Storing your records in a safe place and organizing them can be a time-consuming and expensive process. If you don’t take the time to organize your records, they could become lost, stolen, or destroyed, hurting your business and putting you at risk of laws and fines.
Whether you’re an SME, multinational corporation, or any other type of business, if you don’t know how to store your data securely and how to maintain records retention, you risk the chance of being fined by regulations.
Records retention is a process that organizations go through to decide what records they should keep, how long they should keep them and where they should store them. There are many factors that go into this process such as the type of information the records contain, the size of the organization, and the legal requirements for holding on to certain types of records.
Records retention has two main purposes: legal documentation and disaster recovery. As for the legal documentation, it is usually needed for lawsuits or litigation. Disaster recovery is needed when an organization’s data center gets damaged or destroyed.
Organizations need to retain certain records by law in order to comply with government regulations and to protect themselves in case of legal action.
Records Retention Definition
Records retention refers to methods and practices organizations use to maintain important information for a required period of time for administrative, financial, legal, and historical purposes. It applies to paper documents as well as the retention of electronic records such as word documents and spreadsheets.
A record is considered evidence of certain events that took place within an organization such as purchase orders, contract approval, or correspondence.
The duration of time (retention period) specifies how long records should be retained before they are destroyed. Organizations usually define the business document retention period based on multiple factors such as the nature of the business documents, industry regulations, or business needs. Other information is defined by laws and regulations.
The business document retention period is usually declared via well-defined policies and schedules.
Businesses need to have a well-established and routinely updated document retention schedule to ensure that information is retained as long as it is operationally and legally needed and other information is disposed of systematically based on the disposal schedule of records.
- Control the creation, declaration, classification, retention, and destruction of records. That will firmly result in improved compliance and minimize litigation risk.
- Provide accurate, timely, and full information to enable effective decision-making.
- Provide information and maintain records at the lowest possible rate.
- Process collected data as quickly as possible.
I highly recommend also checking this full-depth article covering records management.
Records retention or documents retention refers to the preservation of critical documents that reflect decisions, policies, financial transactions, and internal controls.
How Long do Businesses Deed to Keep Records?
Records should be kept depending on the rules and regulations the organization is operating in. The life span could be a few days or it could be permanent. For example, in the US certain financial and tax records must be stored for seven years due to IRS regulations.
Business Records Retention Schedule
The retention schedule, also called the data retention schedule, is the core foundation of an effective records management initiative. The purpose is to define how different types of records are managed.
In addition to how long they should be kept to comply with different laws and regulations requirements.
It is a guide that categorizes the many kinds of documents you have and how long they must be kept. It is based on an analysis of all of the legislation and laws that regulate the document in your legal jurisdiction, as well as any business rules that apply.
A well-established and routinely updated general document retention schedule is crucial. A company-wide management strategy will eliminate fines and penalties by ensuring full compliance with laws and regulations.
Records retention schedules are frequently included as part of a data retention policy, which is an established methodology for storing information depending on business needs.
The Importance Of Records Retention Schedule
Records retention or document retention is an essential part of records lifecycle management. Not all records should be maintained and the cost of managing and maintaining them would have a significant effect on the budget and would necessitate more storage space.
Records retention is important because it helps organizations save storage and operating expenses when dealing with paper records, reduce litigation risks by adhering to various rules and regulations, and increase record security by preventing unauthorized access.
While it is necessary to clean away clutter, throwing the incorrect paper or deleting a crucial e-mail might have negative implications. In litigation, not having a document might make the difference between winning and losing.
By having a general document retention schedule for all business units, businesses can
- Reduce Storage & Operational Cost: Maintaining an enormous number of records requires time, money, and labor. A properly executed policy will help to save money on physical storage by controlling the growth of data volume. Also, it will help improve accessibility & reachability.
- Reduce Litigation Risks: Keeping information for more than it is legally stated or destroying documents that should be available for a definite time will surely expose your business to different types of fines, penalties, or other legal consequences.
- Improved Security: Protecting information that is critical to business operations is extremely important. It will minimize data leakage and make sure information is available if need be.
What are Record Retention Policies?
Record retention policies are used to set a time frame for proper records management. This is especially important for companies that have data storage and archiving needs.
A records retention policy is a legal requirement for every organization. The records retention policy should be used as a guide for the organization to know how long to keep their records. This can be done by keeping records that are related to the organization’s operations, financial transactions, and legal matters.
The records retention policy is also an important document in the event that an audit occurs. Records that are no longer needed should be disposed of properly through methods like shredding or burning them.
