Speaking of Taxes...

The thought of an IRS audit is not one most would entertain with open arms, but the possibility of being chosen is a fact of doing business in the United States. To come through it without fines and legal drama, you must have absolutely thorough documentation; this includes everything from your filed returns to your receipt for a small charitable donation. Perhaps the record of its existence is noted in your accounting software, but there can be a big step between knowing (or hoping) something exists and knowing where to find it.

Despite their best efforts, many businesses simply don’t have the filing system or the data security in place to produce said documentation without a scouring of multiple locations and a trip or two to the accountant. Compounding the problem is the likelihood that an employee has inadvertently misfiled a piece of paper that you need, or worse, thrown it out in an effort to manage the disarray.

In addition, you cannot afford the potential consequences of being non-compliant with rapidly changing government regulations. It is difficult to stay on top of records retention requirements to begin with, and putting an effective schedule in place can be nearly impossible for the reams of printed data a business produces in a year. This generally results in one of two things: either the information is kept too long, causing storage needs and expenses to spiral out of control, or it is thrown away too soon, which can put you at risk for exorbitant fines and publicity you don’t want.

So what is the answer? At the very least, each year’s records and receipts should be boxed together in meaningful files, and any electronic data should be backed up; this information should then be sent off to a secure off-site location where it can be indexed for easy retrieval and scheduled for destruction where recommended. This not only puts your data where you can find it, it secures your sensitive information from inquisitive employees with a key to the filing cabinet.

However, this still leaves your files on paper, which happens to be a vulnerable substance. To put your files in the safest place possible, they should be scanned to a secure server where they will be even more accessible to you, but protected from catastrophe by multiple back-ups. Many agencies, including the IRS, now allow for the destruction of certain paper documents as long as an electronic version exists.