Filing - you'll be glad you did it

You know the scene. You've dealt with an invoice, bill or letter and put it in the filing tray.

But a few weeks later as you balance yet another sheet on the top of the tray you begin to dread the thought of having to file all those hundreds of bits of paper away.

Filing is a chore, there's no doubt about it. But when you run your own business, keeping on top of it will make all the difference when it comes to year-end.

"The first few years when I was self employed I didn't do any accounts until a week before my tax return was due at the end of January. This led to an unseemly panic and a lot of additional charges from my accountant who was busy at this time of the year," said Peter Ramsden of Freiss Ltd, a regional development consultancy.

"Then I started using Quickbooks to do my invoicing and tried to keep up with record keeping on the purchasing side. It's the best system I've used so far. The only problem now is invoicing clients for expenses from my purchase receipts - I'm trying not to confuse the system by taking the originals out of my files!"

As Peter says, most accountants are particularly busy at the end of the tax year and expecting yours to go through a mound of unsorted receipts, bills, invoices and other paperwork is unrealistic, unhelpful and will cost you a lot of money.

You need to create a filing system that is easy to follow and will make sense at year-end.

For example, file your invoices in the date you pay them. When you file them, write on them the date of payment and the cheque number used to pay.

Use your cheque book sensibly. Record carefully on your cheque stubs the following information: Purpose of payment, payee, invoice date, date cheque written and amount. This will help at year-end when you are working out your accounts.

But remember - however good your system is, it will only work if you keep it up regularly. It's much easier to file one or two bits of paper a day than a great pile as the end of the year approaches.