Should You Shred Or Save Business Financial Documents?You never know whether you’ll be audited by the IRS. The potential always exists. Some companies keep financial documents forever — just in case. In the past, hanging on to every little receipt could be burdensome for a small business, but that has changed as more move to paperless systems and automatic data backup.
Many financial records can be discarded after a few years, according to an article on the Entrepreneur.com, the online home of Entrepreneur Magazine. The article offers guidelines for saving common small business documents. For materials related to tax returns, for example, three years should be sufficient. However, documents relevant to business operations and assets, such as deeds and contracts, should be kept indefinitely.
While knowing how long you should keep financial documents is important, so is how you store them. Here are two suggestions from the Entrepreneur.com article.
- Companies with paper records need to consider scanning them because digital documents can be stored more securely and archived in the cloud. When setting up a digital archive, think about how often you’ll need to access the data. Perhaps you’ll want quick access to the last three years of your financial records. But you probably don’t need to access the past 15 years of financial records on a mobile app.
- Check with your financial or tax adviser for details specific to your situation, as rules can change and scenarios vary. Some firms and industries have additional compliance needs and may have extended periods they need to keep the records.
In the end, the potential costs of deleting data often outweigh the cost of keeping it. Maybe a client you worked for 10 years ago suddenly decides to sue. Once you store your documents electronically in the cloud, it’s probably worth it to keep a backup of records you might never need — just in case.
Tell us about your strategy for record-keeping. Do you shred what you can or save everything?
Source: Entrepreneur.com, January 2013
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