Your Data Retention Guide For A Small Business
Businesses deal with an extensive collection of records. The process of maintaining and keeping these records doesn’t only entail keeping crucial files in case you need them in the future. There are specific federal guidelines and business policies regarding document retention. Every business owner has the responsibility of ensuring documents are properly maintained and retained. Here’s a brief look at what data retention is, why it’s essential, and how it’s applied.
What Is Data Retention?
A data retention policy is a set of business protocols for maintaining records for a specific period. These policies are created to comply with legal requirements, industry guidelines, and business needs. A data retention policy should highlight why your business wants to keep specific records and how the information will be dealt with when it’s time to dispose of it.
Furthermore, this policy should detail who’s liable for specific data and whether records should be deleted or archived when they are no longer needed. Data retention policies such as email archiving are essential for ensuring appropriate data backup. Backing up data helps your business retrieve crucial information in a situation where it experiences data loss.
What Is The Importance Of Data Retention?
A data retention policy is crucial to ensure a business backs up the right amount of information. If you fail to back up enough information, recovering from a disaster will not be comprehensive. On the other hand, backing up too much information will create confusion when retrieving data.
Data retention policies act as part of your business’s data management strategy. Records can accumulate, making it overwhelming for a small business enterprise. Data retention policies help to set time limits for specific data. A business should only preserve data for as long as necessary. When a company archives data longer than required, it takes up unnecessary storage space and increases costs.
It’s also essential for a company to have a data management system that complies with statutory, legal, and regulatory obligations. These policies support a business’s functions and guarantees data privacy.
While a company may create its own data retention rules, these must abide by data retention laws. For example, in the U.S., publicly-traded businesses should have data retention standards that abide by the requirements of the Sarbanes-Oxley Act. Similarly, healthcare companies should have data retention requirements that abide by the HIPAA regulations (Health Insurance Portability and Accountability Act). If you accept credit card payments, your data retention policies should abide by the (PCI DSS) Payment Card Industry Data Security Standards.
Some companies are also required to meet the requirements of the GDPR (General Data Protection Regulation). These organizations should have data retention policies that show what data is collected, why it’s collected, where it’s kept, and how long it’s retained, as per the requirements of GDPR.
How Data Retention Is Applied
1. Business And Financial Records
A business needs to determine how long they should keep records. Certain records need to be reserved for several years, while others need to be retained permanently. To be on the safe side, you should keep all receipts, bank statements, and general records on your business accounts for at least seven years. All inventory and cash books should be retained permanently.
2. Tax Records
According to the Income Tax Assessment Act, tax records should be retained for at least five years. This Act also extends the period for certain tax records. Experts recommend that small businesses keep their tax records permanently. While this may produce an accumulation of paperwork, failing to follow the appropriate tax record retention regulations can lead to huge fines.
3. Employee Records
Another element of business document retention is employee record retention. The retention of employee records varies depending on the record. Some employee records should be retained permanently. For example, pension plans, payroll records, union agreements, and earning records should be retained permanently. Employee contracts and accident reports should be kept for at least seven years.
4. Insurance And Legal Records
The law requires that accident reports and worker’s compensation reports be kept for at least ten years. Other insurance policy data should be retained for at least three years after the policy is terminated. Legal documents like documents related to accident reports that could lead to lawsuits in the future should be kept for at least six years. Legal documentation, like the breach of contract actions, should be kept permanently.
5. Corporate Records
Small businesses that are based on a corporate model should retain certain records. Information about stock transfers and ownership, business permits and licenses, and annual reports should be kept permanently. On the other hand, information on corporation members and the minutes from meetings should be reserved for a minimum of five years.
Data retention policies are crucial for both large and small corporations. These policies are essential for backing up data for situations that lead to data loss. They also help retain data for future applications. Additionally, data retention policies set the time limit for data, which prevents overwhelming your company with unnecessary information and ensures the proper utilization of data storage systems.