How long should you keep your Business Records?

If we do everything that we're supposed to do – and if we also have a little bit of luck – the business we create will thrive for generations to come. In that length of time an awful lot of paper will be generated from the day-to-day functioning of the business. This begs the question, just how long should business records be held onto?

There are various schools of thought on this subject. Some people actually do an amazing imitation of a packrat, keeping their files and paperwork for as long as they have a reasonable place to store them. After all, you never know when you might need some obscure piece of paperwork from ten years ago. An efficient filing system would be immensely useful to locate what's needed in the great, hulking mountain that's affectionately known as their business records. If you feel that this describes you, here are some guidelines to help keep that vast paper trail you're creating under some semblance of control.

Certainly, some documents should be kept indefinitely. As long as the business exists and thereafter, these items are at the center of your business structure and how you operate. General accounting ledgers, mortgage and deed papers, yearly tax and financial statements, payroll books, retirement records, and articles of incorporation (if applicable) fall into this category.

Other documents that pertain to transactions and payments should be kept for at least ten years. If someone has a question about a sale or an old contract, it will probably come up and the company contacted within that time frame. These documents include banking statements, invoices, written contracts, lease agreements for equipment and office space, accounts payable and receivable records, and cancelled checks.

A business can go through numerous changes during its lifetime. You could run into legal wrangles and find yourself being sued by a client, or you might be the one bringing suit. Employees may have to be terminated and new ones hired in their place. Company policy can change with the times. Items pertaining to employee records and any legal actions with anyone should to stay around for at least seven years. If the particular employee is still with the company then, of course, his or her records should stay for as long as they do and at least seven years after they leave. Expense reports for executives, salespeople, and anyone else that travels and conducts business with clients on the company's behalf are also included in the seven-year pile. And, a business that carries an inventory will keep records for it, as well.

Now, is there anything that can be gotten rid of sooner? Well, memos to office staff, employment applications, and disability or other health-related documents for employees can generally be let go after three years. If a person was never hired, three years is a good time frame. For instance, they may come back within that time and you'll have record that they applied before, along with the reason that you didn't hire them in the first place.

Records represent a history, an important part of the evolution of your business. Companies that can afford the storage and a well-thought-out filing system would actually do well to keep all their records on a permanent basis.