How you save and store your documents may seem simple. However, more manila folders tend to mean more problems — at least when it comes to contemporary record-keeping systems that are functional, scalable and secure.
In this guide, we’ll explain why a proper record-keeping system is so essential for any organization looking to maximize profits and minimize problems, plus the best content-management option on the market.
What Is Records Management?
Records management refers to a comprehensive, organized and orderly system for tracking and saving your business’ records. When successfully instated, a records-management policy will cover:
- A core file-keeping repository or database.
- A simple, sensible method to store and save new files.
- Accessible technology to retrieve and review stored documents.
- Clear timelines for how long records must be kept that adheres to statutory regulations — which can be anywhere from two years to indefinite storage, depending on the record type.
- Responsible and compliant records disposal or deletion.
For sole proprietaries and multi-national, registered corporations alike, these records are the operational and expense paper trails. Each document reveals the financial and legal obligations of your organization and — more holistically — its operational discipline.
Here are some examples of records your business might need to keep:
- Vendor invoices and payment receipts
- Purchase invoices and payment receipts
- Auditor reports
- VAT records, if pertinent
- Customer records
- Bank statements
- Income statements and summaries
- Balance sheets
- Earnings statements
- Tax returns
- Contracts and leases
- Proof of insurance
- Business licenses
- Other wage and personnel records, like medical records and contributions to employee retirement plans.
Record-keeping, otherwise known as bookkeeping, may sound simple. However, in reality, many businesses and administrators struggle to address the sheer amount of documents flowing across departments every single day, plus the subsequent oversights, expenses and missed opportunities caused by poor record-keeping.
Why Are Records Important in an Organization?
1. Reduces Room for Human Error
2. Minimizes Losses
3. Decreases Audit and Compliance Risks
Proper record filing and retention is the first step to upholding industry regulations and wider business compliance. A fully orchestrated record management system ensures you can locate essential documents for tax filings and other mandatory paperwork, minimizes human touchpoints on those documents and sets up user-access controls.
Records management is even more critical for certain document types, such as financial records. Mis-archiving these files can result in severe penalties from government fines to potential legal action if the non-compliance is deemed intentionally negligent.
4. Unburdens Employees
Well-designed record management structures a clear pathway for handling files, which alleviates employees from managing ad-hoc systems themselves. It’s easy to see how this kind of individualistic method quickly snowballs into inefficiency since everyone oversees a subjective set of practices fundamentally tied to their own computer or their own team’s internal storage files.
Furthermore, with one set approach to capturing, storing, mapping and retrieving files, employees can perform work faster, knowing exactly where documents are at all times.
5. Boosts Office Peace of Mind
What employee doesn’t want tools to make their workday easier? This is precisely what a standardized approach to business record-keeping offers, packaged as part of a more significant effort to support efficient workflows and operational systems.
When employees feel their organization cares about the ease of their days and ability to perform work simply and straightforwardly, it is reflected in their work. On a macro level, managers also have stress-levels alleviated, knowing their teams have everything they need.
Top 10 Pros of Keeping Your Business’ Records Organized
Better business record-keeping assures these benefits for your organization:
1. Claim All Possible Deductions
- Maximize your deductions, with proof of expenses and itemized write-offs clearly amassed over the year for you to claim.
- Better tax planning, with documents outlining clear tax liabilities and income categories quickly funneled into filings.
- A savvier overall tax-obligation management strategy with fewer surprises and headaches.
2. Claim All Possible Vendor Discounts
Record-keeping is so vital for businesses in all industries and of all sizes because it keeps you on track with your financial commitments, both internal and external. You’ll help maximize the money flow making up your tapestry of vendors and partners, with a clear paper trail allowing you to see source receipts and find relevant cost-saving opportunities with each.
3. Create and Adjust Budgets
Organized records allow you to get a clearer picture of your organization’s expenses and overhead costs. It serves as a dollar-for-dollar paper trail showcasing exactly where your money goes, when and for what purposes.
Such orderly and readily available information improves the way you prepare budgets. Teams can readily identify the strengths and weaknesses of current budget allocations, then make informed adjustments.
4. Pay the Right Tax Rates
The tax benefits of solid record-keeping don’t end with maximizing deductions. It also allows organizations to make informed projections about tax liabilities, meaning you won’t find yourself under or overpaying.
Plus, your records serve as vital credence to any adjusted taxes or newly claimed deductions. IRS auditors or inspectors may require access to financial business records to clarify recorded changes, beginning with past business tax returns. They’ll expect justifications for reported items, claims, deductions and other liability categories. Having a complete, cohesive set of organized records is your best tool for getting the proper tax rate.
