A Finland Swede in Bavaria

Friday, 26 October 2012

Paperwork and personal accounting: Archiving financial documents

Expense reports, tax statements, invoices, insurance policies, claims, ordinary receipts: Life is full of boring bureaucracy. Most of us try to avoid spending any unnecessary time on paperwork, and I'm no different. That said, I've noticed that I am probably not really minimising my paperwork time, going about some matters in a sloppy, irrational way. Procrastination and bad habits lead to spending more time, not less -- fighting exceptions, asking for extensions, and most of all, searching for badly organised but vital information - be it on paper or in electronic form.

So I decided to change things, for a more systematic approach. I'm my own all-in-one clerk, controller, CFO, and auditor. Perhaps writing about it will make a boring task more fun? Perhaps documenting my own processes will make me more organised? Compared to corporate finance and administration, I have many more degrees of freedom. Fewer legal requirements. No arbitrary corporate policies. More possibilities to make rational choices. And no boss to report to - which, in fact, can turn out to be more of an invitation to procrastinate, than a liberation from unnecessary duties.

My current task at hand is to create processes around the everyday paperwork. The goals are simple:

  • keep an overview of expenses
  • set my own expectations on upcoming expenses
  • pay valid invoices on time
  • write expense reports quickly
  • turn in tax declarations on time
  • submit reports to authorities like insurance companies on time 
  • manage account numbers, passwords and contact data
and do all of the above with minimum hassle, frustration and interruptions

Starting at the bottom-most level, I need to decide on a workflow for paperwork, from incoming documents, processing them, and archiving them. Paperwork is in my case distributed over a multitude of inboxes: snail mail to two physical addresses, and email which in turn may be mere notifications of the need to log in to accounts behind passwords to banks, credit card companies and various other service providers (all in the name of "simplification"), followed by mandatory use of yet another, particularly badly structured de-facto inbox in the form of the Downloads directory.

My belief is that I will find out the easiest process by looking at the desired end state: What documents do I want to archive? In which state, and where?

My tentative answers are:

  • In paper form, I want to long-term archive only such financial papers that legal, contractual and other formal obligations require me to retain on paper - i.e. very little
  • In electronic form, I want to retain all receipts, bank statements and paperwork which either documents past transactions or is relevant for future assets and liabilities
  • Work in process, I want to keep at a minimum, and in very good order - both in dead-tree and electronic form 
  • Concluded, archivable paperwork, I want to archive properly, in good order, by year - only in electronic form, disposing of the corresponding dead-tree instances
  • Turning to the Where part: The e-paperwork in process, I want to keep on my laptop hard disk, with a backup copy on an external hard disk
  • The e-paperwork archive, I want to keep on offline external hard disks in two locations (one at home in Germany, one in Finland)
  • Selected e-paperwork, giving me an overview of my income, costs, assets and liabilities, I want to keep on my kajPad

At my personal level of geekiness, the following step for me is to decide on a directory structure for the inboxes, the work in progress, and the files on archive. As a Mac user still happy with many usability related defaults on Mac OS X, my starting point is the names created in my home directory by the operating system: Documents, Pictures, Movies, Music, as well as the transitional directories Downloads and Desktop. Sure, I could use "Documents" or a subdirectory of it, but much like Pictures, Movies and Music, I think financial documents deserve a top-level category of their own. They're usually PDFs (and if not, they can be made into PDFs). They may be quite sizable. Like Pictures and Movies, they can usually be allocated to a particular year. So, in the name of consistency, let it be Finances (or, in my case, Finanser in Swedish - as Finder on my Mac also displays Pictures, Movies and Music as Bilder, Filmer and Musik).

On the directory level below, I'll just copy the habits I have refined over the years in using my Pictures directory. In Pictures, I have created a disciplined set of top-level subdirectories:

  • rep for Repository (which is then subdivided by year, rep/2012, rep/2011 etc.), 
  • sync for syncing pictures with mobile devices (in the desired resolution), and 
  • lib for a Library of key pictures that remain valid over the years (profile pictures, logotypes, components of web pages and other visuals). Also, Pictures has photography related temp files used by applications, such as Lightroom and Photo Booth. 

I can use the very same idea for Finances:

  • rep for a repository of year-specific receipts and financial statements
  • sync for syncing PDFs (or JPGs) with mobile devices; however, while Pictures/sync has subdirectories that iTunes syncs automatically with my my kajPad's photo albums, I will need to perform manual steps to sync PDF files in Finances/sync with iBook 
  • lib for a Library of key financial documents that remain valid over the years (contracts with banks, insurance companies, landlords)
  • scan as a transitional inbox of documents I've scanned (analogous to Photo Booth)
  • kajbook for the files used by my own financial application, written in Python and MySQL (analogous to Lightroom)

As for distinguishing between what goes to the internal and the external hard disks, and for cleaning up inbox type transitional directories, I have to adapt my Pictures directory related habits somewhat:

  • rep: in Pictures, I use the internal hard disk merely as a temporary repository when travelling; in Finances, I believe I'm better served by having the entire current year on the internal hard disk, keeping only previous years on the external hard disk
  • scan: quite like Photo Booth (which is hardly ever used on my laptop, but still) creates somewhat of an extra "inbox" of pictures which need to be deleted or moved into their proper directory in rep, also my scanner spews out files into a default place and without a descriptive file name; however, not only do the scanned documents need to be renamed and moved to their proper rep directory -- some of the scanned documents aren't financial documents at all, in which case they need to be moved elsewhere, out of the Finances tree 
  • Downloads: quite like I get pictures over email, over Skype and downloading them through a browser, I do get invoices, receipts and bank statements through the very same channels; these files need to be named properly, and brought into the rep directory; also, the cleaning up process of Downloads pertains to Pictures, Finances and all other downloaded files simultaneously, meaning that the cleaning either needs to happen for Pictures and Finances simultaneously, or the clean-up-the-Downloads-inbox step has to be performed as part of the download itself

Another difference between Pictures and Finances is that my photographic past is already sorted by year (and album). My financial past isn't, and I have to come up with a way to keep the two external HDs in sync while I'm sorting past finances. Likely, the total volume of files will remain small enough for me to be able to copy the entire Finances directory on my small 200 GB travel hard disk.

Re-reading and iterating my thoughts, I believe that the directory structure I've thought out enables a smooth work process. Now, I have motivated myself to start enforcing the Finances structure. On my internal hard disk, it should be a matter of an hour or two. Checking which files are on the external hard disk only may take a bit longer - but just like with emptying the inbox, I need something to get started. And having a proper structure for financial documents on the internal hard disk already goes a long way towards orderly finances.

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