In a prior blog, I discussed the importance and benefits of keeping good records as a business owner. Now, at the top of the year, I’ll go more in depth on how to create a routine around recordkeeping, which records to retain and how long, as well as the best tools to use.
First, record retention refers to the safeguarding of important records that document decisions, policies, financial activities, and internal controls[1]. It’s a key function for every business. That means you will need a system or routine for most of the records your business generates and tools to help you do it.
What records do you absolutely need to retain and where do you keep them?
Certainly, the specific type of records that you will safeguard will depend on your business and those records. For example, if you sell products, you should keep records of your inventory and sales. For the most part, the records you need to retain will likely fall into one of the following categories.
Business Formation Documents
Articles of Incorporation/Certificate of Formation, Bylaws or Operating Agreement, EIN, annual meeting minutes, any licenses or permits, EIN, and all amendments to those documents should be saved in one place – preferably in a corporate record book.
Client Records
Orders, invoices, record of payments, project plans, completed project deliverables, drafts, correspondence, meeting notes, should be stored in a customer relationship management (CRM) system. But if you are not quite ready to invest in a CRM, at the very least, store your client records in Dropbox®, Google Drive, Microsoft One Drive®, or some other cloud file hosting platform. If you are ready to invest, know that there is software that matches your business type and size.
Contracts & Agreements
Make sure to keep a copy of all leases, contractor agreements, and contracts with vendors in a place where it’s easily accessible. Signing agreements with e-signatures is pretty common now, which means you will probably be emailed a copy of the final signed document. A good habit would be to keep your electronic contracts in a dedicated folder within your Outlook or Google, AND download a PDF version and save to the cloud and/or external drive.
Business Financials
Bank statements are easily accessible online, so no need to print and store, but you should keep your account opening documents, loan documents, checks, and that folder of materials the bank will give you at account opening - in a filing system. Invest in a filing cabinet if you’re in a business that generates a lot of paper and an accordion-style folder or portable filing box if you have minimal paper to store.
Taxes
Keep your returns and all supporting documents organized by year. Set up a simple filing system for any receipts (hard copies) and store any documents sent electronically in the cloud or on an external hard drive. Eventually, you may consider springing for a scanner to store all of your paper documents to the cloud and external hard drive. Bookkeeping software is a must and will make tax time easier. Manually tracking using spreadsheets can get out of hand quickly if you are not meticulous.
How do you do it?
Once you identify the records you absolutely need to safeguard, you can do it by creating a routine that you will stick to. To put it simply, just do it.
Best case scenario, put the record in its proper place in real time. If you just received your copy of the final signed contract, move it to the right folder in your inbox and save the PDF to the cloud and/or your CRM.
Or pick one day a week (or at least twice a month), and block off time for to you take care of the administrative tasks that are easy to put off. One of those tasks should be ensuring that you (or someone on your team) have filed away all important documents generated that week. If once a week is too much, it’s recommended that you do this at least twice a month so that the “paperwork” doesn’t pile up.
Finally, automate wherever you can. When selecting software or tools, whether free or paid, take a look at the software integrations to determine the programs that work together to capture the information you need and make your life easier.
For more tips on creating a record-keeping routine, and a sample record retention schedule, the SBA has an excellent guide complete with tests and discussion points to help you along the way.
At MC Law, we encourage small business owners to position themselves to avoid problems later. Check out our Business Planning page to learn how we help you have a peace of mind about the operation of your business and our Intellectual Property page for more information on how we help you protect and maximize your business assets. Or feel free to reach out to us for a consultation.
[1] https://osp.emory.edu/handbook/finaward-admin/record-retention.html