Accounting Best Practices, Fifth Edition

10–12. Adopt a Document-Destruction Policy

Many companies keep on storing more documents year after year because they have no idea of when they are supposed to get rid of them. By default, they typically remain in a heap in the back corner of the most distant warehouse, eating up space that can be put to better uses. For companies that have been in operation for many years, this can become a considerable burden due to the many years paper has been allowed to accumulate, especially if management has a habit of purchasing expensive filing cabinets in which to store old records, rather than less expensive cardboard storage boxes.

One solution is to work with a company’s lawyers and certified public accountants (CPAs) to construct a document-destruction policy similar to the comprehensive one shown in Exhibit 10.3. The policy should take into account the document-retention requirements of all federal, state, and local regulatory agencies, always adopting the longest required retention period. Once this policy has been completed, the existing pile of paperwork can be sorted through with an eye to eliminating all items for which there is no legal reason to keep them. When conducting this elimination process, however, it is important to keep all documents for which there is no termination date whatsoever, such as corporate minute books, titles to automobiles, or project files for special ...