Contracts by time or vendor. Correspondence by date or project or name of recipient. Reports might be by week, month, quarter or type of report. Each of these items can then become a subfolder. Use informative file and folder names.
Modern software permits the use of lengthy names for files and folders.
Try to incorporate dates and other identifiers in file names. Create a written explanation of your system. This is cumbersome, but still can be a time saver for anyone who needs to share files. Regularly delete document files that you consider inactive to free up disk space. You can delete a file, store it on a floppy disk, e-mail it to someone who needs the document, or archive important files.