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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.

Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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