Document Retention

Beverly Thompson, one of the most up-to-date members of SCC Sequoia’s Core Team, sent me the following on Nov 13th. I think my readers might find it helpful.

DOCUMENT RETENTION (Beverly Thompson, 11/13/14)

The subjects of document retention and its cousin document management are two of the least sexy ones in the realm of IT. In my experience, in companies from start-up size to billion dollar enterprises, the discussion of document management causes eyes to glaze over and attention spans to wander. Then the legal team of Dewey, Cheatem, and Howe shows up with a subpoena. Or the SEC. Or the IRS. Or it could be as “simple” as a pricing discrepancy on a significant customer’s order and email conversations ensue on who promised what to whom and when. The scramble to gather documents and emails, the proverbial paper trail, begins. And at what cost? How much does it cost your company in terms of man-power and loss of production to gather everything that is needed to handle the issue at hand?

In my career, I have worked in the functional areas of accounting and finance, order to cash, procure to pay, manufacturing operations and logistics, quality control, and IT. I have survived audits by MITI (Japan’s Ministry of International Trade and Industry), restraint of trade lawsuits, sales tax audits, multiple mergers, acquisitions, and spin-offs, and the list goes on. In short, I have personally spent 100’s of hours reconstructing paper trails and gathering data/documents for these unexpected situations. If proper document management and retention policies had been in place, I bet I could have saved more than 50% of those hours just hunting down the information. Multiply my hours by all the others involved in those situations and you can see the true cost of not having a system and process in place.

As a firm believer in “begin as you mean to go on”, setting a document retention and management policy in the early days of a company’s existence helps meld it into the corporate culture. It is not red tape; it is sound business practice. Document management systems are relatively inexpensive these days and a few bucks invested now can save you thousands of dollars later. Implementing this type of system, policy and practice in a larger company will require change management and training but will be well worth the effort in the long term.
Document retention policies need to cover hard copy documents, email, electronic documents, and electronic data. In other words, it should include every method of written communication (and this includes the data needed to generate that communication in the form of reports, invoices, checks, etc.). These document types can be segmented by type of content, use, or a combination. Retention length may be determined by the document type. Some retention lengths are dictated by regulatory agencies like the IRS, SEC, FDA, etc. Other documents, such as email, are harder to classify because of the myriad subjects and content associated with email. Draft documents may not be kept at all. It is imperative that the policy covers all document types however and that the policy be carried out in a consistent manner.

The policy also needs to cover what to do in the event of a government investigation or when some threatened litigation is discovered. The company’s legal counsel or audit firm may instruct the company to cease the destruction of any documents that may be pertinent to the situation. There needs to be processes in place to communicate the situation to involved parties so that potentially required documents are properly saved and are “findable”.

In short, document management and good retention policies may not be the most fun topics but having them will save you time, frustration, and money in the long term.

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