We are nearing the end of the tax season extension period. Did you file your taxes physically or digitally? As a small business owner or entrepreneur, have you ever taken note of how much paper is involved not only in taxes but in your business operations in general?
In the digital age we live in today, any conscious entrepreneur or small business owner knows that the piles of paperwork required to run a business aren’t environmentally friendly, and switching to digital record keeping today is a must. Villanova University highlights how being environmentally friendly has “become [one of the] key focuses for companies across the globe.”
A shift toward digital record keeping is not only good for the environment, but also more efficient than filing away loads of paperwork. Digital record keeping allows for easy accessibility, cuts down on storage space, and are more secure than having physical documents lying around.
Filing records electronically is becoming increasingly popular for a reason. Being more efficient while remaining environmentally conscious is a win-win. It can be hard when making this transformation to know what records do you keep, and for how long? So, how do you successfully make the transformation from physical documents to digital?
What Records to Keep
For an entrepreneur, it’s easy to feel like you are drowning in paperwork — so much so that you may feel like getting rid of some to free up space and declutter your operations. However, you may end up throwing out business records that you will need to rely on down the road. It’s important to distinguish between the documents you will need to keep and the ones you can get rid of. The loss of some documents can hinder your daily operations, while others can halt your business entirely.
Financial records such as income, payroll, expenses, and bank statements will be needed for tax purposes. They will also be needed for the analysis of the progress of your company. Legally binding documents will need to be kept in case of any legal dispute.
Conflict such as employee and partnership disputes or instances where you need to prove ownership of your business can arise. Licenses, permits, and insurance documents are also important in the event you need proof that your business can operate within certain regulations. Keep client and employee information readily available to those with the proper authority. The laws are the same whether you’re a small business or a big corporation.
Electronically filing your documents eliminates the problem of storage as well as while you throw away enormous amounts of paper. Digital records don’t require physical space to be held Computers can now hold massive amounts of data and are very capable of handling any and all of theses documents for a small business owner or entrepreneur. As a result, you can store and hang on to any records you need just in case you need to look back upon them.
How Long to Keep Records
Even if you know what records to keep, they can pile up over time. Sometimes, you hold onto them for too long. In some occasions, especially with physical documents, piles of outdated files can impede on your time retrieving relevant files. Not knowing when to get rid of documents will clutter up your business’ day-to-day activities.
You’ll want to keep client and employee records as long as they are under your employment or services. You don’t want to hang on to them long after that, unless you foresee the need of a dispute. Financial records should be given greater consideration when deciding whether or not to shred or dispose of them. Tax records especially should be held onto for around 7 years after your first filing.
In an earlier, more wasteful time, worrying how long you should keep records was relevant to maintain storage space. Electronic documentation completely takes this worry out of the picture for business owners. You don’t need physical storage space to hold onto these documents, they are all on your computer — you just need digital space. What’s more is that when you delete documents electronically, there is no need to shred paper or throw it away — just hit the delete button and it’s out of your hair.
Electronic vs. Physical Records
In the modern age, more and more businesses are going with electronic documentation for ease of access, to save space, and to make a conscious effort to go green. Consider scanning the documents mentioned above to if they are physical to turn them into a digital copy and properly recycling the paper documents you no longer need. This change will end your cycle of waste and dependence on paper.
If you do choose the physical documentation route, just remember they’ll have to be physically indexed and accessed. That is just too much of a time consumer and environmental waste in today’s world. Record Nations points out this waste, saying, “The average person in the U.S. uses 749 pounds of paper each year. Imagine how many trees could be saved if companies began to implement a paperless system.” Not to mention, disasters such as fire can destroy your records, leaving you with nothing. Digitally filing your documents allows you to backup all records in the case of a disaster.
The move toward digital documentation is essential to any entrepreneur or small business owner looking to run a successful, environmentally friendly company. The days of filing your documents physically are over, as it is just not economically or environmentally feasible any longer. If you are a small business owner or entrepreneur, your efforts in making your documents digital will not only help your business, but it will help the Earth as well. If the majority of business owners are making this switch, even just for the benefits of their business operations, it will conserve a significant amount of trees.