There are an enormous number of record and document types that flow through a corporation every year, many of which will be reviewed repeatedly for a number of years thereafter. Without a proper record keeping system, a company will incur substantially higher costs in some areas. All too often, there is no criterion for how long a record is to be retained, and so documents will tend to pile up in a disorderly manner. To avoid this trouble, there should be an official and written policy that carefully itemizes the number of years that each type of document will be stored before it is destroyed.
The number of years for which various types of documents must be retained will, to some extent, be determined by local or federal government regulations.
If there are contractual agreements with other entities that might result in audits of company records, then the retention period for any related documents should be tied to the termination dates of the contracts. For example, a cost-plus government construction job may require a company to retain all job costing records for a period of three years after the completion date of the contract. The records most likely to fall into this category are those related to billings, fixed assets, inventory, and manufacturing costs.
There will also be a number of documents that should be kept for as long as the company is in existence. These documents include blueprints, formulas, copyrights, patents, trademarks, leases, the certificate of incorporation, bylaws and constitution, and the Board minute book.
If there is some expectation or history of lawsuits in certain areas of company operations, it may also be necessary to retain selected documents to serve as a possible future legal defense, in which case the statue of limitations will serve as the proper guideline for the date of document destruction. Accordingly, the legal staff should be consulted when this schedule is constructed.
If there are other documents for which there are no governmental or legal reasons for retention, then the basis for determining a retention period should be the time period after which there is no reasonable expectation that they will be used.
An example of a policy that incorporates these guidelines is shown below:
Type of Record and Its Retention Period [in the bracket]
Audit report, external [Permanent]
Audit report, internal [10 years]
Audit workpapers, internal [4 years]
Articles of incorporation [Permanent]
Advertising, original artwork [10 years]
Advertising, research reports [2 years]
Advertising, tear sheets and proofs [Permanent]
Bank reconciliation [6 years]
Bank statement [6 years]
Bond, fidelity [10 years]
Budget [5 years]
Check, dividend (canceled) [6 years]
Check, payable (canceled) [6 years]
Check, payroll (canceled) [3 years]
Collection notes [While customer is active]
Contract document [5 years after termination]
Copyright application [Permanent]
Cost estimates [5 years]
Credit application, customer [While customer is active]
Customs paperwork [5 years]
Debit/credit memo [5 years]
Deposit slip [6 years]
Expense reports [5 years]
Financial statements [Permanent]
Forecasts [5 years]
Franchise record [5 years after termination]
Guarantees [5 years]
Insurance claim, other than employee [3 years after completion]
Insurance claim, worker’s compensation [3 years after completion]
Inventory, cost record [3 years]
Inventory, count sheet [3 years]
Invoice, company [5 years]
Invoice, supplier [5 years]
Journal entry [10 years]
Lease document [5 years after termination]
Ledger, general [Permanent]
Ledger, subsidiary [Permanent]
License, business [10 years]
Litigation record [5 years after termination]
Minute book [Permanent]
Mortgage [5 years after termination]
Note payable [5 years after termination]
Note receivable [5 years after termination]
Overhead allocation calculations [5 years]
Patent application [Permanent]
Plan, annual [5 years]
Plan, long-range [5 years]
Proxy [6 years]
Purchase order [5 years]
Receiving record [5 years]
Report, to shareholders [Permanent]
Royalty record [10 years]
Security registration [Review after 5 years]
Shareholder list [6 years]
Trademark application [Permanent]
Source: Willson et al., Controllership, John Wiley & Sons, 1999, p. 1309.
The time periods noted in the above list are examples only, and should not be used for an actual document retention policy without first being reviewed by legal counsel. Any ongoing changes to this table should be authorized by legal counsel as well as the chief accounting position in the company [Controller or CFO]. For a detailed listing of recommended storage intervals for documents, one can consult the “Guide to Record Retention Requirements,” which is published by the U.S. Government Printing Office.