Monthly Mission – Building Your Record Retention Policy

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Monthly Mission – Building Your Record Retention Policy

It is time for Spring Cleaning!  Now is the time of year when we clear out old records, organize the system and start fresh.  This month’s Monthly Mission is about organizing and retaining the right records for the right amount of time in your business.

After 20 years of working in and assisting others with back office construction operations, this topic is one that I thoroughly enjoy.  I love systems and I also love getting rid of stuff!  Creating a system around your Retention Policy enables you to control important documents and also protect against keeping information too long or letting it get out of control.

There are many versions of record retention policies.  There are some best practices and some requirements, but a lot of them are confusing.  I’m a simple person.   I like simple rules.  I like simple systems.  So, I’ll share my simple version and process of record retention so you can have a place to start to develop your own policy.

When dealing with paper, I first decide what to discard.  This makes the pile smaller and it’s a good feeling to know that you are decluttering.  I find it is easier to identify items with a date of 10 years or longer and assess whether they are permanent keepers or can be disposed of.  Then I make a disposal pile.  If it can be disposed of, I call the local shredding company and find out the best way to use their services.  I like to use a shredding service because 1) it is easy and 2) they have a process for handling sensitive information so I don’t have to worry that it ended up in the trash dumpster or blowing down the street.

Next, I divide the remaining “stuff” into categories. I use overall, broad, categories instead of trying to get granular.  My goal is to get it stored quickly and have a system to discard it effectively when the time comes.  I used three categories because I don’t want to sort into too many years that just get confusing.  Again, I like simple and some of the differences are so hard to determine that I might be sorting and deciding on individual pieces of paper in a file when I could just make one decision and move on.  I like to be conservative and simple.  Simple rules!

Here is a general example of my categories (not all inclusive):

7 years

  • Accounting records
  • Employee and payroll records, except for general ledger

10 years

  • Job records
  • Contracts
  • Job books/plans

Forever

  • Insurance policies
  • Board minutes
  • General ledgers (typically stored by archiving the accounting system)
  • Stock/buy-sell agreements
  • Patents/trademarks
  • Deeds

If the items are paper, I put them in banker’s boxes and clearly mark the destruction date as 7 or 10 years from the year end.  The permanent records are marked as permanent and stored in a separate location.  The records can be sorted by type or destruction date.  Each year, pull the boxes with the expired destruction date and send them to the shredder.

I think that electronic records are sometimes more difficult, but the same policy can be used by creating years in your file structure.  Start each year with a fresh folder of the topic de jour with the year on it.  If you have, let’s say, an electronic folder labeled bank statements, then within that folder would be a folder for each year.  Each year folder then contains your saved downloads, scans, etc. of the bank statements.  When the 7 years for retaining those files is up (although I think you only have to keep it for 3, but again, I’m want to be conservative and simple) you can delete the year that has expired.  Here is a picture of what it could look like:

And here is an example of the folder contents broken down by month:

The question of redundancy has become more apparent now that we have electronic scanning.  I’m old enough to remember the fax machine as a major breakthrough!  Today, we can have our entire system online…which can become overwhelming without a system.  Let’s look at an example:

Let’s say you have a box of vendor payments.  Vendor payments could be a 3, 7 or 10-year category depending on what is in the box.  These payments also have an invoice attached and the check remittance from payments to the vendor.  Now let’s assume that this vendor payment was for a job. Don’t forget, this invoice was scanned into the accounting system.  We have an example of a 3, 7 and 10-year category all in one and it is also located in an electronic version and in a paper file!

So now what?

This probably comes down to personal preference.  Since you can easily access the scanned records for future needs (audits, litigation, general questions, etc), I believe the electronic version meets retention policy and the paper version is redundant.  However, I’m still nervous enough that I keep the box AND the electronic record.  (I know, it could be silly, but I want to sleep at night and not worry about a total loss of data if something happens on the server and to the backup!)

You can make yourself crazy trying to identify the different scenarios and possible outcomes.  Which is why I am simple:  Put it in a box.  Put a date on it.  Forget about it until the date on the box and go back to living your carefree life knowing you have a plan and system in place.

Would you like a more detailed record retention list of documents and dates you can use to make your own retention policy?  If you are a member of our group, log in and check out the section on Record Retention Policy.

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