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[B1069]Business Record Retention Guidelines

by Salim Omar, Cpa, Sal

If you are like most small business owners, understanding which records to keep and which are okay to throw out with regards to your business records can be challenging. Business record retention is important for several reasons including: future business sale, succession planning and for potential tax audits. While you can never predict future events, it is certainly best to be prepared. Even if you have a bookkeeper or CPA for your business, it is still important and recommended to keep copies or originals of your business records in a separate location.

When in doubt, it is always best to keep documents rather than to dispose of them. However, there are minimum requirements of business record retention that are recommended for business owners to keep in the event of a tax audit.

Here are the IRS suggestions regarding which records to keep and for which length of time:

Permanently

There are certain business documents that you should retain permanently, including:

• Audit reports
• Stocks and bonds records
• Deeds, mortgages, bills of sale, leases and contracts currently in effect
• Year-end financial statements
• General and private ledgers
• Minute books including charts and by-laws
• Property appraisals
• Property records
• Trademark registration
• Tax returns including all worksheets

Six to Seven Years

• Accident reports and claims
• Accounts payable records
• Accounts receivable records
• Cancelled checks
• Contracts and leases that have expired
• Inventory lists
• Invoices from vendors
• Payroll summaries
• Employee personnel records
• Retirement plan accounting records, returns and reports
• Sale records

Two to Three Years

• Employment applications
• Personal records for employees who have been terminated
• Unemployment records for past employees
• General communication- internal and external
• Expired insurance policies
• Internal audit reports
• Petty cash vouchers

One Year

• Bank statements
• Loan documents
• Credit card statements
• Correspondence
• Deposit slips
• Purchase orders
• Receiving sheets
• Requisitions

Once you have determined which documents to keep, you will need to develop a system to help you organize them all. For all business documents such as minute books, stock ledgers and other permanent documents, it is often recommended to keep these items at a location that is separate from your business. For example, you may decide to keep these important documents in a bank lock box or safety deposit box.

With regards to all of your other business documents, the first step to take with regards to retention is to communicate with anyone on your team about which items are crucial to keep and where you will want them kept. Labelling, separating and then devising a place to store them all will be part of your business record retention plan.

This process can be overwhelming if it is not kept current. So, it is best to develop the systems in the early phases of the business and then to merely dedicate maintenance time to keeping everything organized.

Important Note: Once your company has established a record retention policy, it should be strictly enforced. This is necessary in order to negate potential claims that records were destroyed to remove incriminating information from further review. The policy should also provide for appropriate retention periods for records that will likely be needed at a later date. Finally, when a file's number comes up, records should be destroyed (and recycled if possible).

Running a business from home creates a range of unique, yet somewhat quite common, commercial problems - from poor, amateurish customer perception through to being unable to escape from the work environment or health and safety issues, there are numerous pitfalls awaiting the work at home entrepreneur running his own business. But what exactly is problematic about work from home businesses, and how can these common complications be turned around?

If you work at home, you will at one stage most likely encounter the problem of a lack of credibility. There is a feeling in some sectors of business that just because one is a work at home business with a residential street address, it is somehow less credible or less professional than any other business. This is a problem that must be surmounted if the work at home business is ever to become a more successful, larger enterprise. A common resolution to this is to opt for a mailbox or virtual address in a more commercial part of town - that way, you'll no longer be associated with operating from a back bedroom, but instead be perceived as operating from prime local office space.

Another problem experienced by business people that run work from home businesses is that they find it difficult to switch off after a day's work, simply because they happen to live in the same place that they work. This is quite common, given that at number of home entrepreneurs integrate their business habits into their lifestyle, which can make the difference between work and play less distinct. A good solution to this problem is to dedicate a specific room in the home to work - such as a study or spare room. After the working day is done, you can shut the door and shut out the distractions of work whilst you enjoy your home life.

Some other home-based entrepreneurs report more issues with working from home, in particular the fact that customers tend to show up at your door at inappropriate times, often well outside of office hours. Because customers will treat your home address as an office, don't be too shocked when one turns up on your doorstep with a complaint or to ask you a few questions. This can be one sure fire way to destroy your private life and any privacy you might have otherwise enjoyed - particularly if your business starts to take off. Again the mailbox route may be an option in these circumstances, but it might also be wise to avoid advertising your address where possible.

If you work at home, you will most likely encounter one or more of these problems with your business at some stage, before electing to use an alternative address or office premises. Whether that's right or wrong, it's important to bear in mind these drawbacks of working from home as compared to running from an office, and remember that these may become factors if you elect to save costs on running a business without permanent offices or some form of alternative address.

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Both Salim Omar, Cpa & Nazir Daud are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Salim Omar, Cpa has sinced written about articles on various topics from Marketing, Finances and Business Plan. Salim Omar, author of specializes in providing accounting and tax services to small business owne. Salim Omar, Cpa's top article generates over 49500 views. to your Favourites.

Nazir Daud has sinced written about articles on various topics from Online Business, Management and Accounting Bookkeeping General Svc. Naz Daud - CityLocal Franchises & Business Directory. Nazir Daud's top article generates over 74000 views. to your Favourites.