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Strategies for Effective Financial Record-Keeping System

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Accounting Record Keeping

Maintaining well-organized financial records is essential for both individuals and businesses. A robust record-keeping system ensures accountability, aids in financial planning, supports legal compliance, and prepares you for unforeseen events. However, without a structured approach, managing financial documents can quickly become overwhelming. This article explores strategies for building an efficient and sustainable financial record-keeping system.

Identify Records to Retain

The first step in developing a reliable system is identifying what documents you need to keep. Regulatory requirements, tax obligations, and future needs will determine which records are essential. Individuals typically retain documents such as tax returns, bank statements, pay stubs, investment reports, medical bills, insurance policies, and purchase receipts for high-value items. Businesses, on the other hand, need to store financial statements, general ledgers, payroll records, accounts payable and receivable reports, W-9s, 1099s, and various tax forms.

Understanding the scope of required records ensures that nothing crucial is missed and establishes a solid foundation for organizing your system.

Develop a Logical Organizational Structure

Once you know what records to retain, the next step is to design an intuitive filing system. A logical structure helps maintain order and makes retrieval quick and painless. For both physical and digital records, it’s helpful to create primary categories such as Banking, Taxes, Assets, and Insurance. Within these categories, you can further divide documents by year or type.

Physical records can be organized using labeled folders, with color-coded categories for quick identification. Digital files should mirror this structure, ensuring consistency across both formats. Using cloud storage platforms with folder hierarchies makes it easy to manage digital records efficiently.

Ensure Security and Controlled Access

Financial records often contain sensitive information, so security must be a priority. For physical documents, consider using a locking file cabinet or a safe to prevent unauthorized access. When it comes to digital records, cloud storage solutions with encryption, multi-factor authentication (MFA), and role-based access permissions offer robust security.

Routine backups are also critical to prevent data loss. Schedule regular cloud backups or store files on external hard drives to ensure recoverability in case of technical failures or cyber incidents.

Implement Processes for Ongoing Organization

Establishing a system is only half the battle—maintaining it requires consistent processes. Introduce habits that encourage the continuous integration of new records. For example, set up a designated bin or tray for physical documents that need to be filed. Schedule weekly or monthly sorting sessions to prevent paperwork from piling up.

Digital records can be managed efficiently with the help of mobile scanning apps, which allow you to upload and store documents instantly. Automating document uploads or using templates for financial reports can also help reduce administrative workload.

Define Record Retention Policies

A well-organized financial record-keeping system includes clear retention guidelines. Different types of records have varying lifespans, particularly when it comes to tax and legal documentation. Tax-related files, for example, often need to be kept for three to seven years, while loan documents and property deeds may require longer retention.

Implement an annual archiving process to remove outdated records and free up space. Be sure to securely dispose of old physical documents through shredding and properly delete digital files to maintain data security.

Review and Update the System Regularly

As business operations evolve or personal circumstances change, your financial record-keeping system must also adapt. Periodically assess the system’s effectiveness to ensure it aligns with current needs. Technological advancements, regulatory changes, or the addition of new financial processes may necessitate updates.

Regular evaluations help you identify inefficiencies, improve workflows, and implement new tools that can further enhance your record-keeping efforts. Staying proactive in maintaining your system ensures it remains optimized over time.

The Benefits of a Structured Record-Keeping System

Creating an organized financial record-keeping system requires upfront effort, but the long-term benefits far outweigh the initial investment. A well-maintained system improves efficiency, reduces stress during tax season, ensures legal compliance, and provides quick access to critical documents when needed. For businesses, an effective record-keeping system supports better financial management and helps avoid costly mistakes, such as missed deadlines or lost receipts.

Whether managing personal finances or business accounts, a systematic approach keeps you in control. By following these strategies, you can establish a financial record-keeping system that is secure, sustainable, and adaptable to future needs. In the long run, the effort invested in building a reliable system pays off with enhanced organization, improved decision-making, and peace of mind.

An effective financial record-keeping system is essential for staying organized, meeting legal obligations, and preparing for the unexpected. By identifying the necessary records, creating a logical structure, ensuring security, and defining retention policies, individuals and businesses can manage financial documents efficiently. Regular evaluations and updates keep the system optimized as circumstances evolve. Ultimately, a well-organized approach to financial record-keeping promotes accountability, compliance, and readiness for whatever the future holds.

Norene

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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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