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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.
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