Mastering Records Retention and Destruction in Service-Based Businesses

If you’re running any kind of service-based business—be it a law firm, healthcare clinic, salon, or digital marketing agency—keeping your records in check is crucial. It’s not just about space management or data protection. It’s about staying on the right side of the law, boosting your operational efficiency, and keeping sensitive information safe and sound.

Unfortunately, certain service sectors, such as small consultancies or freelance operations, might think they’re too small to need a formal records management plan. This belief is far from the truth and could lead to big legal and financial risks. We’re here to help you understand why mastering records retention and destruction is crucial for your business.

The Importance of a Comprehensive Records Management Strategy

The shift towards digital record-keeping is undeniable. Many service-based businesses now operate with most of their records stored in digital formats, ranging from emails and payment information to digital contracts and cloud-based databases. This comes with its advantages, like improved accessibility and reduced physical storage needs. But, it’s crucial to understand that just because these records are digital, it doesn’t mean we can skip having a solid plan for managing them.

According to the Association for Intelligent Information Management, businesses of all kinds are gathering data faster than they can secure it, which could lead to legal and compliance headaches. For instance, if your service-based business takes credit cards, the way you store client payments impacts everything from payment card industry (PCI) security to state sales tax and your federal tax return. Incorrect or incomplete record-keeping could result in fines, legal fees, damaged reputation, and customer loss.

Without a good retention plan, there’s a risk of hoarding information, bumping up storage costs, and opening the door to potential data breaches. Having a solid records management strategy helps dodge these issues by making sure only the necessary records are kept for as long as needed and then properly disposed of.

In fact, a 2022 study found that having a records management plan helps boost small—and medium-sized business growth by improving decision-making, efficiency, and effectiveness.

How to Create a Records Retention and Destruction Plan

Now that we’ve established why your business needs a records management strategy, let’s dive into how you can create one.

1. Identify Your Legal Requirements

First things first, it’s crucial to understand your legal obligations surrounding records retention and destruction. Depending on the type of service you offer, your location, and industry regulations, you might have specific record-keeping requirements that need to be followed.

Different service-based businesses have their own set of legal rules when it comes to managing their records. For example:

• Law Firms: Legal practices must adhere to strict confidentiality and privacy laws, preserving client information securely for a period defined by state legislation, and often extend beyond the duration of the client relationship.
• Healthcare Clinics: Governed by HIPAA (Health Insurance Portability and Accountability Act), healthcare providers are required to maintain patient records for a minimum period, usually around six years from the date of last service, although this can vary by state.
• Financial Services: These businesses, including tax preparation services, accounting firms, and investment advisors, are subject to regulations such as the Sarbanes-Oxley Act, which requires them to retain many records for at least seven years.
• Digital Marketing Agencies: While not as heavily regulated as law or healthcare, they still need to ensure compliance with data protection laws like GDPR (for businesses operating or serving clients in Europe) or CCPA in California, which affect how they collect, store, and destroy digital advertising data.

While these examples are a starting point, it’s important to conduct thorough research or seek legal advice to ensure that your business is in compliance with all applicable laws and regulations.

2. Determine Your Record Categories

Once you know the legal requirements, you can start organizing your records into categories. This could include client contracts, financial records, employee information, and any other important documents related to your business operations.

Some records your business needs to take into account in your records management planning might include:

• Client Contracts and Agreements:  These records should be kept for the duration of the contract and any required retention period afterward.
• Financial Records: This includes invoices, receipts, and other financial documents that need to be kept for tax purposes.
• Employee Records: These records include employee contracts, payroll information, performance reviews, and any other documents related to your employees’ time with the company.
• Communications:  Emails, social media messages, and other forms of communication should be retained for a specific period according to legal obligations.
• Digital Data: Any digital data collected or generated by your business, such as customer information or marketing analytics, must be stored securely and deleted when no longer needed.
• IP:  Any intellectual property, such as patents or trademarks, should be retained for as long as necessary to protect your business’s interests.

3. Set Retention Times

Now that you have identified your legal requirements and record categories, it’s time to establish specific retention times for each type of record. A common myth in service-based startups, like IT consulting or creative agencies, is thinking digital records management is automatically secure and meets retention policies. But without correct classification, indexing, and retention plans, digital records can turn into liabilities. 

Your business’s retention policy should be based on legal requirements, industry best practices, and your specific needs. Different records might have different retention times, so it’s essential to review and update your policies regularly. For example, you may need to retain financial records for seven years and client contracts for the duration of the contract and a few additional years.

No matter what types of records your business collects, it’s important to set clear document retention policies to ensure consistency and adherence to legal requirements.

4. Decide on Destruction Methods

Once you’ve determined how long to keep each type of record, you also need to consider how these records will be destroyed at the end of their retention period. Destruction methods should be secure and offer a Certificate of Destruction, which serves as proof that the records have been properly disposed of.

Some common methods of destruction include:

• Shredding: This is a popular method for paper documents. A professional shredding service can do it on-site via a mobile shredding truck or off-site at a secure facility.
• Hard drive destruction: For digital records, it’s essential to securely destroy hard drives and other storage devices to prevent data breaches.
• Digital wiping: This method involves using software to permanently erase data from a digital device, making it impossible to recover.

It’s important to note that simply deleting digital records or throwing away physical documents is not sufficient and can leave your business vulnerable to legal and security risks. It’s best to work with a professional document management company that offers secure destruction services for peace of mind.

At Augusta Data Storage, we specialize in secure document shredding and certified data destruction services to help businesses protect their confidential information and comply with record retention laws.

5. Implement and Train Your Team

With your records management strategy in place, it’s time to implement it across your business operations and train your team on the proper protocols for managing records. This includes educating them on why records management is essential, how it affects the business, and their role in maintaining compliance.

Set Your Business Up for Success with Augusta Data Storage

Effective records retention and destruction isn’t just for large corporations or specific sectors like healthcare and law. Every service-based business, from independent consultants and start-up agencies to salons and cleaning services, needs to keep records management on its radar. Ignoring the need for a solid records management plan is risky and can hurt your business’s credibility and success.

No matter the size or focus of your service-based business, Augusta Data Storage is here to help you craft a comprehensive records management strategy that’s just right for you. We have over 25 years of experience providing secure and reliable document management and destruction services to businesses across the CSRA, and we are the only document destruction provider in the area with NAID AA Certification, meaning we treat your records with the highest level of care and compliance.

Don’t let your business face unnecessary risks—get in touch with us today to protect your operation’s future.