The documents used to process a transaction are not discarded, but are retained on file for some years. For sales transactions, the customer's order, the delivery note and the sales invoice may all be stapled together and filed. Similarly, for purchase transactions, a copy of the purchase order, delivery note, goods received note and purchase invoice may be stapled together and filed.
The documents should be filed in a way that will make it possible to easily locate them If they are needed at some future date, for example, in case of a disagreement between the customer and the supplier, documents could be produced that confirm goods had been supplied and what price had been charged for them. In addition, retention of business documents enables a business to prepare accounting information and to prepare annual financial statements.
There are good commercial reasons for retaining documents and there are also some legal requirements. Some countries also have legal requirements for business documents to be retained for a minimum number of years (usually between three and six years). Some business tax and sales tax laws, for example, require that documents are retained for a number of years in case of enquiry and investigation.
Documents can occupy a considerable amount of space so businesses often store images of old documents on microfiche or on a digital medium long after the original documents have been destroyed. Computerisation allows digital information to be stored on discs, tapes and so on almost permanently.
Any important records should be securely stored safely away from fire, water and other risks that could damage or corrupt the information. Duplicate files are generally maintained for computerised data at locations away from the main business premises.
Documents that should be part of a retention policy include the following:
records of cash received and paid - petty cash, cash and bank transactions
amounts owed to the business by customers, such as trade receivables records
amounts owed by the business to suppliers, such as trade payables records
records of the inventory count at the year-end
records of assets used in the business e.g. items of plant and equipment.
ACTIVITY 5
Suppose that, for filing purposes, a business staples together:
the customer's order, the delivery note and a copy of the sales invoice for all sales transactions
a copy of the purchase order, delivery note, goods received note and purchase invoice for all purchase transactions.
In what order do you think these documents should be filed, for ease of future reference?
For a suggested answer, see the 'Answers' section at the end of the book.