Think about what records are important to your business. Your situation is no different from any other business. Everyone has the same need for recordkeeping. You need to be able to document what your business did. It may be because your accountant wants to verify numbers before he puts your taxes together. It might be because your bank wants to do a field audit. It might be because your customer is looking for verification for a shipment they received.
Documentation is the backbone of your business. If you can’t document what you’ve done, then you can’t verify that your reports are accurate, and you can’t make decisions on how best to run your business. Let’s look at some records you should be keeping.
- Financial Statements and supporting documentation. Keep your General Ledger permanently. With that, you can recreate just about any reports you need.
- Employment Records – Keep your employees’ I-9 forms till 3 years after termination. Earnings records for 7 years after termination, along with employment contracts.
- Bank Statements – Keep a copy of each of the monthly bank statements. You should also have copies of the bank reconciliations that were done monthly. Keep those for 7 years.
- Shipping and Receiving records – These are documentation of the business that you’ve done. Keep each set of documents together. Shipping records are needed in case something gets lost in transit, or your customer wants verification of shipment. Receiving records are proof that you received a shipment and should pay the invoice when it’s due. Keep those records for 7 years.
- Corporation documents – This would include your registration with the IRS, the State in which you do business, stock certificates, operating agreements, records of ownership or change in ownership. Loan agreements. These should be kept permanently.
- Contracts – Keep copies of all contracts while they are active, and for 6 years following the termination of the contract. This makes sure that you have what you need in case of a dispute or any questions.
But it isn’t necessary to keep most documents forever. You can easily become a Records Hoarder. Company file rooms are filled with old shipping and receiving documents, invoices, employment records, contracts that go back to the beginning of time. If you feel warm and fuzzy about keeping them, OK, but there is no legal requirement here. In actuality, they are a fire hazard and an expense.