Records retention plays a few critical roles in the operation of a business, assisting in productivity, organization, and even legal compliance. Despite the importance of retention in records management practice, many businesses still don’t have a solid process in place to ensure that the retention of business records and documents is properly managed and administered. If this sounds like you, you may want to reconsider how you view records preservation. Here are the things you need to know about record retention for your business.
Records retention is the law
For businesses, records retention is legally mandatory. There are rules set out by the government that dictate that all businesses, corporations, organization and trusts operating within Canada must keep adequate business records. Adequate means that your record keeping provides enough details to determine tax obligations and entitlements.
Failure to retain records, either because of poor records management or lack of records retention policy, can result is serious repercussions, including fines and other legal backlash.
Records must be kept for a designated period
Under Canadian records preservation law, all who are required to keep records must do so for a period of six years from the date of creation. However, for specialty records, the period can vary. For example, historical information about a business or organization that could affect its sale or liquidation must be retained indefinitely.
Specific record types must be kept
Records retaining law in Canada outlines that every document, record or piece of information that is relevant to determining and fulfilling tax obligation or in calculating entitlements must be retained. These may include payroll records, e-commerce records, books and records detailing income and expenses, sales and purchase invoices and more.
Other documents that are included under records preservation law include appointment books, logbooks, income tax and GST/HST tax returns, R&D records, as well as other applicable documentation.
You can keep records in different formats
Internal records preservation is strictly a paper-based project. You are required to support your records with original documentation, but these can take many formats. According to the CRA, records management can be executed in the following ways:
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Paper format
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Electronically accessible and readable format converted from paper
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Electronically accessible and readable format produced digitally
A records preservation policy is good records management practice
Records retention policies can help ensure that your organization remains in compliance with the law at all times in order to meet tax and operational obligations. Many organizations have found it effective to administer this process using a document management system, which can help to improve operations while also assisting with business records management.
