|Copyright 2014 by Virgo Publishing.|
|Posted on: 04/01/1998|
Abstract: Why do businesses and organizations keep records? We will discover that requirements from government, protection from litigation and sound business practice are just a few reasons that records are not a choice but a requirement. In a sea of paper and computer data, which documents represent business records? All records are documents, but not all documents are records. If this is true, then how do you tell the difference between the two, and what does that mean to your business?
Record keeping is a requirement for all businesses. Whether we like it or not, all of us are required to keep records. Generally, there are three reasons to keep business records: litigation avoidance, regulatory adherence and sound business practice. Let's look at each separately.
Records are commonly described as the "results" of business transactions. The word "results" implies completion and serves as the evidence documenting what happened during the transaction. Records must have integrity to ensure that the information accurately reflects the transaction and is unchangeable. We use records in courts of law and require expert opinions that attest to their integrity. Once accepted by the court, they can also be used as evidence.
Government requires all businesses to maintain records. There are thousands of federal, state, and local codes and statutes that require record keeping. This is indeed a complex problem. Not only is there a myriad of requirements, but these are complex and confusing, and few businesses understand their record-keeping responsibilities.
Sound Business Practice
In their acceptance rules, organizations such as the American Institute of Certified Public Accountants and the International Standards Organization requires record-keeping standards and practices that are designed both as audit trails and internal controls. These result in records as well.
Needless to say, the complexity of these requirements makes record keeping very difficult even for the smallest organization. Many companies give up and "throw in the towel" by keeping everything, sometimes forever. It is estimated that there are more than one billion cartons of inactive records in this country alone. Probably less than half are in formal records-management programs or in commercial-records centers. Many are simply put out of sight and thus out of mind. Perhaps you have some in your own self-storage facility, locked behind closed doors.
Documents or Records: What's the Difference?
All records are documents, but not all documents are records. Which is which, and how does one know the difference? This is a very perplexing question. Documents today take many different forms. We consider voice mail and e-mail documents. Certainly Microsoft Word or Corel's WordPerfect files, as well as spreadsheets from programs such as Lotus or Excel, are documents. There are even such things as compound or complex documents such as a Word document with an Excel spreadsheet imbedded within it. Are these documents, as well? The answer: yes. Regardless of form, shape, size or media, all are documents. But are they records? The problem goes on and on. What do I keep and how do I keep it to protect myself from liability in litigation, appease the regulators and my accountant?
To top it off, documents are considered the "Currency of the Business Enterprise." Documents act as the primary means of exchange within business systems. This has always been defined as exchange of information, but today's documents cannot only exchange information but also the work process. They carry value to a business not only as records, but also as important information assets that can be reused and shared in work groups.
Records are commonly segregated according to their life cycle. Typically, we classify them into active, semi-active and inactive. These three stages of the records' life represent different uses and importance.
Active Records. During the business process, there are certain events that document the completion of parts of a transaction within the work process. These records are commonly kept near the employee that uses or creates the record, usually in file cabinets, electronic media storage or at ready access to complete a transaction.
Semi-Active Records. These records have reached completion, but are maintained close by for easy reference. They are usually held in file rooms or in secretarial workstations for quick review immediately after the completion of a transaction, and are usually stored for up to a year or so afterward.
Inactive Records. These are records that have minimal practical use on a day-to-day basis but must be maintained for compliance issues. They are usually boxed and stored away from the high-cost office floor space, and are very often poorly indexed and improperly packaged. They carry little importance until they are needed to prove something to a court or a regulator. Then they become absolutely essential.
Records Retention Schedules
In order to maintain order in any records-management program, a company or organization must construct a retention schedule. This is done by grouping records into homogeneous types called records series. Optimum records-management programs assign a life cycle and a destruction date to each record series, along with a citation to the appropriate regulatory code or statute that requires the maintenance of that record. Retention scheduling is complex and precise. Professionals create these in the records-management business usually with the certified records manager (CRM) certification. Both the corporate legal council and the internal auditor must approve the corporate records retention schedules to insure maximum compliance.
All records have a life cycle that ends in disposition. This means either destruction or migration to another media. If the record is destroyed, a certificate of destruction is required to document the destruction. Destruction is usually done by the commercial records center and validated by date, time, method and corporate approval. This certificate is used to validate the destruction in accordance with the retention schedule. This is proof that the record no longer exists and was destroyed in line with the retention schedule guidelines.
Records are everywhere, and they continue to grow at an annual rate of 15 percent to 22 percent, compounded annually. Destruction rarely exceeds growth. Commercial records centers can expect to run out of space periodically--just from existing clients. Although this continues the growth of storage revenue, it also requires additional capital investment for shelving and space. Those of us in the industry must plan for this inevitability.
Regular columnist Cary F. McGovern is a certified records manager and owner of File Managers Inc., a records-management consulting firm that also provides outsourcing services, file-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail firstname.lastname@example.org; Web: www.fileman.com.