In this edition;
Our firm offers traditional accounting, tax advisory and audit services, but we also have a strong emphasis on Business Lifecycle Planning. Visit us at www.bikcpa.com or contact any of our professionals at 847.358.1170
Record Retention Policies: How Long is Long Enough?
Tax professionals are frequently asked by their clients for guidance on document and record retention policies. It is very important to hold onto your business records in case of an IRS audit or other examination, yet there is no single statute of limitations for the many categories of records a business needs to retain. A good record retention policy should take into account legal requirements, industry standards and regulations of federal, state, and local taxing authorities. At the same time, however, the policies should strive for a cost-effective way of doing so.
The following business record retention schedule should be used only as a guide, modified as necessary to meet your specific needs. If you have questions about destroying any tax or accounting records, please contact a BIK & CO, LLP professional at 847-358-1170.
| ACCOUNTING RECORDS | |
| Accounts Payable | 7 yrs |
| Accounts Receivable | 7 yrs |
| Audit Reports | Permanently |
| Cash books | Permanently |
| Chart of Accounts | Permanently |
| Correspondence (legal and tax related) | Permanently |
| Correspondence, general | 2 yrs |
| Depreciation schedules | Permanently |
| Expense records | 7 yrs |
| Financial statements (annual) | Permanently |
| Fixed asset purchases | Permanently |
| General Ledger | Permanently |
| Internal audit reports | 3 yrs |
| Inventories of products, materials and supplies | 7 yrs |
| Loan payment schedules | 7 yrs |
| Payroll records and summaries | 7 yrs |
| Petty cash vouchers | 3 yrs |
| Physical inventory tags | 3 yrs |
| Plant cost ledgers | 7 yrs |
| Purchase orders | 7 yrs |
| Receiving sheets | 1 yr |
| Sales records | 7 yrs |
| Subsidiary ledgers | 7 yrs |
| Tax returns, audit reports and other documents relating to the determination of income tax liability | Permanently |
| Trial Balances (monthly) | 5 yrs |
| BANK RECORDS | |
| Bank reconciliations | 2 yrs |
| Bank statements | 7 yrs |
| Cancelled checks | 7 yrs |
| Cancelled checks for important payments | Permanently |
| Deposit slips | 7 yrs |
| Electronic payment records | 7 yrs |
| CORPORATE RECORDS | |
| Board minutes | Permanently |
| Business licenses | Permanently |
| Bylaws | Permanently |
| Contracts – major | Permanently |
| Contracts – minor | Life of contract + 4 yrs |
| Insurance policies | Life + 3 yrs |
| Insurance records, accident reports, claims | Permanently |
| Leases / mortgages | Permanently |
| Patents / trademarks | Permanently |
| Shareholder records | Permanently |
| Stock registers | Permanently |
| Stock transactions | Permanently |
| EMPLOYEE RECORDS | |
| Benefit plans | Permanently |
| Employee files (ex-employees) | 7 yrs |
| Employment applications | 3 yrs |
| Employment taxes | 7 yrs |
| Expense reports | 7 yrs |
| Payroll records and summaries | 7 yrs |
| Pension / profit sharing plan tax returns | Permanently |
| Time cards and daily reports | 7 yrs |
| REAL PROPERTY RECORDS | |
| Appraisals by outside appraisers | Permanently |
| Construction records | Permanently |
| Lease payment records | Life + 4 yrs |
| Leasehold improvements | Permanently |
Consult with your legal counsel prior to establishing any policies regarding record retention.
What's the Number 1 Reason for Failure?
The holidays are over. The economy, taxes, and the beginning of a new year are underway. For many that means business as usual. You might already be seeing the rut starting to form at home or in your business, but that’s not always a bad thing. Sometimes boring ruts are the pathway to success or the agent that motivates change to occur.
What’s the number one reason for failure? The inability to see the need to change is the number one reason. This is not a national statistic; it’s a BIK-tistic. It’s our opinion formed from watching successful clients year after year make little adjustments to keep up, adapt, or refine even when there were no urgent economic conditions forcing the change. Actually, that’s part of the problem with failure. It’s not being able to pick up on the sometimes subtle clues that may exist.
How does someone begin to identify when change may be needed? For some it’s just a matter of stepping back and looking at their situation. Others may take that same approach, but still be unable to see what to do. Did you ever wonder why some people are naturally able to do things? Athletes, scholars, and musicians are examples of people with natural talent. A lot of them work hard at what they do, but even to get into their “club” they had an innate ability to know how to run, interpret materials, or see the notes. To those not in the “club” it can be very frustrating to try hard and not see the results others get. Keep in mind that everyone has a “club”; an area they have natural ability in. Sometimes people just wish they were members of a different club.
Change is a time sensitive item and time is a limited supply. Someone may be great at shaping plastic into products or selling, but not as strong in other areas, so recognizing when they may need help is critical. Time is a big factor in the change process. In some cases people are ready to go, but need to wait for the right time. An example is buying a stock at the right price. The buyer has the money, but needs to wait for the right moment to get the stock at the price they want it. Often, people run out of time before they can start or complete their refinements.
Here are 4 quick items to assess your “change” ability:
If two or more of these items present challenges, or you have zero interest in making them work, you might want to talk to a professional. Remember, in any self-assessment, anyone can widely interpret the question to their favor, but that defeats the point of the exercise. These are must have items to have in your grasp for any change to have an impact.
- Finances. An understanding of money; the impact of cash flow, taxes, depreciation and appreciation, and having adequate financial resources on hand.
- People Skills. Not everyone has great people skills. Some people excel at what they do, but then have patience issues, lack social skills, or have difficulty thinking on their feet.
- Technology. Technology has always been a component in life. Before the telephone was invented people communicated differently. Mastering the use of the proper technology needed to achieve goals is critical. Filtering out what technology is useful to you is the first step.
- Time Management. This is a silent killer. Someone gets in early and leaves late, yet only 50% of what they needed to get done was accomplished. Either they set the table wrong at the beginning of their day and put too much on their plate, or they let other items eat into their day that stole their time.
Not sure if you need help? Please call. We welcome the opportunity to talk with you, friends, or business associates about new ideas, opportunities, obstacles or general support needs.
