Effective Records Retention Practices for Businesses
By Paul Ursich
Remember how things used to be? You’d carefully store all business contracts, insurance policies, tax records, purchase orders, invoices, banking statements and correspondence with vendors, customers and prospects. When your filing cabinets filled to capacity you’d buy more, move boxes of paperwork to a lonely storeroom or make a U-Haul delivery to off-site storage, never to be seen again.
Things are better in the electronic age—supposedly. Now you can fill hard drives or entire servers with the digital minutiae of running your business, or upload data to affordable cloud storage. But you still have documents that are only available in paper format, so you have electronic and paper data storage challenges. Here’s how it breaks down.
- Saving stuff you don’t actually need—or saving it way too long.
- Neglecting to save important documents.
- Saving—but not being able to find—what you really need when you need it.
Make a Policy
The first step to rescuing your company from records accumulation hassles is to get rid of your existing waste. Then come up with a plan. A document retention policy will enable you and your employees to know what to keep, how long to keep it, and where and how to store it.
Start with your oldest archives. You might be surprised at all the yellowing sales receipts you have for old typewriters or fax machines, or correspondence from clients long gone.
When you’ve caught up with your past, draw up a document retention policy to clearly describe how you want every document handled, whether physical or electronic.
Keep It or Trash It?
Your policy will vary depending on the legal requirements that might pertain to your industry, but here’s a cheater’s guide to the documents likely to most demand your attention.
- Tax records from the IRS and other taxing authorities
- Signed contracts and other legal agreements
- In-force customer and vendor agreements
- Insurance policies and records
Is that everything? Not necessarily. Ask yourself what’s the worst that could happen if you tossed a document. This pdf from the American Institute of CPAs (AICPA) serves as an excellent guide to what should be kept, and for how long. (Although my personal view is that the AICPA recommends keeping many documents for longer than I would.)
Digital is Better
Electronic storage is the best solution when you have a choice. It occupies no physical space and it’s certainly much less costly than physical storage. Some cloud storage services, such as Google and Amazon, charge very little for uploading your data and not much more to retrieve it if a document is ever needed. (You might be surprised at how much you’ll never miss.) And it’s still at your fingertips. While old paperwork might be in dusty sealed boxes in a storage facility, your uploaded electronic data is usually available with a few clicks. Be sure to align your digital storage process with your company’s security policy in order to ensure that all documents are stored in a secure location.
Today, even the most official documents can often be scanned and preserved electronically—but ask your lawyer or accountant before shredding anything important. I’d be glad to help.
Whether storing electronically or physically, segregate all documents by the length of time you choose to keep them. Then shred or delete as each file ages out. Make sure you have a permanent file for those items you’ll keep forever, avoiding the most disastrous accident. And categorize by type of document—insurance, tax, contracts, etc.—for easy retrieval. Then make it one of your year-end tasks to review and dump expiring documents.
With that done, you’ll no longer feel so overwhelmed by data in any form.
Paul Ursich is Director of Advisory Services at Wiss & Company LLP. You can reach him at firstname.lastname@example.org or at 973.994.9400.
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