Record Storage and Retrieval

Lets face it , we all hate filing. But it is an integral part of your accounting system. Your filing system is only as good as the amount of time it takes you to retrieve an item should you need it.

Apart from the fact that you are required to keep records for statutory purposes - having an organized filing system comes in handy should you encounter any disputes with staff, clients and/or suppliers. Records should be filed in a manner that enables easy retrieval of the documents.

Typical reasons for retrieval...

• Statutory requirements for record keeping
• audits (internal as well as external), 
• accountant requiring more information, 
• supplier or customer disputes, 
• employee queries
• Civil Claims

Electronic Records Management

With the advent of cloud storage - storing and backing up your data can be as simple as saving it to a folder tree on your computer. If you are using microsoft 365, gmail or apple you probably already have storage as part of your office package. If you don't already have cloud storage capacity - there are apps on the market like box, dropbox to name a few. Dropbox will give you 2gb for free on a personal account. 

As long as you save incoming documents direct to your folder tree - you will never have to worry about backing up your data again. The downside in cloud storage providers is that you are sharing your business records with a third party - if you are concerned you can always look at hosting your own data on your business's servers.

We haven't covered such details as how to set up your folder tree here - but if you would like some suggestions look out for our coming Automate your business stream of articles which will cover this.

Paper Records

According to Gartner 91% of business have already or partially adopted a digital stragedy. That remaining 9% is more likely to be small business's - so there is always going to be that small percentage of paper invoices you receive. You might also still be printing out paper purchase orders- and/or receiving paper delivery dockets - these will all need to be kept. We recommend one lever arched folder per financial year for any paper records assuming that with the wide adoption of electronic invoicing - that is all a small business will need.

There is also all those small over the counter purchases eg petrol or office supplies receipts to consider. Investing in a document capture software (hubdoc, dext to name a few) - will enable you to take photos of these with your phone - the app will then upload to your accounting software (with or without data processing on your behalf depending on the settings in your app) and you will have an electronic backup.

You basically can take a photo of these purchases in store and they will appear in your accounting software ready to match against your credit or debit card feeds. The document will then be attached to the transaction in your accounting software and if set up - can sync with your cloud storage. However the originals will still need to be kept (in your lever arched file for that year if you decide to go that way). 

What do I need to store?

You need to keep everything that pertains to any line that appears on your financials. You also need to keep working papers in how you came to calculations used to work out any tax deduction (or claim) on a tax return.

Permanent File 

A permanent file/s contains all the information regarding your business setup,

• structure,
• registrations,
• minutes,
• shareholdings.

Other items that would be stored in a permanent file are

• long term assets owned by the business,
• stocks,
• finance establishment documents,
• contracts etc.  

A good way to gauge where you should be filing documents is whether the documents pertains to one tax year or more? If you will need to refer to the document for more than one tax year - it is a permanent file.

Current Files

A current file contains all documents pertaining to your yearly tax return period. Your current files will include items such as: 

• Sales Invoices,
• purchase orders,
• bills,
• supplier statements,
• receipts,
• bank statements,
• loan statements for the period,
• work orders,
• motor vehicle mileage records etc etc.

You also need to keep any calculations showing how you came to any tax deduction (your workpapers) and/or work diaries.

How long do I need to keep my records

How long is a piece of string. Keep your documents for as long as you feel you will not have to refer back to them. 

Tax Records

When it comes to tax records, statutory requirements differ from country to country - from 22 months in the UK, 3 years in the US, 5 years in Australia to 10 years for India after you have lodged a tax return. Keep in mind that if you are depreciating business assets, that means from the last time you depreciated that asset in your tax return. So if your asset's useful life is 10 years - that would mean 10 or 11 years (assuming you purchase the assets part way through a year) plus the statutory requirement period for your country.

If your country does not have a Period of Limitation for tax returns - keeping records indefinitely is recommended if storage capablities provide for the same. In the case of suspected fraud, failure to lodge or knowingly lodging a false return, there is no limit as to how far a tax authority can go back.

Civil Claims

Over and above what you are required to keep by law, you should also be keeping documents for as long you may need them to defend yourself against any litigation that may arise in your course of business. The statute of limitations for civil cases also differs from country to country- that is the time after an event that someone can take your business to court. It is highly recommended you keep your documents to cover any such period. 

While not entirely part of an accounting system - you might also consider backing up and keeping your emails as they could prove helpful should such a situation arise.

Storage Capabilities Cost V Benefit

One of the benefits of modern day accounting and electronic backups is that it is no longer an issue to worry about finding storage space for your archives. You can basically fit all your documents on a thumb drive. But if you are running a paper based business - those boxes of documents can really start to build up. So does the cost of employing someone to file and store these same documents. There is no use keeping documents indefinetely if all that achieves are costs to your business in which you gain no real benefit.