patrick schneider

Sunday, February 17th, 2008

Managing paper in a home office can be a chore. This is especially true if you have any combination of a lot of paper and a lack of space. The negatives of keeping paper around are many: Filing cabinets are ugly, paper can take a great deal of physical space in your home, paper is hard to back up, searching for things can be a chore… the list goes on.

In May of 2007, I bought the NeatReceipts Scanalizer document organization system. I must admit that I first saw this product advertised in Southwest Airline’s “Spirit” magazine. Like the SkyMall, I generally take in-flight magazines with a grain of salt. But, as I will talk about below, after considering the alternatives, I decided to take the $175 plunge.

Benefits to a Paperless Home Office

There are quite a few benefits to going all digital. Clearly you are reading this because you know (or think you know!) the benefits to paperless-ness. For me, the reclamation of physical space and the ability to easily organize (and reorganize) were the top reasons I decided to get off of paper.

Technology also makes it blindingly easy to backup your entire home office. Paper is really a single point of failure. What I mean is that if you store everything on paper, and, say (God forbid) a fire or other natural disaster strikes, all of your paper goes away. And unless you’ve copied everything and have it in some off site storage, you’re never going to be able to get it back. With a digital system, though, you should be able to backup your data to a CD or DVD and stick it in a fireproof safe. Fireproof safes are good investments, are or can be relatively small, and should be used to protect those — typically very few — things that are impossible or extremely difficult to replace.

Another popular and feel-good reason is that going paperless is greener: You can shred and recycle nearly all of the paper you would otherwise stash away. I’ve found that getting in the mode of shredding and recycling actually propels me to recycle more paper than I otherwise would have. In particular I’ve found that I shred and recycle nearly everything: junk mail, phone books, etc. Shredding can be extremely therapeutic.

This list could go on and on. And I’m sure you have a few reasons I didn’t mention. But don’t let all of these benefits stop you from considering some important pitfalls…

You Will Still Need Organization!

So we’ve established that you’re reading this because you believe that having a paperless office will make your life easier. The last section enumerated some of the benefits, most of which you probably already knew. These benefits are great, but all of this doesn’t happen by magic.

Namely, switching to a paperless organizational system does not preclude the need for organization. I think that many people out there view a digital archive system as something that will somehow magically make everything neat and organized. A magic bullet of sorts. But the fact is this: You have to think just as hard, if not harder, about how and why to correctly categorize and organize things with a paperless system. Why? Digital clutter.

For example, take a look at your desktop right now. (Your computer desktop.) How many icons are on it? I would suggest that if there are more than a dozen or so icons on your desktop, then you don’t really have a good handle on digital organization. I could be way off, but the overwhelming majority of people I’ve met with strong computer skills have under 10 icons on their desktop. I’m sure there are people out there that could prove me wrong, but I’d be willing to bet that a majority of people don’t really understand directory hierarchies, file systems, and other basic computing ideas that really help in organizing your digital life.

But fear not. These are skills that can be learned. And there are all-in-one software systems available that take some of this burden off of you. The system that I use — NeatReceipts — allows you to categorize, create folders, re-categorize, and sort all very easily.

To Buy a System, or To Roll Your Own

I highly recommend purchasing an all-in-one solution for a digital home office. When I was first considering going paperless, I though to myself: “I’m industrious. I can buy a scanner and set up a database. I’ll just do the setup work myself and save some money.” Dumb.

The whole point of software is to make things easier. And if you can leverage what somewhat else has already figured out, why not go that route? Neat Receipts has performed beautifully for me in this regard: The Neat Receipts scanner recognizes nearly 90% of the vendors I buy products from, and it automatically categories and records the data from the receipts. Further, the Neat Receipt system meets the criteria of Rev. Proc. 97-22 as set forth by the IRS. If you want to go paperless, you need to ensure that your digital system meets these requirements. Though I’ve never been through an audit, it is hard to imagine going into one without the proper documentation.

Good Point — What if I am audited by the IRS?

Will my paperless home office stand up to the scrutiny of an IRS audit? As best I can tell: Yes, your digitized receipts and records should provide all the firing power you need to document your financial past to the IRS. After a cursory search for something to back up this claim, I came across this document which discusses digital documents and how it affects corporate taxpayers.

Neat Receipts has some more information regarding a paperless home office and how it helps with taxes. Further, Rev. Proc. 97-22 (Books and records; electronic storage; imaging) available on page 9 of this document from the IRS.

If anything, having all of your important paperwork store digitally should make an IRS audit much easier to deal with. You should be able to quickly find everything for the year in question, and your software should be able to provide you with the summaries and calculations to corroborate your filing.

Paper You Shouldn’t Shred

Though the benefits of a paperless home office are many, there are definitely some things that you will want to keep hard copies of. For starters, the closing documents from any real estate you own are good candidates. Marriage certificates, diplomas, etc. Anything else I would just give a quick gut check: Does this feel like something you can shred or not? If not, keep it around. Obviously you want to keep these types of things to a minimum.

What is a good idea, however, is scanning these things anyway. This way you’ll be able to back them up and replicate them in the event of a disaster.

Also, one huge caveat: Back up your database before you shred anything! Just think about having scanned in a week’s or a month’s worth of paper, shredding all of it, and then having a computer malfunction. This would be completely unrecoverable. So, obey this three step process, every time:

• Scan
• Back up
• Shred

Okay, okay — How has it worked for you?

Great! There are basically two categories of things that need to be scanned. One, the backlog of receipts, papers, and files that I have lying around. And two, all of the incoming stuff that is generated normally.

For the backlog, I try to set aside 3 or 4 hours on a Saturday once a month, and plow through some of the old documents that need to get scanned. And to keep up with the continuing incoming stream of stuff, I set aside an hour or two a week to input all of the receipts and bills and such.

The space reclaimed is easily worth any overhead created by the scanning system.

Also, note that I am in no way affiliated with Neat Receipts. I just really like their product. Actually, I do have some criticisms — perhaps I’ll write those up in a another entry. One of my main beefs with them has nothing to do with how their product works. It has to do with their marketing. They seem to be intent on directing their efforts on corporate customers, especially those types of corporate travel-jockeys that generate a lot of expense reports. I feel like they are missing a huge market of people like me — just an average guy who wants to get rid of the paper in his home office.

There’s clearly no perfect system, but I’m a big fan of sitting on the shoulders of those who have already figured out reasonable ways of accomplishing things.

In Closing

Going paperless has a lot of rewards. Implementing a digital solution a little at a time has really worked for me. This is certainly one area in which you’ll want to do your research and make sure that whatever solution you decide on fits your needs.