Bananas and Tax Returns

I don’t know about you, but from my perspective bananas have a shelf life, a short one in fact.  To be edible a banana has to be white all over, and not too mushy.  This was a constant issue of disagreement between my mother and I growing up.  According to my mom, as long as it’s still shaped like a banana color is not an issue,  besides, the more mushy the easier to chew right?  You wouldn’t believe the age of some of the bananas we ate on our cocoa puffs at my house.  It’s OK though, my therapist says with a little more work I’ll get over it.

So, what do bananas and tax returns have in common? Well, tax returns have a shelf life too.  In fact all business records have a life span.  Once that life span is complete you are free to throw them out like a bunch of old bananas (make sure mom isn’t looking when you do).  I find most businesses treat their records like my mom treated bananas, they hang on to them way past their retirement age. That creates a number of problems for the average business.  Problems that cost money:

• The cost to deal with office records ranges from $2.00 to $5.00 per filing inch. That means you are spending between $300 and $700 per year on every four drawer filing cabinet in your office. That doesn’t consider the cost of the floor space or equipment.

• The more information you have to keep track of the easier it is to misplace documents and files. That costs up to $5,000 per worker per year according to the IDC.

• Just storing all of that information costs lots of floor space in the building.  ARMA International has determined that companies who manage their information based on life cycle can eliminate 50% of the information they keep.

• Survey results from ARMA also found that most companies, who don’t manage their information based on lifecycle, have up to eight copies of each document floating around the office somewhere.

• If there is litigation, the more disorganized the company records the more costly the discovery and the risk of loss is greater.

So what’s a company to do in the face of all the information we keep track of?  If our information turned brown like bananas once it served its useful life, the task would be pretty easy.  There is an answer.  Sound information management allows decisions to be made about that information’s life based on a company Retention Schedule. That’s an industry term for a guide that tells you when you can discard documents and files that have served their purpose.

This guide, customized for your organization, helps reduce cost and confusion in the workplace.  So how does one develop a retention schedule for their information?  There are four easy steps:

1. File Inventory.  This is a physical assessment of the paper and electronic information the company keeps.  You actually go to each file cabinet, file server, in some cases trunks of cars, wherever you keep information and list what is there.

2. Assess.  Take your inventory form and then assess what you have. If you are like most organizations there will be lots of duplications and redundancy. During the assessment you’ll determine which forms are duplicates and where lots of inefficiencies and other information bottles necks are.

3. Refine.  The assessment will guide you in refining the way you categorize, store and access your information. Refining the company records management process will allow consolidation of types of information. It will help confirm whether information is being stored and shared properly.

4. Create the schedule.  Once the categorizing and refining of the information is complete you can assign the proper life cycle to each record type.  This requires a little research, but the information is out there. The company attorney and CPA can provide required retention schedules for tax and business records. Your industry trade group should have resources for the record types specific to your business. A web search of retention requirements for different types of information will yield results as well.

This can sound a little daunting but just take the steps one at a time and you’ll be surprised at the results.  If you would like some additional help send a request for our retention schedule guide to .(JavaScript must be enabled to view this email address).  It guides you through the steps and even has a handy inventory form.

We think you’ll go bananas over it.