It’s likely you’ve been asked by your banker, insurance adjuster, attorney and/or auditor for a document that you either didn’t keep or did keep, but can’t find. Whether and how long to hold on to records is a question we hear frequently. A chart highlighting some of the most common records and recommended retention periods is at the end of this article. First, let’s go over some ways to keep your records organized and available.
Tip #1: Systematize Your Records. An organized filing method ensures that you and your staff can find documents quickly and easily. Choose the most appropriate filing method on the basis of how you use those documents. For example, file requisitions consecutively by number or month, journal entries by month, and timesheets chronologically by pay period.
Tip #2: Document Record Use. Save yourself aggravation and lost productivity; provide a sign-out log or cards for staff to complete when they remove a document. The log or cards should indicate the date the staff person removed the record and the staff person’s name who removed it. This effectively assigns responsibility for a record to the person removing it from the files and also lets other staff who may need the same document know where it is, or at least who had it last.
Tip #3: Back Up Your Computer Files. Although computers empower you with a large and versatile means of information storage, they also are vulnerable to a wide variety of technical errors that could erase or corrupt your business documents. Save documents regularly, and keep “soft copies” of vital information on computer diskettes in a secure storage area to prevent them from being lost. If your company uses a network, install a backup network to preserve network data and act as a secondary network if the first one fails. Also, backup all of your data and file it in a lockbox at a bank, in the event of fire or other disasters at your office location.
Tip #4: Establish a Record Retention Policy. Establish a policy that sets out which records need to be retained permanently and which need only be kept for a given period before being destroyed. See the Record Retention Schedule below for timeframes.
- A/P and A/R 7 years
- Audit reports Permanent
- Bills of Lading 5 years
- Charts of accounts Permanent
- Fidelity and surety bonds 3 years
- Sales & tax returns 10 years
- Tax returns Permanent
- Payroll tax returns 7 years
- Expense records 7 years
- Bank statements and reconciliations 7 years
- Cancelled checks* 7 years
*Permanent for real estate purchases, tax payments, special contracts
- Donation record of endowment funds and significant restricted funds: Permanent
- Duplicate deposit slips 10 years
- Employee personnel records (after termination) 7 years
- Employment applications 3 years
- Articles of incorporation Permanent
- Board minutes Permanent
- Bylaws Permanent
- Business licenses Permanent
- Contracts – major Permanent
- Contracts – minor Life of contract plus 7 years
- Insurance policies Life of policy plus three years*
- Labor contracts Permanent
*(check with insurance agent)
- Accident reports 7 years
- Worker Compensation Reports 10 years
- Payroll records 7 years
- Employee files (ex-employees) 7 years (or statute of limitations for employee lawsuits)
- Employment applications 3 years
Real Property Records:
- Construction records Permanent
- Deeds/Titles Permanent
- Equipment Leases 5 years
- Leases payment records Life of lease plus 4 years
- Real estate purchases Permanent
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