There has yet to be formed a business that enjoys paper. The only exception being paper checks bound for accounts receivable and signed contracts for new business. Most businesses are inundated with official paper. Paper comes into organizations from customers, the State, the Feds, employees, attorneys, businesses, and others. Paper goes out of the organization to the same people. It seems that an organization exists solely to move and manage paper.
Paper, in and of itself, has limited intrinsic value until words are printed on it. Depending on the printed words, that paper now becomes something of value. Think of blank check stock. The paper that is used to print checks is limited in value, and only increases as more and more information is printed. The paper now has worth and the organization now sees value in safeguarding it. The paper has a lifespan. Not a lifespan in the biological sense, but a lifespan or timespan wherein the words on the paper have value. Paper that is worthwhile retaining undergoes a name change as well. It moves from being called paper to being called a document. One sees this in the language of the printer/copier. We fill the machine with paper and assemble the printed output into documents.
Offices invest in their documents by accessorizing and adding jewelry in the form or staples, binder clips, or colorful paper clips. Special coverings and tracking numbers are sometimes added. Eventually, every document comes to rest in a favored location in a special room on a specific shelf in a labelled box next to other favored documents that share some of the same characteristics. These documents now patiently await their inevitable destruction after their relevant lifespan is met.
Some documents are of greater value and are kept in a separate location where companies expend greater resources protecting and housing them indefinitely. These documents are generally intrinsic to operating the business or defining who has authority over corporate resources and what those resources comprise. They need to be assembled together and handled in such a fashion as to insure their survival in the event of a disaster.
Other organizational documents may relate to ongoing business practices specific to a project or relating to a specific account where privileged information and access is a concern. These documents are handled in accordance with agreements established between the client and your business.
All documents have some intrinsic value and purpose which establishes the basis and need for an organization to retain them. Document retention is a big big marketplace with many vendors and an incomprehensible number of products that support the efforts of organizations to handle their documents. Naturally, all these products are critically essential and your organization’s very survival is rooted in acquiring and integrating them in your day-to-day processes – sigh.
Note: Take a deep breath and put on the mantle of sanity and reason. Now you are relaxed and prepared to listen and learn from the myriad of vendors all working to separate your organization from it’s money. Take heart… not all organizations are in dire need of document management, and not all organizations need external talent to help figure out what to do with documents.
What characterizes a document to be retained.
Generally, any document that affirms authority to conduct business and/or conveys authority to individuals for the operation of the organization should be retained and protected. The operational documents of the business would include documents pertaining to authority over financial assets to include all financial banking accounts and all investment accounts, and any board proceedings that convey authority or prescribe organizational behaviors. If your organization licenses any assets to other organizations then those documents should be protected as well.
Other documents that should be considered would be licenses and approvals by the town, county, state, or federal government to conduct or engage in business activities. If your organization has insurance policies, those policies should be protected as should any lease or property ownership documents. If your organization has procured any other rights to assets or resources, those also qualify for protection.
Any financial document that your organization made use of to construct an official filing with a governmental entity should be retained according to the requirements set forth by that entity. If you relied upon any documents to architect contracts or set forth terms, those documents should be kept as well. Include your personnel records and historical pay information in this set of documents as they form the basis of your organization’s compensation plan.
A class of documents that is sometimes overlooked is the group of documents that describe processes or materials that your organization makes use of in creating your products. These are generally corporate secrets and also should be protected as should any patent submittal documents or documents from the United States Patent and Trademark Office (PTO) granting your organization a patent.
Lastly, all organizations have user ID’s and passwords to maintain. These credentials need to be retained in a protected fashion that may be on paper or in electronic form. Generally, unless it is an impossibility, all credentials should be located on paper and secured. This type of information is not only secured, but it is also protected and has controls that govern physical access.
Paper? Really? Yes! Paper is still the gold standard in archiving information. Paper is inexpensive, durable, impervious to data manipulation, not affected by malware/viruses, and not subject to technological obsolescence. Paper retains its readable characteristics from the first day of use to whenever it’s needed in the future.
The exception to the rule would be electronic credentials that are generated on-demand and then discarded. These are often used in multi-factor authentication environments. In this situation one has no choice other than to retain the root keys and the cipher keys that are licensed to the organization to generate the acceptable credentials used to grant access.
Generally speaking, an organization should plan on retaining all documents coming in, moving within, and going out of the organization. Having said this, from the vantage point of retaining all documents, an organization can begin the process of whittling away those documents that are unnecessary to retain. The whittling away process is not a fast process, but it is an essential one.
Who is involved in the whittling away process?
The whittling process is one of identifying the documents your organization possesses and then determining the relative value the documents have to the organization. This process takes time and discussion. Expect to spend considerable time and effort in discussions.
An interesting side-effect of the process is that during discussions surrounding the value of documents, often business processes are discovered that are either redundant or no longer necessary to the operation of the business. Of course, this opens up a whole new set of issues an organization needs to address.
Expect to involve people from management, legal, finance, operations, manufacturing, Information technology, and customer facing departments. Do not exceed 7 people in the discussion/decision groups. When groups exceed this number they become dysfunctional and lose their effectiveness.
Keep in mind the goal of the whittling process: to identify documents that are not necessary to retain. Remember that documents is a generic term that encompasses multimedia files to include recordings of audio, video, photographs, and data acquired from processes. One can quickly see why the document identification and whittling processes can be enormously time consuming. As arduous as the process is, it will save countless hours as the organization moves forward.
Document retention is the basis for the process by which an organization self cleans. Document retention provides a method to identify types of documents and their lifespan. The process of document classification, while a bit arduous, sets the groundwork upon which the organization establishes a defensible position for the presence or lack thereof of documents during a legal document production request. The end product of the classification process is a document retention schedule that defines all the document classes and their useful lifespan within the organization.
Having a retention schedule will assist the organization in the following ways:
- Demonstrate compliance with statutory/regulatory reporting requirements
- Control over unrestrained records growth
- Reduction overall of potential litigation risks
- Improved utilization of storage resources
- Cost avoidance
The retention schedule is a single document that is created in support of the organization’s retention policy. The retention policy puts to words the approved methods for classification of document types, their storage locations, the methods of document destruction (both mechanical and electronic), and the management process governing the activities to include who does what and when and how.
If you are unfamiliar with retention schedules or policies, they are easily located with a web query.
Keep in mind that there are statutory requirements imposed by the Federal Government on certain classes and types of documents. Other organizations also impose legal requirements for retention periods. To be certain that you are in compliance with federal, state, and local requirements contact your attorney or CPA.
Sample Retention Schedule:
- Accident reports/claims (settled cases) 7 years
- Accounts payable: invoices, ledgers, and schedules 4 years
- Actuarial reports Permanently
- Articles of incorporation Permanently
- Audit reports Permanently
- Bank reconciliations 4 years
- Bank statements 4 years
- Bills of lading 3 years
- Budgets – projections 2 years
- Bylaws Permanently
- Contracts, mortgages, notes and leases (expired) 4 years
- Copyrights/trademarks Permanently
- Correspondence (general) 2 years
- Correspondence (legal and important matters only) Permanently
- Correspondence (routine) 2 years
- Deeds, mortgages, and bills of sale Permanently
- Depreciation schedules Permanently
- Directives – exclusive Permanently
- Duplicate deposit slips 2 years
- Employee expense records 3 years
- Employment applications 2 years
In part 2 (Document Cornucopia – retaining and protecting) categories of risk will be addressed and the considerations your organization can explore to protect documents that have been identified as necessary to retain.