- Scan, scan, scan. Businesses have so much paper. Scanning
and digitally archiving files achieves two purposes: cuts down on storage space and makes it easy to locate.
- Have a back-up plan. Whether you scan or keep your data on your computer, make a backup and make sure that backup is in two places. Also, cloud backups are inexpensive so consider that option.
- Shred but pay attention to the statute of limitations. Don’t just shred tax return documentation to eliminate paper. Make sure you understand how long you need to keep your records before you shred them. For most tax returns the statute is three years after the due date of the return, or three years after the return was actually filed, whichever is later. The difference is forms 941 which specifically set the statute at three years from April 15 of the year following the year for which the return was due or 3 years after the date the return was actually filed, whichever is later.
- Create a system and schedule it. Figure out which of your records should be saved ahead of time. Then create a system and a schedule for shredding, filing and scanning, and train your employees how to follow it and stick to it. Although it’s important to follow that system, review it on a regular basis to make sure it still makes sense. Technology changes as do your employees so be flexible.
- Protect those passwords. Use a password management program such as lastpass or clipperz. Don’t store your passwords on a piece of paper under your keyboard or on a sticky note attached to your monitor. And set up passwords in your accounting system even if you’re the only user. You have confidential data in your accounting system and you really need to protect it. Also, don’t forget to encrypt those files that you scanned in #1.
Use the cloud. Many people tell me they don’t want to use the cloud for their finances because it’s not secure. The reality is that we use it every day. We use it to access our banking information, pay our payroll or sales taxes on-line and report payroll to the payroll service. The list is endless. What is less secure is the confidential data we keep on our servers or in our desk. Plus, there’s the added bonus that your accounting software is always backed up (see #2).
Using products such as bill.com, Xero, QuckbooksOnline, etc., will keep the detail information connected at the transaction level. And for an additional peace of mind you can always backup your cloud service annually to your own backup system.
Naturally you need to check out hosting or cloud services but the benefits are many. Those services have to maintain a certain level of security. Most will also have redundant backups in different parts of the country.