Enjoy this guest post from Doug Palmer, Founder of Palmer Financial.
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It’s that time again for “spring cleaning” of company financial records. For company pack rats, this can sometimes be major challenge. What to keep? What to store off site? What to destroy? Inevitably, most people will just throw their hand up in the air and decide to keep everything just one more year. Here are a few tips:
>> Create a Retention Policy and Stick to It: Designate one person to have the responsibility to determine retention periods to approve record destruction and the destruction method and to set record retention policies and procedures. Then, stick to the designated plan.
>> Make Sure Archived Records are Retrievable: Records are to be maintained in a safe and retrievable place for the duration of the retention period/policy created above. Where possible, all records should to be scanned and a PDF copy kept as the supporting documentation. Go paperless as soon as possible!
>> Soft Copy Records Should Be Useable: The physical ability to process/use retained records must also be maintained. If new computer systems are placed in service, any preexisting records should be converted to a format that is compatible with the new system.
>> Test Your Backup: Magnetic media should be tested on a sample basis at least once a year to determine whether information has been lost. Backups of magnetic records should be kept at a separate location from the primary records.
>> Clearly Marked Destruction Date: The destruction date shall be clearly marked in all records that are maintained at an outside storage facility. All file boxes should contain complete lists of their contents. Please note that a copy of all file box listings should be maintained by the Company. It is important to file records with similar destruction dates in the same file boxes. Here is a suggestion:
| Description of Record | Retention Period |
| Payroll Reports/Journals from Payroll Company | Retain indefinitely |
| Copies of returns files (forms 940/941) | 10 years |
| Forms W2s | Retain indefinitely |
| Forms W4s | As long as in effect. Four years thereafter |
| Human resource Files | As long as in effect. Four years thereafter |
| Annual Audit Reports | 6 years |
| Hard Copy Expense Reports | 7 years |
| Vendor Contracts | Life + 2 years |
| Leases | Life + 7 years |
| Vendor Invoices | 7 years |
| Compliance certificates | 5 years |
| Availability certificates | 5 years |
| Customer Invoices | 10 years |
| Customer Contracts | 5 years |
| Voided Checks | Destroyed after audit |
| Cancelled Checks | 10 years |
Doug Palmer is the CEO and Founder of Palmer Financial, LLC, an accounting and finance outsourcing firm, with strong experience in finance operations, financial reporting and analysis, budgeting, strategic planning, and accounting system implementation.
Whew! That was helpful to me. What do you use for back ups? I use Mozy backup serviceand have been totally thrilled with it. It’s very inexpensive and super simple to use.
About Denise O'Berry
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