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Keeping Business Records Organized

Small Business Advice

Keeping Business Records Organized

Deciding what business records to keep and which business records to toss is not a straightforward decision. But our small business advice will give you some good guidelines for proper business recordkeeping.

As this year winds down, it's natural to look forward to the new year and begin planning for the future.

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.

Keep Permanently

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
Budgets
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

Industry-Specific Guidance

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).

Parting Words

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.