Just like the milk in your refrigerator, information has a shelf life. Unfortunately business information does not come pre-stamped with an expiration date. It is up to each business to develop their own best dates, after which information becomes no longer needed. It is then up to the business to responsibly get rid of their business information, otherwise it may continue to take up more and more valuable space and resources costing time and money.
One of the first steps a business can take is to list the types of information held by the business. This listing is formally called a retention schedule. Then for each type of information an expiration date is determined. These dates are formally called retention periods.
How does a business determine these dates? There are typically three main considerations when calculating these expiration dates:
- Business Need: the information is still needed to run the business
- Law: a law requires the information should be retained for a certain number of years or once some event has occurred
- Audit: in the event of an audit, the business would be required to have this information.
The rationale for determining the retention period should be documented, including any legal citations. This will come in handy if a judge ever questions why your business destroyed certain information, or if you are trying to remember how you came up with a certain retention period.
A retention schedule should include in addition to the names of information types and their retention periods, a brief description of the information type. In the event of multiple copies of an item, an information owner should be designated to be responsible to retain the “official” copy.
Retention schedule example:
|Name||Description||Information Owner||Retention Period|
|Accounts Payable||Records of amounts owed or paid to outsiders||Accounting Dept||Year End + 7 Years|
|Accounts Receivable||Records of amounts owed by outsiders to the business||Accounting Dept||Year End + 7 Years|
|Chart of Accounts||Listing of all accounts used in the General Ledger||Accounting Dept||Life of Business|
|Banking||Records of bank accounts||Accounting Dept||Year End + 7 Years|
|General Ledger||Complete record of the financial transactions of a business||Accounting Dept||Life of Business|
|Benefits Administration||Records of the payment of benefits to employees||Human Resources Dept||Termination + 6 Years|
|Personnel Files||Records of individual employees||Human Resources Dept||Termination + 6 Years|
Remember, the retention schedule is meant to be a living document. As your business creates new information types, they should be added to your retention schedule. Periodically the rationale for retention periods should be reviewed, especially if new law indicate a change in retention periods.
Note: if your business anticipates it will be involved in litigation, the relevant business information must not be destroyed. The retention period for the relevant business information is suspended, formally called a legal hold. The information is put on legal hold until the litigation is complete or no longer anticipated. Once the legal hold expires, the original retention period for the information is restored.
Nitza Medina-Garcia, Certified Records Manager, Records and Information Management Consultant
Contact us today! Let us help you create a retention schedule to meet your business’s needs.