CoAdvantage- Former U.S. District Court Magistrate Judge John Facciola says, “If your clients don’t have a records management system, they may as well take their money out into the parking lot and set it on fire.”
He’s not wrong. Improper or inadequate recordkeeping can be devastating when businesses are hit by audits, investigations, or litigation that requires certain kinds of records to be produced. But that kind of good records management is neither easy nor cheap. A “Preservation Costs Survey” from the University of Chicago Law School reports that fixed costs for records preservation at large companies can average $2.5 million annually.
What makes records management such a big deal?
First, most businesses are subject to a wide array of recordkeeping requirements established by a huge variety of regulatory bodies. Consider just this sampling:
- OSHA requires that certain medical records be retained, in some cases for decades.
- Payroll records must be retained for three years under federal law, but in some states for longer.
- The Fair Labor Standards Act (FLSA) requires that employers maintain an extensive number of records for every nonexempt worker for a period of several years.
- The Internal Revenue Service requires that tax and tax-related records be preserved, many for as long as seven years.
Further, in addition to a variety of federal regulations, organizations may also be subject to state and local laws as well.
Record-keeping this extensive imposes a significant burden on employers. Not only does it take time and manpower to create and organize such documents, but employers must also figure out how to store everything in a way that is cost-effective and minimizes filing errors. That last point is more serious than it may seem; Gartner has found that organizations lost an average of a month annually waiting on records that have been misfiled or mislabeled to be found and retrieved.
How can small businesses tackle this thorny problem?
Digitization can help enormously. The federal government itself is already shifting gears into an electronic world. The National Archives and Records Administration (NARA) is currently on a mission to get federal agencies to store all their own records in electronic format by the end of 2022. NARA believes that digitization “allows [organizations] to manage information as an asset, rather than a liability.” In other words, digitization can create efficiencies that allow organizations to maximize each record’s value while minimizing associated costs. Digitization is also pivotal to automating record-keeping activities (such as automatically scheduling certain records for destruction after an appropriate time period).
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about CoAdvantage’s ability to create a strategic HR function in your business that drives business growth potential, contact us today.