A record retention policy is important because it provides the company with an overview of what they have stored and how long they have kept it. It also helps them identify if there is any need to archive or dispose of any old files because it can help them avoid legal trouble down the road.
Usually, document retention policies should answer these questions:
- Retaining Records: Which records should be kept (taxes, legal documents, Accounting, payroll, etc.)
- Records Disposal Schedule: How long should they be kept (months, years, trash/shred/destroy)
- Document Form: In which form the documents should be retained (paper, digital, etc.)
- Where To Store: Warehouses, physical cabinets, digital system.
An effective record retention policy will also minimize litigation threats and discovery costs, as well as the time it takes to recover from actual cases. Document destruction in compliance with a fair corporate record retention program will assist in protecting the company from legal risks.
Document Retention Policy Best Practices
The best retention policy for your organization will depend on many factors, including the type of organization, the nature of its business, the size of its operations, and the legal and regulatory environment in which it operates.
However, there are some general best practices that all organizations should follow when developing and implementing their retention policies.
1. Define the types of records you need to retain
The first step in developing a retention policy is to identify the types of records your organization needs to keep. This will vary depending on the nature of your business, but some common types of records that should be included are financial records, personnel records, customer records, and legal documents.
2. Determine how long you need to keep each type of record
Once you have identified the types of records you need to retain, you need to determine how long you need to keep each type of record. The length of time will vary depending on the type of record and the legal or regulatory requirements that apply to it.
For example, financial records typically need to be kept for seven years, while personnel records need to be kept for at least three years.
3. Develop a policy for retaining records
After determining how long you need to keep each type of record and the location of those records, you can develop a retention policy. For example, you might decide it is necessary to maintain general business records for a period of six years and personnel records for a period of five years
The Importance Of Automating Records Retention
Depending on industry regulations and business rules, organizations must have a flexible system to configure the retention period based on a predefined schedule.
Good records avoid audit findings and, perhaps, damages in a lawsuit; so, critical documents should be available and easily accessible when required.
Having a system to automatically manage the destruction of records will help in
- Reduced Human Errors: When we automate human processes, the business operations will run more effectively and with less error-prone. In case of retention & disposition, automating the destruction of records based on the schedule defined will make sure that no expired information retain.
- Increased Employees Productivity: Less manual & repetitive tasks will help your employees focus on more crucial projects. That will surely improve their morals & increasing office efficiency.
- Improved Compliance: Using a system to automate the destruction of electronic records will surely improve compliance with different regulations requirements. Companies need to verify that only information that needs to be retained is available.
Benefits Of Using A Digital System For Records Retention
An organization should adopt a system to handle its electronic records lifecycle to achieve the following
Dynamic Schedule Based On Classifications
The disposal schedule of records should be set based on their classifications.
Classifying information associated with legal and operational retention requirements and setting their retention period will allow you to define the document retention policies to comply with your current rules and regulations.
Powerful RM or enterprise content management solutions should give the ability to monitor records throughout their lifecycle. In that case, employees will be able to get insights into their information, status, retention period, and even assigned disposition dates.
Automated Destruction Of Records
The system should automatically be able to either dispose of or archive records based on their schedule.
This automated process is essential for reducing human error-prone thus reducing the risk of non-compliance.
Every organization should have a well-defined and routinely updated retention policy. That is extremely essential to be fully compliant with different laws and regulations which will result in cost reduction and increased employee productivity.
A record retention program is essential for a variety of reasons. A records retention program can help you avoid lawsuits while also ensuring compliance with federal and state rules and regulations.
What is a record retention?
Record retention is the process of maintaining and disposing of records. Records are the information created, received, or maintained by an organization or person. The records need to be kept for a minimum period of time in order to meet legal, regulatory, and business requirements.
How long must records be kept?
The Federal Records Act of 1950 states that organizations need to maintain their records for a minimum of 3 years from the date they were created or received. In addition to this law, there are also many state-specific laws which govern how long records must be stored. For example, in California, records must be stored for 7 years after they are created or received while in Texas they have to be stored for 10 years after creation or receipt.
What records must be kept for 10 years?
The records that must be kept for 10 years are the medical records and the prescription information. The medical records must contain all of the patient’s health information and must be kept in a confidential manner. The prescription information contains all of the medication prescribed to the patient, which is also confidential.
What is the retention policy?
A record retention policy is a document that establishes the length of time records must be retained. The purpose of this document is to ensure that records are kept for a sufficient period of time to meet legal requirements, state regulations, and company policies.