Recordkeeping
Your business records are a living history of the day-to-day life of your business. They document your transactions with customers, vendors and creditors. If any business or institution has questions about the operations of your business, your records need to be up-to-date and available to resolve any queries.
You should maintain individual business records for a minimum period of time according to recommended record-retention periods. However, in certain circumstances involving pending or potential litigation, you may want to consider extending these record-retention periods. Your legal counsel should be consulted prior to discarding documents that may be subject to an extended retention period.
Electronic records
In today's business world, more information is stored electronically than ever before. As technology continues to change so does computer hardware and small business software. Before changing hardware or software, make certain that stored electronic records will be accessible when you need them.
Finally, documents stored electronically may be subject to special retention requirements. The IRS, for example, has special computer retrieval requirements when business records are maintained on a computerized system. You should talk with your tax advisor regarding any applicable IRS requirements.
Recommended retention periods for records:
| Accident reports and claims | 7 years |
| Accounts payable ledgers and schedules | 7 years |
| Accounts receivable ledgers and schedules | 7 years |
| Audit reports of accounts | Permanently |
| Bank reconciliations | 1 year |
| Bank statements | 7 years |
| Canceled checks (see exception below) | 7 years |
| Canceled checks for important payments (i.e., state and federal income taxes, purchases of property, special contracts, etc.) should be filed with the papers pertaining to the underlying transaction | Permanently |
| Capital stock and bond records, ledgers, transfer registers, stubs showing issues, records of interest coupons, options, etc. | Permanently |
| Cash books | Permanently |
| Charts of accounts | Permanently |
| Contracts and leases (expired) | 7 years |
| Contracts and leases still in effect | Permanently |
| Correspondence (routine) with customers or vendors | 1 year |
| Correspondence (general) | 3 years |
| Correspondence (legal and important matters only) | Permanently |
| Deeds, mortgages and bills of sale | Permanently |
| Depreciation schedules | Permanently |
| Duplicate deposit slips | 3 years |
| Employee personnel records (after termination) [substantially longer periods apply to employers who produce/handle hazardous materials] |
4 years |
| Employee benefit plan records | 7 years |
| Employment applications | 3 years |
| Expense analyses and expense distribution schedules | 3 years |
| Financial statements (end-of-year, other months optional) | Permanently |
| General and private ledgers (and end-of-year trial balances) | Permanently |
| Inherited property valuations | Permanently |
| Insurance records, current accident reports, claims, policies, etc. | Permanently |
| Internal audit reports (in some situations, longer retention periods may be desirable) | 3 years |
| Internal memos and reports (miscellaneous) | 3 years |
| Inventories of products, materials and supplies | 7 years |
| Invoices to customers | 7 years |
| Invoices from vendors | 7 years |
| Journals | Permanently |
| Low-income housing records | 7 years |
| Minute books of directories and stockholders, including by-laws and charter | Permanently |
| Notes receivable ledger and schedules | 7 years |
| Option records (expired) | 7 years |
| Payroll accounting records and summaries, including payments to pensioners | 7 years |
| Petty cash vouchers | 3 years |
| Physical inventory tags | 3 years |
| Property appraisals by outside appraisers | Permanently |
| Property records (including costs, depreciation reserves, end-of-year trial balances, depreciation schedules, blueprints, and plans) | Permanently |
| Purchase orders (except purchasing department copy) | 1 year |
| Purchase orders (purchasing department copy) | 7 years |
| Receiving sheets | 1 year |
| Requisitions | 1 year |
| Sales records | 7 years |
| Savings bond registration records of employees | 3 years |
| Scrap and salvage records (inventories, sales, etc.) | 7 years |
| Stock and bond certificates (canceled) | 7 years |
| Stockroom withdrawal forms | 1 year |
| Subsidiary ledgers | 7 years |
| State and federal income tax returns and worksheet, revenue agents' reports and other documents relating to determination of income tax liability |
Permanently |
| Time books | 7 years |
| Trademark registrations | Permanently |
| Voucher register and schedule | 7 years |
| Vouchers for payments to vendors, employees, etc. (includes allowances and reimbursement of employees, officers, etc. for travel and entertainment expenses) | 7 years |
Source: RSM McGladrey, Inc.
RSM McGladrey is a business services firm offering middle-market companies business and tax consulting, wealth management, retirement resources, payroll services and corporate finance.