The Importance of Business Records Retention
Owning a business or a company is not an easy job. A business is established well, when the policies of operations and administration department are efficient. Whether you possess an industry or a business or you have your own non-profit organization, there are many categories of business records and documents that you are legally compelled to retain, which may include equipment leases, invoices, bank statements, real estate, tax returns and W-2 forms.
Record retention polices are not only the law in itself but it is smart business too. It is very important to retain your records on right time and for the right length of time, and if you are not doing this, then it can create a serious problem for you and your business. For example, you may find yourself powerless to elucidate an invoice or a billing issue with a client or a vendor. You might come across some tax annoyance. Also if there's some sort of issues with insurance, then you may find yourself incapable to state or prove that your operations and business has undergone a financial loss of some kind. The list of problems arising due to lack of retention of the records is endless. Hence every company should have a good retention policy and guidelines to follow.
The retention guidelines for documents and records have a time limit as per the records and as per the industry. For example:
• Documents of tax returns – such as, tax, gifts, real estate money should be retained permanently
• Bank Statements shall be for max 7 years
• Sales invoices and sales slip shall be retained for 7 years
• Corporate contracts ideally should be retained for 20 years post termination
• Petty cash and expense reports should be generally kept for 3 or 5 years respectively
Please note that these terms and time deadlines for retention of records are conditional, as per the type of the business and industry. Above examples are partial for accurate understanding and for creation of a sound retention of the records, one shall then contact the accounting firm. A frequent blunder is presumptuous that an individual or a team inside your company is retaining some definite records, but in fact, they're not actually doing this. This difficulty turns out to be more rampant in big industries that are having manifold sister concern business or small units and/or locations.
Another issue or common fault is thinking that third parties, such as distributors or vendors, are retaining records but even this is also not true. Lastly the third one is that we might keep all the records at one location that is vulnerable to many kind of loss, such as fire damage, theft or water damage. Merely putting all the significant business records in just one file cabinet or digital server in the focal office is not at all a good idea. There must be duplicate copies of all the records and documents. Additionally it is also important to keep these records in a protected location, such as a professional locker or any document storage company.
For more details on record retention policies in depth you can also visit Irch.com.
About The Author
Sarah Jones is an expert on business data management and records maintenance who also likes to write many interesting articles and blogs, helping enterprises in coming up with the best business record retention schedule and document preservation guidelines. She recommends Irch.com as the best source of information on the subject.