Establishing a Records Retention Schedule

All of us know, or should know, that we need to save and safeguard our business records. When we start up, it's easy to hang on to every document, receipt, invoice and business record. But, after a few years, we find that all these records we've been keeping are taking up more floor space in file cabinets than the work spaces for ourselves and our employees.

The good news is that we really don't have to keep all those records forever. Yes, some we do need to keep forever. Some we keep only until the IRS has had its way with us. And some we need to keep for only a few years. Determining which records need to be kept, and for how long, is a little harder. And properly disposing of temporary records is not as simple as just tossing the papers into the recycling bin.

Here is where a records retention schedule comes into play. This document lists the types of records your business produces (financial, personnel, employee handbooks, contracts, operations, meeting minutes, policy statements, online privacy statements ... the list can seem endless); identifies any legal requirements for how long the record must be kept and the requiring authority, such as the IRS or the Sarbanes-Oxley Act; notes how long the record is generally actively used in business operations; and possibly contains other information as well, such as noting that the records contain sensitive personal identifying data (or if microfilm or digitally scanned copies are acceptable legal alternatives to the paper document).

Follow the Plan

Search the Internet and you will find plenty of information about records retention schedules and samples, such as the one offered by Millennium Records Management at www.millenniumrecordsmgt.com/RecordsRetention.pdf. Remember, however, that a sample schedule is just a generalized representation of what one looks like. Your records retention schedule will be tailored to your type of business, where you are located, in what state(s) and/or countries you do business, whether you are privately owned or trade shares on the stock market, are a public institution, hold government contracts, and myriad other factors.

You will want to work with your accountant, legal counsel, and/or a professional records management company to develop and establish yours. Implement the records retention schedule officially so everyone in your company knows about it. This helps ensure that your vital records are actually kept in the first place. Later, say you have several file cabinets of accounts payable invoices. Your retention schedule says you need to keep these for six years, but experience shows you really only get into them for three years. Knowing this, you can free up your office space by transferring these records to secure off-site storage or an acceptable alternative storage medium.

Safe Disposal

Once you have records that reach the end of their retention period you can dispose of them, but you can't simply toss them into the recycling can. You need to have an established process for their disposal. Yes, you have to create more documentation to get rid of old documents.

You will want to have the people who generated the records sign off that they no longer need the records. You should note that the records have reached the end of their retention period according to your established records retention schedule, and check that their retention period has not been extended due to audits, litigation, etc.

You will want to certify when, how, and by whom, the documents were destroyed. This is easier today than hauling boxes down to a loading dock and feeding paper into a shredder next to a dumpster. Recently, mobile shredding companies have proliferated. A company will drive its big truck-mounted confetti shredders to your business, haul your boxes to the truck, let you witness their destruction and give you a certificate of destruction.

Staying Above Board

Establishing, implementing, and following a records retention schedule will go a long way to ensuring that your company keeps and maintains the vital records you need to continue in business. And, in a worst case scenario, should you be caught up in litigation or the like, it will prove your records are kept and destroyed in a regular, approved, documented process, and not in a midnight burn out behind the barn in an amateurish attempt to avoid culpability and responsibility, or to obstruct the legal process.