Why are record retention policies important?
For starters, “records” can be paper files, electronic documents, correspondence of any sort and data used in business applications and databases. Record retention policies are necessary for businesses for the sake of effectuating efficiency, ensuring compliance, minimizing legal risk and centralizing data. Moreover, clients and customers demand that particularly sensitive documents they provide to their professionals will be safeguarded appropriately and timely destroyed/returned. A sound record retention policy will ensure that occurs.
What are the consequences of poor record retention policies?
If records aren’t properly tracked, companies can run into obstacles with filing taxes and managing budgets. Sloppy record keeping will lead to problems if faced with legal action or an audit. These factors alone (apart from the exposure from litigation) justify that a business maintain a clear document retention policy and certainly in regards to electronically stored materials.
What principles should be considered in formulating a record retention policy?
The length of time for keeping records varies greatly depending on the record type. But generally, consider these guiding principles:
- Identify what types of documents your company has to address under its own unique policy;
- Implement a retention schedule spelled out in writing and is disseminated to all employees;
- Assign responsibilities regarding who will implement and even modify the policy or conduct self-audits;
- Identify any controlling regulations governing the profession/field and consult with counsel regarding same or any other professional depending on the issue (for example, tax or financial advisors) ;
- Understand the term “litigation hold” and how one will be implemented;
- Maintain cyber and E&O insurance
Read more guidelines about keeping records and why it is important at the Internal Revenue page https://www.irs.gov/businesses/small-businesses-self-employed/why-should-i-keep-records