Do I Need a Corporate Retention Records Policy?

In business and the corporate world, bookkeeping, among other items, is essential. Hence, it is commonplace to see storage, cabinets, and computers keeping information such as tax information, payroll, bank Statements, sensitive personnel records, and other confidential information. 

However, there may be some outdated documents your company no longer needs. They may take up too much space and be too expensive to keep as you add newer documents to storage. 

What your company needs is a corporate retention records policy. It is a system that manages the complete lifecycle of your company files – from their creation, use, effectiveness, and deletion. With a comprehensive corporate retention records policy management, your company can ensure compliance with regulatory requirements, boost efficiency, and mitigate risk simultaneously. 

This article explores everything you need to know about business records, their types, document retention guidelines for businesses, and implementing records retention programs. It also answers the age-long question: how long do we have to keep business records? Let’s dive right in:

What are Business Records?

Business records are documents – either in hard copies or digital formats – that are tied to the day-to-day operations or are related to the business. 

These records can either be tangible – you can touch, feel, and keep them in a physical location. Or they could be electronic data stored in computers, hard drives, flash drives, memory cards, or the cloud. 

It is essential to maintain the retention of business records. But why should you do so?

Firstly, it allows you to track the progress of the business. Reviewing your business charts, reports, and other information can allow you to monitor your business’s performance and identify improvement areas. 

Furthermore, these records can allow you to prepare an accurate financial statement. You can draft an income statement from your reports – a document that shows the income and expenses of your business. It can also help you create a balance sheet that reveals the assets, liabilities, and business equity in a given time. 

Additionally, keeping your business records can allow you to identify sources of your income and keep track of your deductible expenses when you prepare your tax returns.

What’s more? Proper retention of business records can help you manage your vendor and employee payments and profit distribution to your stakeholders and investors. 

The bottom line is that maintaining business records promotes a seamless business operation.

Types of Business Records

There are different types of business records that should be maintained for different periods. Below are some of the most common types of business records and recommended records retention periods.

• Financial statements. Financial documents, including balance sheets, income, and cash flow statements, are essential records that should be kept either physically or digitally. They allow you to track your business progress and maintain tax returns. These documents should be stored permanently. 
• Legal documents. These documents, such as leases, licenses, and contracts, remain valid. Depending on your  company’s corporate retention records policy, it may be necessary to keep them indefinitely.  
• Corporate records. These documents include company bylaws, meeting minutes, and articles of incorporation. These documents are essential and make up the company’s direct framework. Thus, it may be necessary to keep them permanently. 
• Employment records. They include payroll records, personnel files, employee benefits, and HR information. These pieces of information are essential as long as they stay valid. Depending on state laws and regulations, it may be necessary to keep them for at least 7 years after an employee has left the company. 
• Bank records. This includes bank statements and canceled checks. While these records are essential, it may be necessary to keep them for at most 7 years.
• Property records. This includes real estate purchases, titles, mortgages, and deeds. These documents hold sensitive information that may require to be kept permanently.

It is essential to note that there are general guidelines that promote these records retention periods. So, if you’re wondering how long to keep records for business, understand that the period is often determined by state and federal legal requirements as well as business needs.

Document Retention Guidelines for Business

You need to develop business document retention guidelines to implement concise retention periods for your business records. You can deploy the following best practices to promote a corporate retention records policy.

• Identify applicable laws and regulations. It is essential to research, identify, and understand the regulatory requirement that applies to your business. This may include state and federal laws, contractual obligations, and industry regulations. 
• Establish retention requirements. Based on the legal requirements that apply to your business, identify how long you want to store certain types of business records. While some regulations may specify minimum retention periods, others may specify maximum retention periods.
• Consider operational needs. Beyond legal requirements and industry regulations, you need to consider your organizational needs when ascertaining retention periods. This may include the volume of records, the purpose of the records, and the costs associated with storing them. 
• Determine storage methods. You also need to determine the appropriate storage method for your business records. While some documents may be kept in secure physical locations, other need to be uploaded and saved electronically. 
• Determine destruction methods. You should also ascertain the data destruction method to safely discard and protect sensitive information. Some of the destruction methods include data shredding and data degaussing. 
• Deploy a retention schedule. Once the retention guidelines have been created, you must implement a schedule highlighting which business records should be retained permanently and which ones should be destroyed after a retention period. This schedule will create an orderly manner in which documents are maintained and destroyed. 
• Train employees. Ensure that employees across all departments know the business document retention guidelines and their responsibilities in managing, storing, and destroying business records. You can provide training to ensure that everyone is on board. 
• Review and update guidelines regularly. You should review and update your retention periods with changes in regulatory, legal, and operational needs.

These steps can help CIOs and CISOs develop retention guidelines suitable for industry and regulatory requirements. It will also help ensure that all business records are appropriately retained while minimizing storage costs.

How Long Do We Have to Keep Business Records?

When developing document retention guidelines for business, it’s essential to know how long various types of business records need to be kept. Here are some standard retention periods for these common business records:

1. Financial records. Tax returns, payroll records, bank statements, and expense records may need to be kept for at least 7 years to comply with IRS guidelines.
2. Employment records. Documents such as resumes, cover letters, I-9 forms, and termination records may need to be kept for at least 7 years in line with the Equal Employment Opportunity Commission (EEOC).
3. Legal documents. It may be necessary to keep contracts, deeds, patents, and copyrights permanently as they are essential company documents. 
4. Customer records. Invoices, receipts, and credit memos may need to be kept for at least 7 years in compliance with IRS guidelines.
5. Insurance policies. Insurance claims and policies may need to be kept at least 5 years after the validity has ended. 
6. Environmental records. Permits, audits, and inspections may need to be kept for at least 5 years, according to the Environmental Protection Agency (EPA).

Implementing Records Retention Programs

Implementing an effective records retention program is essential for organizations to comply with legal requirements while minimizing storage costs. 

Here are some tips for implementing an effective records retention program and ensuring compliance with legal requirements:

1. Develop a corporate retention records policy. Establish a corporate retention records policy that outlines how long different types of records need to be retained, who is responsible for retention and destruction, and how records should be stored.
2. Implement a document management system. Implement a document management system that tracks the retention and destruction of records. This system should include procedures for identifying which records should be retained, how long they should be kept, and when they should be destroyed. Note: It’s important that whichever system is used, that it is secured to avoid data breach.
3. Conduct regular audits. Conduct regular audits of the records retention program to ensure it is followed properly. This can include reviewing retention schedules, verifying the accuracy of the information in the document management system, and ensuring that records are being disposed of promptly and appropriately.
4. Minimize storage costs. Minimize storage costs by implementing electronic document storage and encouraging the use of digital documents. This can reduce the need for physical storage space and make it easier to manage and search for records.

A comprehensive corporate retention records policy is essential for businesses of all sizes. It ensures compliance with legal requirements and helps minimize storage costs, improve record keeping, and reduce legal liabilities. 

Following the tips mentioned above will help organizations to develop adequate records retention programs tailored to their needs.

If you need help developing or implementing a corporate retention records policy, contact us. Our team of experts can provide efficient ways to destroy and decommission your old and outdated business records, helping your business to minimize storage costs and improve your overall record keeping. Contact us today to learn more about how we can help your business.