Five Reasons Why You Should keep paper or pdf copies of Old Bank Statements.
One: Tax Departments love to use these during audits. It’s a third party document, it shows how much money was deposited into the bank account, and it’s easy to request. There can be a substantial difference between the company gross income and incoming funds; but this can give most tax audit departments an idea of how much the company makes. (Note: that for audits, you will also be required to produce original documents, so don’t get rid of that other paperwork!)
Two: Small Companies switch bank accounts all the time. I’m not sure why; but it’s true. Getting bank statements for closed bank accounts can be a painful and costly process. That initial freebie can cost $$$ to wrangle out of bank later. Just keep copies and make sure you have all of them once a year. It will save you mad coin later.
Three: Online software applications that download bank transactions are not the same thing as bank statements. The technology is getting better; but I’ve seen applications skip transactions, post transactions multiple times, and summarize multiple transactions. Try being a bookkeeper and being handed a software file and asked to fix it without a roadmap. At times accounting software is an unreliable narrator of the business activity. Trying to unwind a large mess costs money and time.
Four: Fraud. Believe it or not, most fraud happens when the business owner isn’t reviewing the bank statements. It can range from identity theft to employees stealing. If you feel compelled to lock the business to safeguard your assets, shouldn’t you also take some simple steps to also safe guard the money?
Five: Accuracy. Bank Rec’s increase the accuracy of the Accounting Records. I’ve yet to see one business that can make sure everything is recorded without a bank rec process. Automated downloads can make this more accurate as well. And if you see a transaction that you don’t understand; this is the time to ask questions, track it down and use the bank information to manage the business.
How long should you keep them? I suggest at least seven years. Ask your attorney or CPA what they think about it. I wouldn’t be surprised if your CPA has a few horror stories of people trying to track down bank statements.
*This goes for credit card statements as well. 🙂