Why Business Records Should be Kept

1.0 INTRODUCTION

According to the United States Federal Emergency Management Agency (FEMA) (1992), of all the businesses damaged (a category of 4 storm), 80% of those lacking some form of business continuity plan failed within two years of the storm. However, even with all the warnings and advice to have in place a strategy for protecting information assets, many businesses and organizations, both large and small, fail to take effective measures to manage and protect their documents and records to mitigate the risks of hurricanes, terrorism attacks, extended power outages and other business interruptions (Emery, 2005).

A well-managed records retention and destruction program can help support the company’s efforts to face business challenges. In order to face any problems in the future, disaster preparedness is one alternatives that can be taken for developing a records and information management program for the business. If we own or manage a small or medium-sized business we are responsible for the appropriate guardianship of both our employees’ and customers’ records and information. All the records created in our company activities should be kept in so that we have evidence to be use in future. The consequences of not having a records management program in place can have even greater negative impacts for not only small and medium-sized businesses but also large businesses. The business benefits of implementing a records management program in our company can be clearly seen not only for the time being but also for future.

2.0 RECORDS AND INFORMATION MANAGEMENT

          Some people have mistaken that records management is about notice everything that comes across one’s desk in the course of doing business. In some vastly structured industries, it may seem like that is the case but in most cases it is not only making sure that what needs to be kept as a record is retained, but it is about how long it should be kept, where it should be stored, who has access to it and when it should be destroyed (if necessary).

Shepherd and Yeo (2003) mentioned that a record is not defined by its physical form, age, or the fact that it contains information. Its essential characteristic is that it provides evidence of some specific activity. Whatever the format, records need to be properly managed for business efficiency in an organisation. Mnjama and Wamukoya (2004) agree that records are valuable assets that need to be managed and protected. Records are required for developing and implementing policies, planning, keeping track of actions, achieving consistency in decision-making, providing effective service to citizens and achieving greater efficiency (Kemoni, 2007). Therefore, records must be properly managed to ensure their usefulness through time.

          The ISO 15489: 2001 standard defines records and information management as ‘the field of management responsible for the efficient and systematic control of the creation, receipt, maintenance, use and disposition of records, including the processes for capturing and maintaining evidence of and information about business activities and transactions in the form of records’. A record is any recorded information relating to the work of your business, regardless of who created it or how the information was recorded (Emery, 2005). She summarize it to more specifically, records are recorded information, regardless of physical or digital form, that are: generated or received and used while conducting business and preserved because of their informational value or as evidence of your organizational structure, functions, policies, decisions, procedures, operations, mission, programs, projects, and activities. Records can exist in any medium and in many forms, including documentary, databases, photographs and audio visual.

          According to Regalia Records Management (2009), businesses nowadays generate an ever-increasing business records from every aspects of the organization and it is true for any organization irregardless of size or industry and the significant challenges posted by the sheer volume of both the active and inactive information require sound and consistent records management solutions. Erima and Wamukoya (2012) stated records management supports risk management and business continuity planning. It identifies which records are vital to the running of the business and supports the business continuity or risk management plan. BNARS (2009) with records management manual, timely processing of outgoing and incoming correspondence will lead to operation efficiency and effectiveness. Pemberton (1991) and Ngoepe (2008) declare that better service delivery always begins with better records management practices. This is because government departments can only take appropriate action and make correct decisions if they have sufficient information at their fingertips. 

                For example, every business should be keeping a prescribed set of records in order to meet IRS auditing standards. This means that your general ledgers, receipts for expenses, and many other financial documents need to be retained for anywhere from 7 to 10 years. Many small businesses incorrectly believe that the IRS is more likely to audit large corporations than smaller enterprises. On the contrary - according to the Transactional Records Clearinghouse (TRAC) of Syracuse University, audit rates for the largest corporations with assets of $250 million or more have decreased from 64% in 1988 to 27% i 2008. In turn, companies with $10 million to $50 million in assets were 29% more likely to be investigated. Not having an up-to-date records retention program can mean lots of time and money expended to find the required records. Some small companies can spend thousands of dollars and significant time to respond and close out an IRS audit because they haven’t prepared for this eventuality but having a fully functional records management program isn’t just about keeping records for a prescribed period of time – it’s about following the lifecycle of a record, from its creation to active use, maintenance, inactive use and disposition; whether that disposition is for long term storage or destruction.”- (TRAC), 2008) 

           Other than that, study that has been made by Mampe and Kalusompa (2012) has drawn parallel to the response of the study which to establish how records users viewed records in relation to their daily business activities. The majority of records users 24 (68.6%) cited that records were very essential and seven (20%) said that records were essential to their business activities. Ramokate (2010) also has make study on the management of land board records. The study found that records were important for the conduct of different land board activities such as dispute resolution and land administration with five (100%) response. The study also established that 54 (80%) said that records were important for communication. Similarly, Ngoepe (2010) also highlighted that sound records management is crucial to the conduct of business and makes public administration more efficient and effective. Without effective records management programme, projects for instance are difficult to implement in the absence of well managed records (Kanzi, 2010).

