I am enthusiastically committed to the goal of reducing paper and the headaches associated with keeping track of it, organizing it, destroying it and generally moving it from one stack to another. In our office we do not create any paper file file folders for new or existing clients. We do not retain paper copies of clients original documents and we do not retain paper copies of old tax returns. Instead we use scanners and imaging software to digitize all of these documents and archive them. This results in greater ease of retrieval, indexing and filing.
A great bi-product of this system is its propensity to safeguard against data loss. Our data is currently mirrored, synchronized or backed up on four different electronic media. All this helps me sleep a lot better at night. During the most recent hurricane season we only had one marginal scare when we didn't know where Wilma was going to end up. Before leaving our waterfront office building for the weekend we packed up an external hard drive, removed the last backup tape from the server and synchronized a laptop to the server. That was it. If something would have happened I was only a wall outlet and an Internet connection away from being back in business.
When it comes to dealing with our own records we are just as committed to doing away with paper. We scan everything we possibly can and destroy the paper copies if feasible. Expense receipts are a huge part of this and absent the occasional rebate receipt we have found there is little reason to retain the paper copies. This is especially true for receipts generated by thermal printers (which most are). If these are not scanned or photocopied the original eventually fades to the point of being unreadable. We use the same high capacity, redundant systems for this that we use for client documents but I think most businesses and homes could benefit just as much with a simpler, less costly system. One solution I came across recently is NeatReceipts. We have not used it but it looks like just the ticket to move a newcomer into the paperless world. Their site also has a great page featuring IRS positions on digital record keeping and document retention.