5. Scale Your Business
Are you applying for a loan, filing for a new permit or re-upping your business license? Are you interested in a game-changing business grant? Having records at-the-ready expedites these applications and makes the prep work for each far less stressful.
More broadly, business records will be necessary when managing any of the following licensing and permit requests, including:
- Liquor licenses
- Food preparation permits
- Seller’s permits
- Home-occupation use (HOU) permits
- Broader doing business as (DBA) statement
Depending on your industry or location, these licenses and permits may be required at local, state and even federal levels. Certain business sectors may also be required to maintain proof of insurance. Losing or neglecting these records puts your business at a higher risk for audits, fines, operational penalties and even legal action.
6. Profit Share
Companies that offer profit sharing to employees need a streamlined records-management system that makes tracking and allocating these profits easier. Without such a system, this employee perk becomes a habitual pain point for your administrators. The same logic applies to profit-sharing amongst company shareholders in the form of dividends.
7. Strategically Refinance
When timed right, business loan refinancing can lower interest rates, re-work your repayment timeline or both. However, to do so, you’ll undergo a repetitive business loan application requiring you to submit several key financial records, plus additional files to back up your application.
8. Understand Your Financial Strengths and Weaknesses
Solid, streamlined record systems ensure you can conduct a financial analysis of your business whenever the need strikes. Your records will objectively outline where your business thrives, including its top revenue sources, as well as showcase budget variability, uncertainty and top expenses.
Similarly, records clearly highlight your full business assets ecosystem, plus things like your business equity and liabilities.
9. Calculate Your Business’ Basis of Property
Basis of property refers to the original cost of purchasing your business’ office, building or property adjusted for depreciation.
To begin, temperature-checking this aspect of your investment is important for tax purposes. Basis of property calculations foremost affect depreciation deductions you can claim on your business’ taxes. It also affects gains or losses on potential property sales and exchanges, as well as amortization claims, casualty losses and other important asset-depreciation tracking.
10. Alleviate Stress
From properly preparing the full gamut of tax returns to managing everyday operational expenses, it’s no wonder administrators are often stressed, working and worrying around the clock.
A streamlined and digital-first records-keeping system alleviates many of the pain points involved in one of the simplest yet most essential aspects of running a profitable business. Good filing systems speed up core administrative activities. Great filing systems relieve the stress associated with performing these activities in the first place, letting you place your brainpower on higher strategic priorities.
The Best Way to Keep Your Business Records Organized
So, what’s the ideal way to manage your business records? The answer is enterprise content management (ECM) systems.
ECM software is the most contemporary solution for businesses to cohesively capture, compartmentalize, track, change and store files and data virtually.
These platforms offer the ideal solution to ease the most common process pain points associated with managing core business documents — the ones affecting every department or process in your organization.
What’s more, the majority of ECMs is cloud-based, so you can handle every file and piece of paper remotely, without needing to physically be on-premise or at your desk.
Why is ECM your ticket to better business record-keeping? Consider the core features of a comprehensive, cloud-based and automated ECM and the benefits each feature brings:
It’s digital: It’s 2020 — filing cabinets stuffed with manila folders don’t cut it anymore. Plus, they come riddled with the risk of incidents like lost or damaged files, poor security and more.
It automates document capturing: No more manually filing paperwork in bulky storage spanning an entire wall of the office before — and often redundantly after — scanning it into ad-hoc computer folders. Document-capturing software integrated into an ECM can automatically read, then digitize documents into electronic form before sending them straight to ECM storage. The most advanced document-capture software also codes the information on a document into readable data that can be searched in seconds.
It permits annotations: Highlight, underline, circle and add actual notes to ECM-stored documents without creating extra copies.
It lets you e-sign and send files in the platform: User-friendly ECMs make it easy to sign and send files directly from the software itself. Compare this to the time-intrusive downloading and hard drive re-saving necessary before you can email a document in old content-management systems, which don’t have in-platform sharing capabilities.
It instantly finds what you need: Dynamic ECMs will have a range of search features available right there on the application’s home screen. One of the most convenient of these core features is a cross-platform document search. Compared to other internet-based filing systems, application-screen document searching lets you cross-reference files simultaneously in just a few clicks. You can even reference ECM-stored files while in other apps, allowing you to check or coordinate information without leaving the program you’re currently using.
It acts as your second eyes: Comprehensive ECMs will come with platform-agnostic applications permitting bonus functions like a web portal search or optical character recognition (OCR). Use key words, values or wider global search filters to find the exact data you need without sifting through half a dozen folders just to find one file with one specific line of information.