3.0 WHAT ARE THE BUSINESS CONSEQUENCES OF NOT HAVING A RECORDS

      MANAGEMENT PROGRAM?

           By not enforcing a records management policy in a consistent way, it can cast the business in a poor light. In order to fully understand why a records management program should be in place in the company, the business consequences of not having a records and information management can be seen in below:

                 i. Adhering to Industry Rules

Firstly is the adhering to industry rules. For example, organization in US need to bear in mind the importance of the need to maintain certain records to fulfil with Internal Revenue Services (IRS) tax regulations; but there are additional regulations that most businesses are subject to that require the maintenance and secure destruction of business records (Doug, 2009). Financial advisors and traders are subject to NASD and SEC regulations, educators are subject to certification and training requirements, real estate professionals are subject to certification, licensing and maintaining appropriate paperwork for each real estate transaction, and so on. The list is exhaustive and as a business owner or manager, you know your company is ultimately responsible for paying the fines and responding to auditors or investigators if any of your employees is non-compliant with your industry’s regulations. At the very minimum, just about every business is subject to the Fair and Accurate Credit Transaction Act (FACTA), legislation was put in place to prevent identity theft. It specifies that every company is legally responsible for protecting both employees’ and customers’ personal and financial information. Thus, even if we have only one employee you are responsible for the protection of any information that you collect to maintain that person on the payroll. This includes that person’s social security number, their birth date, address and other information. If you do credit checks on employees or customers that information is also subject to protection. According to the FTC Chairman at that time, Deborah Platt Majoras in 2007, he stated that “every business, whether large or small, must take reasonable and appropriate measures to protect sensitive consumer information, from acquisition to disposal. This agency will continue to prosecute companies that fail to fulfil their legal responsibility to protect consumer’s personal information” (Federal Trade Commission Press Release, 2007).

               ii. Protecting Vital Records in Case of Business Interruption 

Emery (2005) said by not managing vital records can have a devastating effect on the longterm survival of the business. By not protecting and identifying vital records can put a company out of business. For example, after hurricane many businesses lost the ability to move forward not just because their local infrastructure was destroyed. Many had staff members that evacuated to safe havens much farther inland with electricity and network access. Yet, electronic files located on local servers and paper files located in basements can make it impossible for staff to work effectively from afar, even if they have access to their email. Some paper-based documents were completely destroyed because of flooding and mould damage. - (Emery, 2005)

               iii. Lawsuits

Speaking of lawyers, the United States is the most litigious country in the world (Emery, 2005). Just one lawsuit can be extremely expensive to defend for both large and small organizations. In US, about 90% of US corporations are involved in some form of litigation. Lawsuits can arise for any number of reasons – employee grievance, business or product liability. The business may even have insurance to cover the cost of any court fees and or judgments that may arise out of situation even if the business is not liable we will still end up spending a lot of time and money supporting the Discovery process. Discovery is a process used during civil lawsuits or criminal cases to gather, search, cull and produce large volumes of relevant information for legal review Doug (2009). The defendant company or party will then review the request and gather the information and provide it to the plaintiff. Just imagine being requested to find paper documents that may have been generated over 10 years time and having to go back into a warehouse to find them. Without an organized way to retain the paper information using a records retention plan and indexing the information in a way that it can be found, discovery can be a time consuming activity. We may still need to find information that has been generated over the last 10 years but now it is stored on data records, word processing documents, spreadsheets, e-mails, CDs, microfilm, voice mail messages, network shared repositories, desktops, back-up tapes. The Discovery process has become much more complex and sprawling from a records access standpoint. The scope of what can usually be gathered typically includes active documents and data and archived information. According to a recent study conducted by AIIM, 28% of organizations would take more than a month to produce documents for a legal discovery process. - (Doug, 2009)

4.0 CONCLUSION

         A records and information management program is a requirement for all businesses. Without one in place your company is in danger of running conflicts with the law and could be at risk of going out of business if any disaster attacks. As we know information is the vital strategic and operational assets of organization to make decision making, support the business operation and as evidence to the organization business activities and operation. It is very important to preserve the records for the future use so that if any cases happens it can be prove to support the issues. Not only that, it also enables organizations to evaluate performance and

improve services and run the office and plot strategies for their business. Information can be summarize as the core of every business transaction. Many initiatives has been made to preserve the records by most organizations such as digitize the records through digitization as a recovery if any happens to the records, so this has proven that the records is very important to be keep and well preserve.

5.0 REFERENCES

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Transactional Records Clearinghouse. (2008, April 13). IRS Audits of Largest Corporations Plunge to Historic Low. Syracuse University. Retrieved May 5, 2016, from http://trac.syr.edu/

Yeo, G., & Shepherd, E. J. (2003). Managing Records: A handbook of principles and practice. Facet Publishing