Spring Cleaning for Your Business Records

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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If time is money, then over the course of a year you can save serious dollars by reducing the time it takes to find a file – just cut the clutter. In fact, a recent study found that messy desks cost American businesses $177 billion each year in lost productivity. With Spring just around the corner, now is a great time to clean out those old files and papers that are cluttering your office and delete unnecessary files and email that are cluttering your computer.

What to Toss

There's bound to be a lot to toss, but don't toss too much. Determine what papers and other information you need to retain and what you can dispose of to minimize clutter and save storage space.

Check Company Policy

It’s a good idea to create a record retention and disposal policy for your business. Your policy can include a schedule for regular purging of papers that no longer serve your operational, fiscal, legal, or other needs.

You may require the retention of all email and customer correspondence, just in case of future inquiries or lawsuits. For items that must be retained, consider better organization for the materials, such as new file systems or a digital archive for paper receipts and other documents that you scan and burn to DVD.

You should retain all contracts, leases, and other agreements; even those that have expired can serve as guidance for future agreements. You must keep all minutes of corporate meetings and resolutions forever.

Determine Legal Requirements

Before purging, be sure your spring cleaning doesn't run afoul of the law. A handful of states, including Illinois, Maryland, New Hampshire, and Oklahoma, have adopted the Uniform Preservation of Private Business Records Act, which requires businesses in those states to retain business records for a minimum of three years from the date of the document's creation.

You should keep tax returns and related documents for a minimum of three years, which is the usual time in which the IRS and your state can audit the returns. It’s wise to keep a copy of the return and proof of filing (a certified receipt for a paper-filed return or the acknowledgment for an e-filed return) forever because the government has an unlimited period in which to audit a return that it believes has never been filed. The rules for retaining tax records are spelled out in IRS Publication 587.

You usually have to keep employee-related documents, such as job ads and application forms, time sheets, I-9 forms, employee files, and records of workplace investigations of accidents or other employee-related incidents, for a minimum of four years in case of examinations by the IRS or your state (e.g., related to unemployment benefits or workers compensation claims).

Proper Disposal

Today, tossing out old papers may not be as straightforward as adding them to the trash. Certain documents require proper disposal; sensitive documents should be shredded and computer data should be thoroughly erased. Use special care when disposing of:

• Employer records containing medical information. Various federal laws are strict about the confidentiality of this information.;
• Customer records containing credit card information. Again, there are laws mandating confidentiality and steps that must be taken if and when such confidentiality is breached.

Special disposal requirements may apply to certain businesses, such as medical practices, financial services companies, and law firms. In fact, businesses large and small are subject to a variety of state and federal laws regarding proper document disposal.

If you are doing a big Spring cleanup, you may want to consider hiring a shredding service. The cost of this service may be less than the value of the time you would otherwise spend operating your office shredder.

Bottom Line

A little effort spent on a Spring cleanup can pay off in increased productivity. And it just might make you feel better about your workplace!