I use hanging folders but only put one Manila folder in each one. I always label on the left and so I position the little plastic letter holder on the right side of the hanging folder for the first one for that letter. Subsequent files of the same letter are simply a manila folder inside a hanging folder. If I haven't got any files for a particular letter yet there is an empty hanging folder in the cabinet with the plastic letter holder on the left side so I can visually see this.

Simon