Main Menu

Document Your Decisions with a Records Retention Policy

08.03.2017

SBM August Financial Fitness logoMany small business owners make important decisions every day that should be properly documented following a specific records retention policy. Without a plan in place, businesses are left defenseless if the IRS were to come knocking. Karen Stern, Partner in Charge of Brown Smith Wallace Entrepreneurial Services Group, discusses the value of a records retention policy, in this month’s “Financial Fitness” column, as featured in Small Business Monthly.

It’s imperative to establish a specific records retention policy, preferably written and followed regularly. The process of records retention ensures that records are kept as long as legally and operationally required and that obsolete records are disposed of in a systematic and controlled manner. Keeping some items and getting rid of others means that there is actually NO policy. Once the policy is implemented, ensure all employees are familiar and regularly maintain files in accordance with the guidelines.

For example, it’s not unusual for a small business to make a loan to one of its shareholders. If the IRS were to question the loan and attempt to reclassify it as a dividend payment, having the loan documented in your minute book can be the difference in a successful defense against the IRS.
Below are general guidelines to use in determining which records to keep and for how long:

  • Permanent records: Audit reports, annual financial statements, trademark registrations, property records and depreciation schedules
  • 7 years: Tax returns, payroll records, accounts payable/receivable schedules and cancelled checks
  • 5 years: Internal audit reports and excise tax computations

If you are not sure what records to include in your policy, it’s worth the investment to establish a specific records retention policy.

To discuss your current policy or for help completing one, reach out to your advisor. For independent advice, contact Natalie Mamrenko,CPA, CQA, Manager in the Brown Smith Wallace Entrepreneurial Services Group, at nmamrenko@bswllc.com or 314.983.1315.

Karen Stern, Partner in Charge, Entrepreneurial Services GroupFor more information on how a bookkeeper or CPA can help your small business, contact Karen Stern, Partner in Charge, Entrepreneurial Services Group, at 314.983.1204 or kstern@bswllc.com.

Team

Back to Page