Record retention: Is it time for a little office clean up?

Filed under: Contributed Columns |

Spring has already passed, so you might have lost the urge to do any sort of “spring cleaning.” Or maybe you’re in the mood to get files and paperwork organized and purged, but aren’t sure about what you can get rid of.
Like most businesses, yours is probably no exception to a continuous paper build up. What are you to do with all of that paper, and how long are you expected to hold onto it?
To get things organized, it might be best to start by creating a file retention policy. You should decide how to handle both paper and electronic documents and files. These records can include everything from bills that have been paid to employment files and e-mail. Keep in mind that your company should properly dispose of any confidential documents by utilizing a document shredding company.
Depending on your company, there may be industry and/or legal standards or regulations to comply with. Meeting those requirements is where you should start in creating your policy. Beyond that, here are some basic principles that could be put into place.

Human resources

Good recordkeeping begins with your employees’ hiring records. The application for the job and any pertinent hiring notes need to be kept in order to document reasons for selecting or rejecting an applicant.
It’s recommended that you keep hiring records, like job applications, résumés and job postings for a minimum of one year after the position has been filled. Employment files should be kept current while the employee is working and for seven years after employment ends.
The Immigration Reform and Control Act requires employers to retain Employment Eligibility forms, like the I-9 form, for one year after termination or three years after the worker is hired, whichever time period is later. Remember that I-9 forms should always be kept separate from personnel files.

General and accounting

For your general business and accounting records, there are different time frames that certain records should be kept.
The IRS requires that taxpayers maintain records that allow a reviewer or an auditor to establish the correct income, deductions, credits or other matters affecting tax or informational returns. That said, there are no specific time frames contained in the IRS Code. Below are some general guide lines and suggestions for time periods for document retention.
Documents to keep for one year: General or routine correspondence with clients and vendors, duplicate deposit slips, receiving reports or packing slips, purchase requisitions and stockroom withdrawal forms
Documents to keep for three years: bank statements and reconciliations, expired insurance policies, internal reports and sales commission reports
Documents to keep for seven years: accident reports or claims for settled cases, accounts payable ledgers and schedules, accounts receivable ledgers and schedules, cancelled checks for regular or recurring bills, cancelled stock or bond certificates, employment tax records, expense analysis and expense distribution schedules, expired contracts and leases, inventory records, invoices to clients or from vendors, payroll records and summaries, purchase orders, sales records, subsidiary ledgers, time cards, and travel and entertainment records
Even though federal guidelines don’t require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to keep the following documents indefinitely.
Documents to keep forever: audit reports from your CPA or accountant, cancelled checks for important payments (tax payments, large asset purchases), cash books, charts of accounts, unexpired contracts/leases/deeds, corporate documents, minutes books of directors and stockholders, documents substantiating fixed asset additions, depreciation schedules, financial statements (year end), general ledgers and year-end trial balances, journal entries, insurance records, current accident reports, claims and policies, investment trade confirmations, IRS revenue agents’ reports, legal records, mortgages, bills of sale, property appraisals by outside appraisers, property acquisition and improvement records, retirement and pension records, tax returns, and trademark and patent registrations
Many companies have become or are working toward becoming paperless. It is just as important to organize and regularly purge electronic documents as it is for paper documents. Being organized and following a consistent record retention policy could “save” your business in efficiencies and sometimes financially costly circumstances. Record management can be strenuous, but staying on top of your records is important for the future of your business.
If you have specific questions in regard to the financial documents or retention policies of these documents, contact your financial, legal or human resources adviser.
Tammy Apaydin is the chief operating officer at BiggsKofford and can be reached at tapaydin@biggskofford.com or 579-9090.