As this year winds down, it's natural to look forward to the new year and begin planning for the future.
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But December is also the time to look back at all of the records you've amassed during the past 12 months.
What are you supposed to DO with all of this stuff? Do you keep the personnel records indefinitely? Can you ditch the tax information after 7 years? How long do you need to keep your partnership agreements or your audit reports?
Here are guidelines to help you determine the answers to such questions and decide what you should keep and what you can toss if you're part of an association or a for-profit or not-for-profit business.
Creating a Retention Policy
To establish a plan for throwing away documents at regular intervals (aka your retention policy), ask yourself the following questions:
- How useful is this record to the company?
- What would the consequences be if we didn't keep this record?
- How often has the company been called upon to provide this information in the past?
- What do we need to respond to the most recent requests for information?
- Is this document required for governmental reporting?
- Could this document be required in case of litigation?
- Do we need this document for historical purposes?
Once you've answered these questions, you will have your criteria for keeping and discarding documents. And don't forget all of the electronic records you're keeping now. You'll need to answer the same set of questions about your company's e-mail, as well as all the information stored on computers and networks.
According to experts in records management, businesses, associations and not-for-profits should permanently keep the following documents:
- Audit reports
- Board minutes
- Cancelled checks for special contracts, important payments, asset purchases and payment of taxes—keep each check with the appropriate documentation to explain the purchase
- Capital stock and bond records
- Cash books
- Charts of accounts
- Computer backups
- Constitution and bylaws
- Contracts and leases (those that are still in effect)
- Correspondence concerning legal and other important matters
- Deeds, bills of sale and mortgages
- Depreciation schedules
- Insurance records
- Minutes for directors', stockholders' and charter meetings
- Payroll records
- Property records, including blueprints and plans
- Retirement information, including IRA and Keogh contributions
- Stock and bond certificates—even the cancelled ones
- Tax returns
- Trademark, copyright and patent registration
- Year-end financial statements
- Year-end trial balances
Keep 5–10 Years
- Accident reports or claims in settled cases
- Accounts payable ledgers and schedules
- Accounts receivable journals and schedules
- Allowances and reimbursements to vendors, employees and company officers for travel and entertainment expenses
- Cancelled checks that were NOT for important purchases, legal matters or taxes
- Client billings
- Expired contracts
- Expired leases
- Inventory records
- Invoices to customers
- Invoices from vendors
- Ledgers from subsidiaries
- Sales records
- Timecards and daily reports
- Vendor invoices
- Voucher register and schedules
Keep 1–5 Years
- Bank statements
- Company publications
- Employee personnel records (after termination of employee)
- Employment applications for people not hired
- Fundraising information and reports
- General correspondence with customers and vendors
- Grant applications
- Internal audit reports
- Monthly financial reports
- Newsletters and other collateral materials
- Petty cash vouchers
- Policies and procedures
- Purchase orders
- Receiving sheets
- Safety records
The length of time that you need to keep records depends to a great extent on your industry and the type of company or not-for-profit you run. For expert guidance about your particular industry, check with the Web site of the Association of Records Managers and Administrators (ARMA).
One final tip about records: electronic files now keep track of more business information in a smaller space. Even ephemeral means of communication such as e-mail can be kept for decades.
For that reason alone, never type anything into an e-mail that you wouldn't feel comfortable reading into evidence at a trial. Especially when dealing with bosses, supervisors, co-workers and employees, keep any clever, cutting or off-color remarks out of letters, memos and e-mails—even the interoffice variety.
And when in doubt about tossing a particular record, check with your attorney or accountant just to be safe.
Article provided by Socrates. Socrates is the leading source of do-it-yourself books, kits, forms and software that help small business and real estate property owners take care of legal and related matters themselves. Each Socrates solution is relevant, compliant, comprehensive and a lower cost alternative to traditional legal and professional services.
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