Document Retention for Small Business

posted by Jeff Garrison on Friday, August 12, 2016

For both legal and practical reasons, every business should have a document retention plan.  Without a plan, several individuals will be making independent decisions about what documents are kept, where, and for how long.  This will lead to inconsistencies that can create legal liability and business management challenges.

​What to Keep

To determine if something needs to be kept, a few questions need to be answered.

  1. Is there a legal or regulatory requirement for keeping a document?
  2. Is there a use for the document beyond it's primary purpose.  For example, would a document be useful in litigation?  Or would the information be useful for future analysis and strategic planning?​

​Where to Keep

This starts with determining if original documents should be saved, should everything be converted to digital, or a combination?  For most documents, it makes little sense to keep hard copies these days.  The cost of real file space far exceeds the cost of digital file space. Filing can be inaccurate making retrieval challenging.  Security is lower. And there is the risk of physical loss. 

When it comes to digital storage, there are questions as well.  Should they be kept on a company server or in the cloud?  Should the documents be organized in a virtual "filing cabinet" or "indexed" in a document management system? 

Another "where" issue is actually about "who."  Who has access to the documents and, in a document management system, what can they do with those documents?

For How Long

For many documents such there are legal minimum retention requirements and best practices.  Examples include tax returns, business financial records, employment records, accident records, and so on.  Of course, documents need to be kept to meet those requirements.

How long to keep business contracts, customer records, and other things will have a lot to do with they type of business you are in.  Your business attorney and accountant can provide some guidance.

Keep in mind, once in place, following your retention plan is important for at least two reasons.  First, it will help you to keep costs and "records clutter" under control.  The "purge project" every few years will be unnecessary.  Second, if you don't follow your retention plan will protect you from accusations that records were arbitrarily destroyed to keep them from being discovered and it will see that those documents that you want gone by a certain date will get gone.

Conclusion​

This may seem overwhelming and thus, a good reason to put making a plan off.  To make it easier, in a future post we will list the most common types of business documents and the recommended length of retention.

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