Implementing a records_retention_program_st
- 1. April 2012 Implementing a Records Retention Program © 2011 Tax Professionals Resource, a division of Lorman Business Center. All Rights Reserved.
- 2. Implementing a Records Retention Program R ecord retention is an important issue for businesses of all sizes. Paperwork, both virtual and physical, is a daily part of operations Inventory and Audit What Records Need to be Retained and is generated at a breakneck pace. There is The first step is determining exactly what only so much space to be had in a business, so paperwork is generated on a daily, monthly and clearing out the unnecessary data keeps room annual basis. An inventory of each department available in both the filing cabinets and hard brings into focus the kind of information that it drives. Electronic storage space is as precious as produces. Knowing how much volume and what physical, despite the fact that hard drives keep type of records are created simplifies the next getting larger. Constantly buying new hard process of the program, which is auditing all of drives is an unnecessary expense, so clear out the information. those old files. There are some records that need to be kept Keep in mind that some of the records need to be permanently, others for a certain amount of time, retained for various reasons and purposes, some and the rest can be destroyed as space is needed. can be destroyed after a certain amount of time This is true for both electronic and paper and others can be destroyed. The key to creating records. Certain records contain important legal and implementing a record retention program is documentation such as the incorporation records. knowing what needs to stay, what needs to go Other records have historical data that is core to and when. Once that is determined, it is a matter the operation, and so on. These documents are of clearly communicating to personnel what they the heart of the business so put them aside in a need to be doing with the records they generate. secure location, far away from the rest of the records. Appoint an Individual to Oversee the Project In the case of a small business, this may be the owner or a secretary. The smaller business is going to have a simpler time of organizing and implementing, but it still has to be done in a consistent manner. The goal is to eliminate piles of paper lying around without throwing out documents that are essential for operations. A larger operation needs to select an individual for the job and give them formal support. That person needs to have the autonomy to do their job without having to worry about someone else looking over their shoulder during the process. He also needs to be able to have reasonable freedom when it comes to implementing the record retention program as all departments need to be coordinated on when to clear out or keep documents. page 1
- 3. Implementing a Records Retention Program The rest of the documents need to be weighted in to do with money handling is considered a terms of their importance. Take the following financial record. principles into consideration when auditing records: - Personnel information. Anything that has to do with employees personal information, benefits, - Do the records have information for legal attendance and more fall into this category. purposes, such as reporting to the federal, state and local authorities? - Insurance documents. Paperwork relating to insurance policies such as accidents, fire - Does the paperwork have any further value inspections, claims and more go into insurance. after its original purpose is exhausted? The information may come in handy in the case of an Create and define categories for all other records audit, whether it is an internal one or by the IRS. that are important to the organization. Make sure the definitions are clear so as to eliminate - Are there any consequences that would arise confusion as to where records go. from not having the document available? Again, consider if it has information that would be valuable in an adverse situation such as an audit Creating a Schedule for Retention and or lawsuit. Destruction of Records As mentioned before, some records are kept - Is the information a copy? If the data is a copy permanently, others need to be kept for a period of an existing file, there is no loss if it is of time and the rest can be destroyed at will. A destroyed. There are central files available to schedule made of timetables is the best method make a fresh copy on demand. to provide direction to employees. For example: Create a table with the type of record at the top, Categorizing Records for the Program then two columns underneath. In the left column, enter the specific record type. In the right All of the information produced by the business column, enter the amount of time that the record falls into a category of some sort. Some has to be retained for. Someone who is looking categories have laws regarding how long the at cancelled checks can then cross-reference the paperwork has to be retained for, so check with sheet to see how long they have to be kept for. local and federal laws to ensure that the retention The suggested period of time is four years, so if policies are in compliance. the checks are older than four years, they can go Some of the more common types of record into the document shredding bin. Having a categories are: schedule saves time and money for all involved. - Business paperwork. This includes articles of incorporation, corporate bylaws, records of The suggested period of time is four years, so if stocks and bonds, all contracts, legal paperwork the checks are older than four years, they can go and board meeting minutes. into the document shredding bin. Having a schedule saves time and money for all involved. - Financial records. Financial paperwork has a much broader definition as in anything that has page 2
- 4. Implementing a Records Retention Program Record Storage, Retrieval and Destruction Thieves gladly go through dumpsters to find sensitive information. It is also not unknown for As records age, they tend to not be needed thieves to piece together shredded documents on immediately for reference. The person in charge the hunt for information to steal. Always make of record retention generally has two choices for sure that sensitive information is disposed of storage and retrieval. One is to scan all properly, whether it be a service that burns documents into PDF files, which creates the shredded documents or an on-site shredder that need for electronic storage in the form of servers turns paper into fine pieces. and hard drives. The other is to hire storage companies that take the records off-site and Disseminating the Records Retention stores the material in secure, climate-controlled Program environments. After senior management is aware and informed, it is time to disseminate everything to the employee base. The most efficient way to get this done is to publish a manual that outlines the policies and procedures for record retention. Employees then refer to the manual whenever they have a question about what they should do with records whether they are tasked with clearing out a file cabinet or deleting files from hard drives. If there is any confusion, the employee can then go to the department head or records manager to clarify the disposition of the document. The issue that arises from either form of retention is accessibility. An individual who Regular Review of Record Retention Policies needs to retrieve a record has to be able to easily find what they seek. For electronic storage, a Set a schedule to review the policies at regular database of everything that is on the hard drives intervals. The length of time for intervals is up to is necessary. A similar database is needed for the person in charge, but checking in frequently physical storage so the individual can go to the after implementing the program is beneficial. storage, find the right box and pull the records People who are having issues are corrected in the without spending more time than is necessary. early stages. Problems with the overall program Create an authorization form for the destruction are easily fixed at this point as well. Once of records before anything is destroyed. It keeps everyone involved is comfortable with the person in charge of record retention informed procedures, reviews can become more of what is being disposed of, and also catches infrequent. errors before the records are gone forever. There is a right and a wrong way to dispose of records. The wrong way is to throw all of the paper into the trash without a second thought. page 3
- 5. Implementing a Records Retention Program Want to learn more about records retention? Check out our OnDemand Webinar: “Records Retention and Information Management: Balancing the Need for Policy Compliance and Employee Productivity” 89 Minute OnDemand Webinar Learn More page 5
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