It's virtually impossible to facilitate an effective cash flow management effort without a comprehensive financial plan in place. Putting together such a plan requires insight into your small business' revenues and expenditures, much of which can be gleaned from financial documentation.

Entrepreneurs often avoid implementing proper paperwork management policies because they view them as too laborious or unnecessary. Consequently, many struggle to keep their documentation in order. Not only does this compromise the cash flow management process but it can also put a company at a higher risk of identity theft, hinder tax filing and make it difficult to provide proof of transactions if the need arises. 

Disorganization can be a blight on both paper records and electronic documents. However, creating a filing system can make it a lot easier to determine what's what and quickly locate specific information. For instance, try taking the time to separately categorize and store account statements, tax information, receipts, employee payroll data and documents pertaining to commercial loans.

It can be tempting to dispose of receipts for taxi journeys, catering for your annual holiday party, parking lot fees and restaurant bills, but before you do so, consider whether the information they contain will be useful down the road. Carrying out a thorough analysis of these records can help you put together projections of expenditures for next quarter or fiscal year based on how much you spent in the last one.

Small business expert Rhonda Abrams, writing for USA Today, advises entrepreneurs to retain supporting documents for business expenses for at least five years, and recommends holding onto some – such as tax returns and investment statements – indefinitely.

Once you've separated what you're keeping from what you're throwing away, don't simply discard unneeded documents, as this puts you at risk of identity theft and could compromise the security of your company's personnel information and financial data, as well as the personal details of job applicants.

Rather than tossing potentially sensitive documents into the trash or recycling bin, take the time to shred them. Abrams notes that businesses are required by law to shred paper containing certain details, such as Social Security numbers, so adopting a policy of shredding can also help to ensure compliance.