B1: 2.10 Storage of financial documents

It is important that businesses store their financial documents (invoices, credit notes, bank statements, cheque book stubs, payroll records etc.) and their books (books of prime entry and ledgers) safely and securely.

First, it is a legal requirement to do so and secondly it will be useful when analysing the business’ performance and when dealing with customers, suppliers, lenders and so on. Let’s say for example that a customer is refusing to pay for goods that were supplied to him. If we cannot prove that he received and accepted the goods we might not be able to claim the money due to the business.

How should financial documents and accounting records be stored?

They can be stored in paper format or electronically but irrespective of the method used, a business must ensure that they are stored securely and safely to reduce the risk of them being stolen, lost or damaged, or being accessed by unauthorised persons.

How can they be kept safe?

When dealing with physical documents and records we should try to ensure that they will not be damaged due to poor surroundings. The storage area should not be damp or at risk of fire and flood. In addition, it should be secure (as most financial information is confidential), so it should be accessible only to authorised personnel.

Care will also be required when dealing with electronic records and businesses will often implement policies regarding:

  • Passwords to ensure that access to the records is restricted
  • Back-ups, anti-virus software and firewalls
  • Data encryption
  • Use of external memory such as memory sticks
  • Email attachments
  • Wiping hard-drives of computers that are being disposed of
  • and so on…

How long should the documents and books be kept?

The length of time that documents and books should be help for depends on:

  • The type of organisation we are dealing with (i.e. whether it is a sole-trader, a partnership, a company or some other type); and
  • The type of record or transaction that the document relates to

It is the aim of this section to provide general information so we will not go through the rules for all situations. In general, a company should keep the books and records and financial documents relating to an accounting year for at least six years following the end of the accounting year.

So for example, a business with an accounting year end of 31st December would not dispose of its financial books and records for the year ended 31st December 2015 until 31st December 2021 at the earliest.

What should be done when the documents and books are no longer required?

When a business no longer needs to keep its accounting records it should dispose of them safely and securely. Remember that these records might still include confidential information, so it is important that they are destroyed so that the data is no longer accessible. Common methods used include shredding or burning paper documents and there are various businesses that exist that will carry out these tasks on behalf of organisations if they do not wish to do this themselves.