Proper Record Keeping

Proper record keeping is critical for the success and legal compliance of any business (especially a law firm).  The negative repercussions of poor accounting and bookkeeping practices can have a serious impact on your practice.  In this article, we'd like to address the basic record keeping policies that will help your firm maintain a solid (and compliant) accounting system.
 
First and foremost, your record keeping policies should define the types of documents that will be stored.  These might include:

• Articles of Incorporation
• Bank Statements and Reconciliations
• Credit Applications
• Financial Reports
• General Ledgers
• Journal Entries

Obviously most law firms will be aware of which documents must be stored to remain compliant with state policies.  However, if there are any questions it's best to consult a national legal services firm that works daily with corporate governing bodies across the country.

Second, your record keeping policies should address the length of the term the various documents will be stored.  Using the same examples above:   

• Articles of Incorporation should be stored indefinitely
• Bank Statements and Reconciliations should be stored for a minimum of 6 years
• Credit Applications should be stored as long as the customer remains active
• Financial Reports should be stored as long as management requires
• General Ledgers should be stored as long as the company exists
• Journal Entries should be stored for a minimum of 10 years

Again, the specific parameters for every document must adhere to the requirements of the state in which the company is structured.  Considering the increasing affordability of virtual storage, it's better to be safe than sorry.

Finally, your record keeping policies should include where the documents are stored and who will oversee their maintenance.  Companies can either build an internal repository (if they have the IT resources), or contract with an online storage site.  Regardless of which path is chosen, the document retention and its management should be centralized and respected.  The department and processes must allow for the most up-to-date security while maintaining easy access to all appropriate parties.

Unfortunately, many firms fail to understand the most important reason for defining and following these record keeping procedures:  cost savings.  Because accounting systems are seen as a costly but necessary evil, many discount the ROI that can be achieved through proper accounting systems and the need for the complete accounting services that make it all possible. Before you make the same mistake, consider the cost of missing records or incomplete information, and the potential savings offered by a more organized and focused storage system.