Accountants and business consultants are frequently asked by business owners how long they should keep business records. There is no cut and dry answer for this, as there are countless factors that play into answering this question. Another important decision to consider is how records should be saved. It is important that businesses establish a records retention policy to provide information that can support decision-making by management. A policy is also generally required according to legal retention requirement guidelines.
Records include paper files, electronic documents, correspondences (letters, faxes, and emails), and data used in business applications and databases. A record retention schedule creates a uniform schedule used company-wide, and clearly defines how long specific documents should be retained and how they should be destroyed after the specified period has passed.
The type of record will greatly impact the length of time that it needs to be kept. A record retention schedule can prove to be very beneficial, as the policies that are outlined will help mitigate risks associated with failure to retain documents for the required length of time. There are seemingly endless federal, state, and local regulations and laws that all dictate how long documents need to be retained. Organizations that accept funding from governmental or non-profit sources can potentially be subject to additional record retention requirements.
A record retention schedule not only provides direction for retaining documents but can also serve as a guide for when specific documents can be destroyed due to physical or electronic space constraints. There are expenses for storing records, along with the risk of losing documents as the result of a natural disaster. With a good retention policy in place, the legal risks, discovery cost, and recovery effort can be minimized.
Keeping documents longer than needed can pose a risk to your organization. Therefore, it is critical to destroy documents in accordance with a reasonable record retention schedule. Be careful not to destroy any documents or information that is requested or summoned by a court order. Additionally, be sure to keep documents for the required length of time and don’t destroy them prematurely.
Implementing a records retention policy is important for every business to use and follow. A retention policy can protect your business from legal risks, and make it easy to find documents as needed.