As an accounting firm, you are responsible for managing a significant amount of sensitive financial and personal information.
Without proper storage and management, you risk losing crucial information, compromising data security, and facing compliance issues that can lead to legal and financial consequences. Whether it's digital or physical files, they must be stored appropriately to ensure quick and easy access, while also complying with regulations.
In this blog post, we'll explore the three methods of archiving records, best practices for managing archived files and archiving best practices.
Three Methods Of Archiving Records
There are three methods of storing files that accounting firms usually use:
Traditional storage: This method involves storing physical files in cabinets or boxes. While it's the oldest method, it's still widely used by accounting firms. However, this storing files method can be time-consuming, and it requires ample physical storage space. Traditional storage also has a higher risk of damage or loss, as the files are vulnerable to fire, theft, or natural disasters.
Digital storage: Digital storage is becoming increasingly popular among accounting firms. It involves converting physical files into digital format, which can be stored on a computer or in a cloud-based system. Digital storage is more efficient and secure than traditional storage, as it eliminates the need for physical storage space and reduces the risk of damage or loss.
Scan on-demand storage: This method is a hybrid of traditional and digital storage. It involves scanning physical files and storing them in a digital format. However, instead of storing all the files digitally, only the essential files are scanned and stored digitally. The remaining files are stored in physical cabinets or boxes. This method reduces the amount of physical storage space required while also ensuring easy access to the most important files.
How To Manage Your Accounting Files?
Once you have chosen the archiving method that suits your accounting firm, it's crucial to store files effectively. Here are six best practices for managing archived files:
Invest in a document management system:
A document management system (DMS) is software that allows accounting firms to store and manage their files digitally. A DMS is essential for accounting firms that opt for digital or scan-on-demand storage as it usually takes care of most of the process while providing security measures to protect them. A centralized location for storing files ensures easy access and allows multiple users to access files simultaneously.
Set your archiving protocols:
The effectiveness of a document management system depends heavily on the process put in place for efficient sorting and organization of files. Without proper protocols, archiving every memo or defective document can quickly clog up the system within months.
An archiving protocol is a vital tool for outlining the process of archiving files from creation to destruction. It establishes consistency and standardization across the firm by providing guidelines for file naming conventions, organization, retention policies, and disposal procedures. A well-designed archiving protocol is essential for ensuring the smooth functioning of the archiving system and reducing the risk of errors and inefficiencies.
Make sure the system is accessible to all:
In next-gen accounting firms, with remote working increasing, choosing a system that is accessible from anywhere, at any time is essential to keep the machine running. The archiving system should be accessible to all employees who need it based on their roles and responsibilities. For example, an employee in the finance department should have access to financial records, while an employee in the HR department should have access to employee records.
Don’t Overlook Audits:
Regular audits of the archiving system help identify potential issues and ensure compliance with regulations. Audits should be conducted at least once a year in Accounting firms to ensure the system is functioning correctly and that all files are accounted for.
Review and adjust:
It's essential to regularly review and adjust the archiving system to ensure it's meeting the firm's needs. This means evaluating the system's efficiency and useful they are to your employees. Make sure to establish milestones to identify everything is running correctly and regularly check with your team how you can improve the process. Keep an open mind to employees' recommendations and ideas.
What are archiving best practices?
Now that we have explored the different methods of archiving records and how to manage archived files, let's look at some tips to apply every day in your accounting firm:
Designate ownership
It's crucial to designate ownership of the archiving system to ensure accountability and responsibility. This means assigning someone to manage the archiving system, including overseeing the archiving protocol, managing access, and conducting audits. Having a designated owner avoids misunderstandings and ensures that the system is being managed effectively and efficiently.
Use Multi-Factor Authentication to Control access
Access to the archiving system should be tightly controlled and restricted to authorized personnel. This means implementing multi-factor authentication, such as passwords and security tokens, to ensure that only authorized personnel can access the system.
Using a VPN (Virtual Private Network) and corporate devices is always the best choice. Accounting firms deal with sensitive financial and personal information, so ensuring the security of the system is critical.
Timeframes Are Essential
Creating timeframes for retaining files is essential for compliance with regulations and ensuring the archiving system is functioning efficiently. Retaining files for too long can take up unnecessary space while retaining files for too short a period can lead to non-compliance with regulations. It's essential to establish timeframes for retaining files based on their type and importance.
This Is Your Call to Revise Your Filling System
Accounting firms deal with a vast amount of information, which requires careful management and organization. Choosing the right archiving method and implementing archiving best practices are crucial for the smooth functioning of the firm. If your accounting firm doesn't have an archiving system, it's time to take action and implement one to ensure the efficient and effective management of files.
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Kevin Mitchell, CPA
Senior Manager and CPA with over 20 years of experience in accounting and financial services, specializing in risk management and regulatory compliance. Skilled in managing audits and leading teams to deliver exceptional services. Proud father of two.
References:
Document Management Tools for CPA Firms. (2022, December 1). Document Management Tools for CPA Firms. https://www.cetrom.net/resources/blog/document-management-tools-for-cpa-firms
Tuấn, N. Q., & Consulting, V. B. (2018, November 22). Archived accounting Documents - Time Limits and Destruction Procedures. VIVA Business Consulting. https://vivabcs.com.vn/resources/tax-audit-accounting/archived-accounting-documents/
Taylor, D. (2022, May 18). 6 Best Practices for Archiving and Storing Files in 2023. The Motley Fool. https://www.fool.com/the-ascent/small-business/document-management/articles/archive-file/
