Frequently small businesses ask me as a professional bookkeeper varying questions about document retention. I am not going to tell you which documents you should retain. This information needs to come from your CPA, attorney and/or your corporate headquarters. I want to write about document retention because ultimately, you may be responsible for archived documents. There are certain documents that you will be required to keep on file and available if needed by auditors. Not only must you have them, BUT you must be able to retrieve them – which box and which folder. If you can’t find it, then you don’t have it!
Learn which documents you must retain and for how long. Find out if electronic copies are acceptable or if you must keep hard copies. I will write about my best filing system another time, but a few tricks concerning retained documents:
- Use colored dots to mark the corner of files you will need to archive at the end of your fiscal year. Then all you will need to do is pull those files and place them into an archive box for storage.
- If you have a single document and not a year’s worth of similar documents, it is okay to create a folder for one document, label it and then color tag it. This makes it easier to retrieve this document if it is needed. I always give critical documents their own folders. [HINT: I will make an electronic copy of an archived document if it is something I may need to refer to from time to time.]
- Part of my filing system is to keep an electronic catalog of all my files. Not only does it make it easier to find a document or folder (I’ll write more about this another time), it makes it very easy to create content lists of archived boxes.
- Number your boxes and label them with the general contents and dates.
- Your boxes need to be stored someplace where they will be safe. If your basement floods easily or is subject to dampness, don’t put them there. If your attic has insects, don’t store them there. If you have a lot of boxes don’t stack them beyond their maximum load; the boxes can become damaged and will collapse. You might consider checking into commercial storage companies. They will pick up your boxes and will deliver boxes back to you if you need to retrieve a document (see the value of having a good list?). These companies can be expensive, but may be worth the cost if you have neither the space nor a good, safe location to store them.
- If electronic copies of your documents are allowed, typically certain guidelines must be followed. Some of the requirements will include minimal redundancy of your electronic files, where the electronic data is stored, legibility, etc. You must obtain a copy of those guidelines and adhere to them.
Retention is a very important topic and should be part of your company’s Policies and Procedures. Documents that must be retained should be known to anyone in your company who works with them. I recommend also that document management be assigned to someone who will take responsibility. That person might be you, because ultimately the liability is yours.
Sue McLaughlin is the founder and principal of McLaughlin Bookkeeping Services, LLC and MBS Bookkeeping Seminars. Her mission is to offer small-business clients a fair price for bookkeeping services while delivering excellent customer service.