How Long Should You Keep Business Records?

How Long Should You Keep Business Records?

What are business records?

Business records are any and all physical or digital documents that record a business transaction, condition or event. Common business records include invoices, legal contracts, minutes of meetings, employee records, tax & insurance documents and more.

Why do you need to store business records?

Business records are necessary for internal reviews, audits & compliance procedures. These procedures can take several years, and that is why it is necessary to store business records, in a way that makes it easy to retrieve them when required. 

How long should you keep business records?

There are various kinds of business records like employee records, tax records & more. As per different rules & regulations in different parts of the world, businesses need to store these records for varying amounts of time. For example, businesses operating from the UK are required to store their insurance records for 6 years regardless of the claim amount.  Whereas businesses situated in India are required to store their insurance records for 5, 7 or 12 years depending on the claim amount. 

 Is Your Organization Ready for Document Management? 

Here is a breakdown of the various kinds of business records & how long you need to keep them.

*Note* The following details are based on taxation & audit regulations in the US. Check the regulations in your country of business for more details.

How long to keep contracts, licenses & mortgage records?

Business contracts are legally binding agreements or contracts formed between two or more parties, for conducting business together. Companies are required to have auditable contract records for up to 6 years from the expiry of the contract.
Similarly, licenses are the various industry-specific & government documents required to start or run a business. They can include fire & safety licenses, shop & establishment licenses, food safety licenses, tax registrations, etc. Companies are required to store all license records for 6 years from the date of procurement.
Mortgage records include loan documents, rent agreements, tuition records, payment slips & more. Mortgage records also need to be stored for a minimum of 6 years from the termination of the mortgage or payment period.

How long to keep correspondence records?

Business correspondence refers to any & all communication (physical & digital) between two or more parties (internal or external), in the form of documents, messages & (in some cases) audio recordings. Business correspondence helps with conflict resolution, acts as evidence of formal communication & enables a transparent correspondence process.

Business correspondence can include letters to the supplier, customer feedback, employee WhatsApp chats, letter of application & more. It is advisable for businesses to store legally-mandated correspondence records for a minimum of 6 years from the date of commencement.
Document Management Software In USA

How long to keep financial records?

Financial records are documents that record the financial transactions related to the business. Financial records are required to be submitted during audits, and help auditors get a better understanding of the company’s financial status & calculate tax deductions.

Most financial records like deposit slips, bills of lading, cancelled checks, invoices & payroll records need to be stored for a minimum of 4 years. Financial records like debt deduction records & worthless securities however have a higher minimum holding period of 7 years from the date of commencement. There are certain financial records that need to be stored forever. These include auditor reports, annual statements & general ledgers.

How long to keep employee records?

Employee records like attendance records, medical history, performance records & personnel files need to be stored for a minimum of 7 years from the date of the employee’s departure or termination. Whereas corporate employee records like expired employee contracts, timesheets, disability benefits, dental benefits, OSHA logs & withholding tax statements need to be stored for a minimum of 6 years from the date of commencement.

How long to keep insurance records?

Active insurance policy records need to be stored for a minimum of 6 years from the date of expiry, whereas expired insurance policy records have a shorter minimum holding period of just 4 years. Claim settlement documents can be requested by auditors for up to a 10-year period from the date of settlement. Supporting documents like accident, fire & general safety reports need to be stored for a minimum of 6 years from the date of filing.

How long to keep tax records?

Most tax records need to be stored permanently, as they are required during every audit. These include pension & profit-sharing records, sales & use tax returns and federal, state & local tax return records. Payroll tax returns however can be discarded 4 years after the date of filing the returns.

Best tool for managing business records

Managing all these different types of business records can be overwhelming for businesses without a concrete document organization structure. But there is one tool that can permanently eliminate the hassles of everyday document management, and it is called document management software.
A Document management system like GLOBODOX reduces document handling time & improves overall productivity by automating repetitive document processes. Document management systems help you organize your documents into clearly defined groups or folders, based on their content. This in turn helps you find those documents much faster with features like multi-condition search, multi-language search & full-text search.
Document retention is another important facet of a document management system. By default, all document management systems store uploaded documents indefinitely. But let’s say you want the system to notify you when your documents are expiring or no longer needed for audits & compliance. Document expiry takes care of that.
Document management systems also have much better security than other documentation tools. You can archive documents to protect them from accidentally getting edited or deleted, encrypt documents for safekeeping, restrict document privileges & track document activity at every step. Document management software also provides workflow automation that allows you to replicate & automate your entire document approval process online.

Conclusion

The minimum holding period for storing business records can differ from business to business and country to country. Visit your state or federal government website for more details. If you are still unsure, it is advised to keep business records for at least 10 years.
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