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.