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What is a Document Retention Policy And Why do You Need it

Any business that deals with sensitive information needs a document retention policy. Does your business have staff you keep records on, for example? If so, your business deals with sensitive information.

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While the specifics of a document retention policy can vary from company to company, there are some general principles that all businesses should follow. In this article, we'll cover what a document retention policy is, why you need one, and what it requires of your business.

What is a document retention policy?

A document retention policy ensures that a company keeps track of the documents it generates (employment contracts, invoices, medical records, etc.) and retains them for the appropriate period of time: no longer, no shorter.

The policy specifies what types of documents need to be retained, how long they must be kept for, and who is responsible for maintaining them. This helps the company keep its information organized and accessible. More importantly, it ensures the company is compliant with relevant regulations and protects them in the event of potential litigation.

How to create a document retention policy

Your document retention policy needs to answer two main questions: what kinds of documents your business generates, and how long you should keep them. It might sound simple enough, but you'll have to consider factors like state and federal legal requirements, industry regulations, and other policies within your company.

Once you have decided what types of documents need to be retained, you will need to determine how long to keep them. This will vary depending on the type of document and the purpose it serves. For example, a financial record like an expense report submission may need to be kept for years, while personnel files can be destroyed after six months after they've left the company.

Your document retention policy should make these things really clear so that all employees know what is expected of them. It's important to review and update your policy on a regular basis to ensure that it meets the changing needs of your business and the regulatory environment.

Reasons for having a document retention policy

There are many reasons why a company might have a document retention policy. It’s essential for companies that handle confidential information to ensure that all documents are disposed of properly and in a timely manner. For other companies, the reasons to have a policy include: 

Staying compliant

Compliance with local and industry regulations has always been necessary. But in a globally-connected world, legislation like GDPR is making document retention and data storage more of a compliance issue than ever. Depending on your industry and location, there may be certain legal documents that you are required to keep on file. A document retention policy ensures that you are in compliance with any relevant laws.

Protecting your business

Having a document retention policy helps to defend your business in the event of a lawsuit or other legal action. This could be about anything from cybersecurity breaches to your lack of a Slack policy. It provides a record of what has been done and said and when, which can be critical in defending your company and staff against allegations from former employees, "patent trolls", or your competitors.

Avoiding penalties

If you fail to comply with government regulations your business could face hefty fines in real terms or, like in the case of GDPR breaches, a percentage of revenue. A document retention policy helps you avoid these penalties by ensuring that you are keeping the required documents on file, and handling/disposing of them properly.

Supports decision-making

When it comes to business, there are a lot of decisions that need to be made on a daily basis. Which products to sell, how to market them, and to whom, every decision made can impact the bottom line.

A document retention policy helps make sure that all of the important documents related to running your business are kept safe and organized. This way, when a decision needs to be made, you can easily find the information you need to make an informed decision. That should even cover resources like online accounts: login details, and how to use tools like Google My Business software.

Amazon begins their meetings with six-page memos because they keep the meeting focussed on the document, but those documents are also a valuable store of thinking about the business. They're useful to refer back to, and a good onboarding tool for new recruits.

Access control

There are many reasons to have an access control policy in place for your organization. By having a formalized policy, you can ensure secure document sharing and that only authorized personnel have access to sensitive information. This can help to protect your organization from data breaches, legal liabilities, and unauthorized access to confidential documents.

And in the event that you do have a security incident where you need to track down who had access to which areas of the storage room or shared folder. By knowing who has access to what, you can more easily determine who could have been responsible for any unauthorized activity.

By having a clear and concise policy in place you can help to protect your data and assets, while also making it easier to monitor and manage access to your facilities and networks. Security measures like 2FA and IP whitelisting can help you protect your documents too, and those should be included in your policy too.

Protection of documents

It's essential for businesses to have a system in place to protect their documents. A document retention policy helps to ensure that documents are properly stored and protected from unauthorized access or destruction.

One reason is to comply with regulatory requirements. For example, certain industries are required to keep certain records for a certain period of time. Another reason is to protect the company from legal liability. If a company destroys documents that could be relevant to a lawsuit, like a waiver protecting them from liability, it could be held responsible for mishandling that evidence.

Additionally, a document retention policy can help to prevent data breaches by ensuring that sensitive information is properly protected. By standardizing these procedures, it also makes sure that documents are organized in a safe, consistent, and efficient way across several offices in the company.

Document retention in a changing world

Digital transformation is changing the way companies handle documents, from eSignature to a PDF QR code generator, to global regulation like GDPR. As handling and storage get more complex, it's important to have clear procedures in place. Whether physical or all-digital, a document retention policy is necessary for any company that wants to protect its customers, staff, and assets by keeping its information secure.

Want to learn more? Find out what the difference is between retention and preservation by reading our blog post below.
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Yauhen Zaremba
Yauhen Zaremba
Yauhen is the Director of Demand Generation at PandaDoc. He’s been a marketer for 10+ years, and for the last five years, he’s been entirely focused on the electronic signature, free online PDF merger, and document management markets. Yauhen has experience speaking at niche conferences where he enjoys sharing his expertise with other curious marketers. And in his spare time, he is an avid fisherman and takes nearly 20 fishing trips every year.

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