Have you ever had a moment where you have looked at your desk and couldn’t even see it because it was absolutely covered in papers? Like, couldn’t even get a glimpse of what the surface of the desk actually looks like?
Paperwork, records, business documents. There is a lot of it when it comes to a business, even a small one. From the post-it notes with reminders about tomorrow’s video conference to the sign up sheet for the company potluck to employee time sheets to income tax returns, offices are inundated with paperwork. If you are like me, it can be so tempting to look at all of the papers and just want to shove them all in the recycling bin. But, that wouldn’t be a good move. Many business documents need to be retained.
All of the records and documents can be incredibly overwhelming to organize. Plus, all of that paper takes up space. Instead of sweeping all of the paper off of your desk in a moment of frustration, it is better to think about what can go, what needs to stay and for how long? So, what can go and what can stay?
It can be cathartic to get rid of everything, but, unfortunately, a good rule of thumb to follow is, “when in doubt, keep it.” In regard to business document retention you probably already knew that you shouldn’t be throwing out your income tax returns, but there may be some documents that you didn’t realize that you should be keeping around. Here are 4 surprising business documents that should be retained.
The Receipt from that Business Lunch Last Month
Yes, you should be keeping all of your receipts that are business related—even that one from your club sandwich and chips with a client a month ago. Basically, if you are going to, or if you already have written it off on your taxes, you want to keep the receipt as proof that it happened. If the receipt is tax related it should be kept for as long as you keep that tax return, which is recommended to be 7 years. Keep in mind, the IRS has specific guidelines when it comes to writing things off, so follow those closely.
You also want to keep receipts for any assets that are purchased or serviced, any inventory that has been bought, any vehicle expenses related to the business, as well as any advertising expenses (Square).
Time Cards for the Employee that Was Terminated a Few Years Ago
Employee files need to be kept around for a while including personnel files, medical files, drug test records, I-9 forms etc …. Yes, that includes time cards. At The Balance, Suzanne Lucas explains that when it comes to employee time cards, “The law requires you to maintain these records for three years, but recent lawsuits mean it would be smarter for you to keep them for longer.” Different states have different regulations and guidelines, so be sure to check and make sure you are doing what you need to do when it comes to document retention. Remember, when in doubt, it is better to save it.
Those Interview Notes for the Position that was Filled 6 Months Ago
Some sources advise that you keep anything from the hiring process including interview notes, resumes, applications for 1 year after the date the decision is made, while others advise holding on to these things for at least 7 years after an employee leaves. This is to help in case you are ever accused of discrimination in your hiring process. As stated by the U.S. Equal Employment Opportunity Commission, “It is illegal for an employer to discriminate against a job applicant because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information.”
Keeping these business documents as well as others that need to be retained does not just mean shoving them into a drawer in your office or filling a box with “important stuff” in the supply closet. These documents should be carefully organized, and you should be able to access them when needed. The good news is that most of the documents CAN be digitized and stored electronically. Read about keeping certain documentation stored electronically here.
For more information about what is required by the IRS check out their rules and guidelines for document retention.
Please keep in mind that this is not an extensive list of what documents should be retained and that regulations can differ from state to state. Consult with your accountant and lawyer for more information for your specific business. Following the appropriate parameters will help you exponentially in the case of an audit or lawsuit. For more information about this, contact us at Lucid Advisory and Finance and we will be happy to help!