Document Retention 101: Here’s How to Know What to Purge and When
Developing a practical document retention and destruction schedule is an important part of an organization’s overall document management strategy. More often than not, over the course of any business and during the progression of lifecycle document management, you will find yourself holding onto documents that have outlived their usefulness.
It can be a nagging professional responsibility and a potential risk management/compliance issue – so how can you determine what should stay and what should go? The “paperless office” strategy is difficult to achieve, because while “going paperless” certainly has its logical benefits, the mentality of letting go can often be intimidating and overwhelming. Luckily, there are plenty of resources as your fingertips to help you figure it out.
Record Retention Guidelines
Below are some document retention guidelines to help you create a record retention schedule. Please note that each state and industry have different record retention requirements. These are guidelines only and are not intended to represent legal advice. Please consult with your attorney or industry compliance experts before destroying paperwork.
- General correspondence: 2 years
- Bank reconciliations: 2 years
- Purchase orders: 3 years
- Safety Reports: 5 years
- Business Contracts: 6 years
- Payroll-related records: 7 years
- AP/AR Ledgers: 7 years
- Human Resource records: 7 years
- Audit reports: Permanent
- Annual financial statements, federal and state tax returns: Permanent
- Insurance records, accident reports, claims policies: Permanent
1. Check your industry and legal requirements
Each state or industry has certain record retention requirements that professionals must adhere to in order to be in compliance with the laws and regulations that govern that entity. For example, the North Carolina Bar Trust Account Guidelines state, “A lawyer shall maintain complete records of all funds, securities, or other property of a client … for a period of six (6) years following completion of the transactions generating the records.” Breaking industry retention guidelines could spell trouble should your business become involved with a legal issue or your clients request an old file that you prematurely destroyed. On the other, hand if you’re taking up valuable office and storage space with records that are past the retention period, purging them will relieve a great burden on your overhead costs and efficiency. We recommend checking with your industry association for specific best practices.
2. Evaluate the lifecycle of your business records
Perhaps your industry does not require document retention for a certain period of time. If establishing a document retention schedule is left up to personal preference, it can easily become a frustrating guessing game trying to decide what to keep. What if an old client resurfaces years later and needs a file? What if you get audited and those old receipts and financial statements are missing? For example, it’s a good rule of thumb to keep tax records for six years and every-day paperwork for 3 years. If you’re hesitant to purge important records, we recommend scanning them and storing them electronically via the cloud. Keeping records in electronic format can greatly reduce overhead costs while ensuring that all records are still organized and accessible – which leads us to our third point.
Get started by evaluating the lifecycle of your business records to determine timeframes for storage and destruction. Take the accounting department for example- each month invoices are passed through accounting and paid. These invoices may be referenced 2-3 times and passed between several coworkers for approval and payment. Then, the invoice is required to be stored for 5 years. The total lifecycle of this record is 5 years, but its active lifecycle is only 1 month – after 30 days, the record is approved for archival storage since it will most likely not need to be retrieved again until its destruction date.
By reviewing each department’s document lifecycle and processes, you can establish guidelines for document storage, scanning, and shredding.
3. Create a permanent electronic repository
For some businesses that are not interested in file purging and would instead prefer to retain all documents indefinitely, scanning your records and using an electronic content management software enables you to enjoy the convenience of having access to your records 24/7 without the additional overhead costs or disorganization associated with hard copy files. Permanently storing important legal, business, or financial paperwork can become costly for businesses. Implementing an electronic document management system allows you to securely maintain confidential documents without cumbersome documents. Those file cabinets lined up in your office can’t protect your documents forever. Document scanning is a viable long-term solution that will drastically improve the way you manage paperwork. Consider a document shredding service or paper destruction service in Charlotte, NC for records that have outlived their usefulness.
Above all, Record Storage Systems encourages responsible and secure document retention and purging. We recommend seeking advice from your state or regional industry association regarding best practices for records retention. No matter what stage you’re at in the document management lifecycle, we offer services to help you along the way. Whether you need document storage, scanning, shredding or electronic document management, we’ll help you establish a process that keeps your records safe and accessible.
More about document management strategies:
- Records Management 101: Accounts Payable Edition
- Tired of Pushing Paper? Here’s How to Decide if Going Paperless is Right for You
- Do Your Competitors Have a Better Document Management than You?
- Three Factors that Determine the Cost of a Document Scanning Project
- Four Features of a Successful Document Shredding Provider
- Your Most Common Document Management Questions Answered
- How to Create a Document Scanning Budget for Your Organization
Record Storage Systems proudly services these areas throughout North Carolina and South Carolina: Ballantyne, Boiling Springs, Concord, Charlotte, Columbia, Corneous, Hickory, High Point, Huntersville, Indian Land, Florence, Fort Mill, Gastonia, Greenville, Greensboro, Hickory, Matthews, Mint Hill, Mooresville, Rock Hill, Spartanburg, Statesville.