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Operating You, Inc.


Now that you are running a business you need to set up the infrastructure that goes with it. Some of the operational requirements will be dictated by how you have structured – as a sole proprietorship or an incorporated business. Let me discuss some of the basic ones that you will need. I am making an assumption that you know the equipment and material you need to conduct your service offering. For example, if you are a consultant, you probably need a laptop with necessary applications. This list is in addition to that.

  1. Accounting System

You need a system to track your business income and expenses. I strongly recommend that you separate your business income/expenses from your personal ones. This not only allows you to track the success of your business, but also enables you to accurately report taxes to IRS (and benefit from business expense deductions). Here are a few things you can do –

    • Open a business checking account to manage business cash flow. You may want to open this at the same bank where you have your personal savings/checking account. That may allow you to avoid maintenance fees and transfer money to/from your personal account instantly.

    • Obtain a credit card for your business expenses. The payment grace period offered by credit cards enables you to better manage your business cash flow by delaying payments. Getting the miles or points is an extra bonus. Just make sure to pay on time and to avoid cards with annual fees.

    • Track every income and expense. Many folks just use an Excel spreadsheet to track their business expenses. However, you should be able to use dome of the free tools available online. Two of the most popular ones are: www.mint.com and www.outright.com

    • Keep all your receipts. This will come in handy if you get audited by IRS. Here are some ways –

      1. You can either put them in a box or envelope and label them ,

      2. Scan them and save digital copy. IRS has certain rules on this. The two most important are – the scanned copy should be legible when printed, and the digital records should be indexed and cross-referenced with the actual transaction. See IRS publication (TBD) for details on these and other requirements.

      3. You can use tools such as NeatReceipts that comes with a scanner and software, or

      4. Use service provider such as www.Shoeboxed.com. They will scan and store the receipts for you. They offer a free service and a premium paid service.

  1. Records Management/Filing System

Invoices, balance sheets, reports, checks, letters, sales brochures, payment reminder letters, notes, discussion notes, project plans... hold it. We're self-employed here not in the business of setting up a library. Right? The truth is that there is enough documentation going around with any self-employed business that one does need to arrange everything or get smothered in a completely jumbled mess. Also, organizing documents is important because we have to deal with a mix of traditional paper documents and electronic files.

Good documentation management certainly means increased productivity. With orderly document management, you don't waste time and you always have your accounts, important communication, returns, etc. all there when you need them.

Important questions to ask before you set up your own document management system – both for e-files and paper documents

  • Who will handle my document management system? Do I really need to hire someone or can I use good tools to handle it efficiently by myself?

  • What is going to be my basic document template/in-house style guide? Time-stamping, date stamping, levels of document sharing, etc. Where would the more confidential documents go?

  • How would the documents be filed and archived? Should I go for storage in alphabetical, subject-wise or date-wise storage? Which documents would be accessed more often than others?

  • What is the physical or electronic space available to me? Is it sufficient?

Physical storage of documents

For physical storage of documents you won't have much problem finding regular folders, cabinets, etc. Try color coding if you are creatively inclined. Don't go for fancy trappings but focus on utility and ease of use when buying stationery or cabinets for physical storage of documents. Ensure a stock of labels to keep everything organized.

E-storage of your documents

There are several great software products that you could utilize for e-storage of documents. Before we discuss these products, here are some tips for proper storage of e-documents.

  • Organize file types

  • Make full use of nesting folders like all folders for each month of year 2011 go into one folder marked 2011 with a folder for each month. You could try folders for a financial year instead of the calendar year.

  • Follow file-naming rules like no spaces in file names, 27 characters etc. and be specific about names. No point having a folder marked 'confidential'. Use a password instead but call the password something that you could easily recall it when required.

  • BACKUP properly.

  • Sort and cull your folders often – both for physical records and e-records

You will find details on the document management software in the Productivity Tools section.

What records to keep (list of files/folders)

Here is a list of records for you to start with. Prepare a folder for each and store the documents with an index that makes sense (date, client name etc). As your business grows, you may need additional categories as necessary. My suggestion is to store digitized copies of the records where possible. They take less space are easy to find, i.e., if organized properly. The paperless office is not just environment friendly; but also cost effective for your business. Note that the folders I mention here can be physical folders or folders on your computer. Interpret them as appropriate in your case.

  • Legal documents

Use this folder to store records and documents related to business incorporation, license and registration, article of organization etc.

  • Marketing Collaterals

Depending on the type of business you are in, you should have marketing material that explains your business’ value proposition. For example, collaterals for a consulting business may include its capability statement and case studies.

  • Proposals

You may have one folder for all proposals you send to prospective clients, or separate folders for each client.

  • Client Related

When a prospect becomes a paid client, you should absolutely create a separate folder for that client. All communications, including client contracts, invoices etc. should be in this folder

  • Bills

Most of companies now offer Electronic Bill (E-Bill) option. Sign up for that when available. In the rare occasions where you receive a paper bill, after you make the payment, mark it as paid and file it in this folder.

You should also use the online bill pay option to pay the bills. Many banking institutions offer this as a free service or at a very nominal fee. They are awesome; your bank either does a direct transfer to your payee account, or prints and mails a check to them. Also, usually, the bank is responsible if the payment doesn’t reach the payee on your instructed time.

  • Tax documents

Prepare a separate folder for your tax documents, such as tax returns and communications with IRS and State & local Tax departments.

In addition to these, prepare additional folders for documents that you feel you need to retain.

How long to retain

    • Tax related documents – six years or longer
    • Contracts and legal documents – for ever
    • Others – judgment call (better to keep a digitized copy if destructing the paper document)

Tips: When getting rid of documents, don’t just throw them into the recycle bin. Make sure you shred the ones that have confidential or personal information.

  1. Liability Insurance

Depending on what type business you are in you may need to obtain business liability insurance. If you have employees then you may also need a Worker’s Compensation coverage in most of the states. Some clients/states may require the Worker’s Comp even if you are the only employee.

Your client may ask to be named as the beneficiary on your liability insurance and may dictate a minimum coverage amount.

Certain type of businesses may also need additional insurance such as Loss & Omission for consulting.

Additional (optional) processes/systems:

In addition to the processes mentioned above, you may want to consider one or more of the following depending on whether your business needs them. Click on each to learn more about them.


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