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Implementing a records_retention_program_st
Implementing a records_retention_program_st
Implementing a records_retention_program_st
Implementing a records_retention_program_st
Implementing a records_retention_program_st
Implementing a records_retention_program_st
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Implementing a records_retention_program_st


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  • 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 ProgramR ecord retention is an important issue for businesses of all sizes. Paperwork, bothvirtual and physical, is a daily part of operations Inventory and Audit What Records Need to be Retainedand is generated at a breakneck pace. There is The first step is determining exactly whatonly so much space to be had in a business, so paperwork is generated on a daily, monthly andclearing out the unnecessary data keeps room annual basis. An inventory of each departmentavailable in both the filing cabinets and hard brings into focus the kind of information that itdrives. Electronic storage space is as precious as produces. Knowing how much volume and whatphysical, despite the fact that hard drives keep type of records are created simplifies the nextgetting larger. Constantly buying new hard process of the program, which is auditing all ofdrives is an unnecessary expense, so clear out the information.those old files. There are some records that need to be keptKeep 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 paperand others can be destroyed. The key to creating records. Certain records contain important legaland 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 toand when. Once that is determined, it is a matter the operation, and so on. These documents areof clearly communicating to personnel what they the heart of the business so put them aside in aneed to be doing with the records they generate. secure location, far away from the rest of the records.Appoint an Individual to Oversee the ProjectIn the case of a small business, this may be theowner or a secretary. The smaller business isgoing to have a simpler time of organizing andimplementing, but it still has to be done in aconsistent manner. The goal is to eliminate pilesof paper lying around without throwing outdocuments that are essential for operations.A larger operation needs to select an individualfor the job and give them formal support. Thatperson needs to have the autonomy to do theirjob without having to worry about someone elselooking over their shoulder during the process.He also needs to be able to have reasonablefreedom when it comes to implementing therecord retention program as all departments needto be coordinated on when to clear out or keepdocuments. page 1
  • 3. Implementing a Records Retention ProgramThe rest of the documents need to be weighted in to do with money handling is considered aterms of their importance. Take the following financial record.principles into consideration when auditingrecords: - 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, stateand 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? Theinformation may come in handy in the case of an Create and define categories for all other recordsaudit, 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 bevaluable in an adverse situation such as an audit Creating a Schedule for Retention andor 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 periodof an existing file, there is no loss if it is of time and the rest can be destroyed at will. Adestroyed. There are central files available to schedule made of timetables is the best methodmake 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 rightAll of the information produced by the business column, enter the amount of time that the recordfalls into a category of some sort. Some has to be retained for. Someone who is lookingcategories have laws regarding how long the at cancelled checks can then cross-reference thepaperwork 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 ifpolicies are in compliance. the checks are older than four years, they can goSome of the more common types of record into the document shredding bin. Having acategories are: schedule saves time and money for all involved.- Business paperwork. This includes articles ofincorporation, corporate bylaws, records of The suggested period of time is four years, so ifstocks and bonds, all contracts, legal paperwork the checks are older than four years, they can goand board meeting minutes. into the document shredding bin. Having a schedule saves time and money for all involved.- Financial records. Financial paperwork has amuch broader definition as in anything that has page 2
  • 4. Implementing a Records Retention ProgramRecord Storage, Retrieval and Destruction Thieves gladly go through dumpsters to find sensitive information. It is also not unknown forAs records age, they tend to not be needed thieves to piece together shredded documents onimmediately for reference. The person in charge the hunt for information to steal. Always makeof record retention generally has two choices for sure that sensitive information is disposed ofstorage and retrieval. One is to scan all properly, whether it be a service that burnsdocuments into PDF files, which creates the shredded documents or an on-site shredder thatneed for electronic storage in the form of servers turns paper into fine pieces.and hard drives. The other is to hire storagecompanies that take the records off-site and Disseminating the Records Retentionstores the material in secure, climate-controlled Programenvironments. 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 ofretention is accessibility. An individual who Regular Review of Record Retention Policiesneeds to retrieve a record has to be able to easilyfind what they seek. For electronic storage, a Set a schedule to review the policies at regulardatabase of everything that is on the hard drives intervals. The length of time for intervals is up tois necessary. A similar database is needed for the person in charge, but checking in frequentlyphysical storage so the individual can go to the after implementing the program is, find the right box and pull the records People who are having issues are corrected in thewithout spending more time than is necessary. early stages. Problems with the overall programCreate an authorization form for the destruction are easily fixed at this point as well. Onceof records before anything is destroyed. It keeps everyone involved is comfortable withthe person in charge of record retention informed procedures, reviews can become moreof 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 ofrecords. The wrong way is to throw all of thepaper 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
  • 6. Implementing a Records Retention ProgramDid you enjoy this white paper? It is our goal to provide you with great content on timely,relevant tax topics. Download more white papers and stay compliant in the ever changing taxindustry.Tax Professionals Resource is dedicated to the enhancement of the tax profession. We arecommitted to keeping our members up-to-date and informed about the latest news, law updatesand best practices in the tax field. Join now for instant access to members-only resources andfree training to help you stay current and ensure your professional success.Lorman is not the author of or responsible for the content of the materials provided herein. Lorman publishes these materialswithout warranty and expressly disclaims any representation as to the accuracy or appropriateness of any statements or advice thatmay be contained herein. If you have questions regarding the contents of these materials, please contact the author or a qualifiedprofessional in the field." page 5