The beginning of the New Year is one of the best times to implement new (and more efficient) business practices. Keeping better business records is one resolution that every New York or New Jersey business should consider.
Good business records can help track the progress of your business, prepare your financial statements and tax returns, and ensure that you are paid for your products or services. In addition, accurate and complete business records are some of the best ways to avert or defend a business lawsuit.
Below are a few tips to consider in 2013:
Documentation: Good business records start with careful and thorough documentation. All activities and transactions related to complying with government regulation or reporting requirements, memorializing daily business activities, and protecting the legal rights of the business should be placed in writing and retained as business records.
Management: To effectively manage records, businesses must have systems in place. Although the specific systems will depend on the needs of the business, it is important that both paper and electronic records be addressed. Businesses should also have policies and procedures in place so that employees understand their obligations when it comes to records management.
Retention: It is important to understand your legal obligations with respect to document retention, which may be dictated by regulations, statutes of limitation, or contract. For instance, federal law requires that records of employment taxes must be kept for at least four years. As a general rule, records should be retained for as long as they are useful to document an underlying transaction, protect a legal right, or inform a business decision. Of course, businesses cannot and should not retain records indefinitely, but can and should purge them in accordance with a procedure established with the aid of counsel. In the event of contemplated, threatened or existing litigation, counsel should be promptly consulted and a written “document hold” letter prepared and sent to appropriate parties.
Security: Businesses should also have policies and procedures in place to protect the security and confidentiality of their records, which may include sensitive customer data as well as proprietary business information. To avoid potential liability, businesses should consider how this information is collected, stored, and disclosed.
Auditing: Businesses with record management programs in place should conduct an annual review. In many cases, businesses will find that they have outgrown their current systems or otherwise need to alter their systems to meet the changing needs of the company.
If you have any questions about business records or would like to discuss how to improve your company’s policies and procedures, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.