that an IRS entry into the tax-prep industry “could, in theory, threaten revenue for H&R Block, Jackson Hewitt and Intuit,” with almost a third of Intuit’s sales at risk. However, analyst Andrew Silverman believes the “Direct File” tool “won’t successfully compete,” as the IRS “can’t devote the resources to it and is ill-equipped to create or maintain the software necessary to appeal to taxpayers.”

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PCAOB sanctions five firms for violating reporting requirements

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The Public Company Accounting Oversight Board announced Tuesday it settled disciplinary orders sanctioning five audit firms for failing to comply with PCAOB reporting requirements, the latest in increased enforcement efforts.

The firms are Bush & Associates CPA, Barton CPA, Crowe Hussain Chaudhury & Co., B S R & Co. (“KPMG India”) and RSM Brasil Auditores Independentes Sociedade Simples. 

“Failures to make required disclosures undercut the PCAOB’s ability to protect investors, and firms must not take these obligations lightly,” PCAOB chair Erica Williams said in a statement.

PCAOB logo - office - NEW 2022

Three of the firms violated PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants, which requires a firm to file a Form AP within a specified time after an audit report issued by the firms is included in a document filed with the Securities and Exchange Commission. Barton failed to file multiple required Form APs within the specified time, and Bush and Crowe failed entirely to file the Form APs until they were notified of their delinquency by PCAOB staff.

KPMG India and RSM Brazil violated PCAOB Rule 2203, Special Report, which requires a firm to file a Form 3 disclosing certain reportable events — such as criminal, regulatory, administrative or disciplinary proceedings against a firm or its personnel — within 30 days of their occurrence. KPMG India and RSM Brazil both failed to timely report multiple disciplinary proceedings against the firms, and, in the case of KPMG India, its personnel, by local regulators.

KPMG India and RSM Brazil’s violations were identified through regular monitoring of registered firms’ compliance with Form 3 reporting requirements. Bush, Barton and Crowe’s violations were identified through a sweep.

“Sweeps are a critical aspect of the PCAOB enforcement program,” Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations, said in a statement. “We will continue to use sweeps — and ongoing monitoring — to identify firms that fail to comply with PCAOB reporting requirements.”

Tuesday’s sanctions are the latest in a long line of increased enforcement efforts by the PCAOB, most recently including banning the firm Yusufali & Associates and barring its partner for multiple violations. In September, it settled sanctions against four firms for failing to make required communications with audit committees, as well as one firm for violating reporting requirements. The board previously sanctioned Baker Tilly, Grant Thornton Bharat, Mazars and SW Audit in February, as well as three firms in November 2023 and five firms in July 2023.

Without admitting or denying the findings, all the firms consented to their respective orders, which censure the firms and impose $50,000 civil money penalties on Bush and $25,000 each on Barton, Crowe, KPMG India and RSM Brazil. The orders also require each firm to undertake remedial measures to improve their policies and procedures concerning PCAOB reporting compliance.

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