ARCHIVING

Archiving

The digital archiving of documents is becoming an increasingly important topic in today’s world. The terms “archiving” and “digitization” now go hand in hand, making it necessary for companies to finally say goodbye to piled-up paper and dusty filing cabinets. However, many still hesitate to take this step due to apparent uncertainties and challenges, such as the issue of “compliance.”

This article sheds light on the topic of digital and compliant archiving and covers the following points:

What is Archiving?
Analog vs. Digital: What is Digital Archiving?
Why Digital Archiving?
What Needs to be Archived?
Retention Periods

Challenges in Digital Archiving
Compliant Archiving According to GDPR
Archiving and GDPR
How Does Digital Archiving Work?
Digital Archiving in the Cloud with Microsoft 365 and SharePoint Online

What is meant by archiving?

The term “archiving” originally dates back to antiquity and derives from the Latin word “Archivum,” which roughly describes the storage place for records and documents. In the second half of the 15th century, the concept of an archive and archiving found its way into the language of chancery and continued to establish itself.

Since then, the fundamental idea of collecting and archiving has persisted and is still applied in many institutions today. However, it is not solely based on internal company archiving guidelines but is often subject to legal requirements.

Today, archiving is mostly defined as the timeless, unalterable, and usually controlled systematic storage of documents and data. This can be done both in analog and digital or electronic forms. The purpose of archiving is to store data and documents in a way that makes them accessible and retrievable at any time.

Although archived documents generally have little relevance for day-to-day operations, certain types of documents must be stored for a specified duration in accordance with specific guidelines. This is a legal requirement.

Analog vs. Digital: What Is Digital Archiving?

Document archiving can generally be done in two ways: analog or digital. Analog refers to physically storing files and documents in paper form. In contrast, digital document archiving stores information and data on a digital storage medium. There are three possible methods for digital archiving: commonly used are hard drive systems (NAS – Network Attached Storage), which allow continuous access. Still in use are alternatives that store data on tape or optical media like CDs or DVDs, making them not always accessible. A third variant that has emerged in recent years is known as cloud storage or cloud-based storage.

However, working with documents and data in digital form doesn’t necessarily require them to be in their original digital format, as is the case with emails. Even post-digitized, scanned paper documents, such as traditional letters, can be electronically archived in this manner.

Triggered by digitization, companies are increasingly focusing on digitized processes, while traditional counterparts like paper archives take a backseat. This shift has also brought about terms like Digital Workplace and paperless office. Furthermore, with the digitization of documents, digital document archiving, often referred to as electronic archiving, is gaining more significance.

Terminology

In the digitization of documents, especially in their management and processing, the two terms Document Management System (DMS) and Document Archiving are often mistakenly used interchangeably or confused. However, a DMS primarily focuses on the structured storage of documents and the storage of additional document properties to simplify retrieval for the user. Document archiving, on the other hand, is typically already part of a document management system, as is the digitization of paper-based documents or the automation of document-based processes. The task of document archiving is the long-term preservation of documents. Nevertheless, the line between DMS and archiving is becoming increasingly blurred, so users hardly notice the difference in their daily work.

Why Digital Archiving?

Document archiving serves as the foundation for businesses and provides legal security concerning administrative bodies and legislators. Nevertheless, the topic of “archiving” is not particularly popular among entrepreneurs and employees because it can be very time-consuming, complex, and resource-intensive, depending on the form of archiving. Additionally, archiving does not directly contribute to the company’s profit.

To minimize these efforts, it is worthwhile to invest in a digital archiving strategy or archiving concept and transition from analog to electronic archiving. Concrete advantages over the analog approach include:

Advantages of Electronic Archiving

Space Saving: Physical storage of papers and file folders in a dedicated archive is no longer required, as they are stored in a database-supported manner. Cloud servers are particularly advantageous for this purpose.
Immediate Access: (Online) documents and files are instantly accessible for all employees, anywhere, and at any time.
Time Savings: Documents are readily available through full-text searches and do not require manual searching by employees in archives.
Transparency & Clarity: The data can be viewed in real-time, including permissions. Additionally, transparency eliminates unnecessary copies.
Cost Savings: Rental costs for physical storage space, as well as material and personnel expenses, are significantly reduced, leading to long-term cost savings.
Continuity & Consistency: Digital archiving of all media prevents media breaks. Documents in paper form should be digitized.
Scalability: A good archiving software allows for easy scalability, enabling the archiving of large volumes of data.
Legal Compliance: Archived documents serve as a reference and proof that legal regulations, such as GoBD and GDPR, have been and are being adhered to.

Another reason that makes electronic archiving not only sensible but also necessary is the significantly increased frequency of document generation and dissemination, along with the exponentially growing volume of data. Managing this workload manually in large companies is hardly feasible with an analog solution. Furthermore, transitioning from an analog to a digital strategy also modernizes the existing IT infrastructure, benefiting the entire company.

What needs to be archived?

Companies archive various types of documents and data. This can include everything from correspondence with customers and invoices to annual financial reports, encompassing everything generated within the company. However, when it comes to archiving business records, there are legal requirements where the option of archiving voluntarily is removed, and storage becomes mandatory. The obligation to retain documents is based on the Generally Accepted Accounting Principles (GAAP) or, in the case of digital data storage, on the Generally Accepted Recordkeeping Principles (GARP).

Critical to the obligation to archive is that the documents have tax relevance. However, not every document needs to be retained for the same period. Here, too, the legislator has established specific guidelines in the form of retention periods.

The primary business records that are subject to mandatory archiving according to the legislator include:

Books and records
Inventories
Annual financial statements, consisting of the balance sheet and income statement
Management reports
Opening balance sheet
Work instructions and other organizational documents necessary to understand these records
Received commercial and business letters (e.g., emails)
Copies of sent commercial and business letters
Booking receipts

Document Retention Periods

In the United States, businesses and self-employed individuals are subject to prescribed minimum periods for document retention, known as document retention periods. These periods are established based on a combination of federal and state laws, industry-specific regulations, and individual company policies.

Here is a sample list of document types and their corresponding retention periods, based on various U.S. laws and regulations:

3 Years (Typically recommended by the IRS):

Tax returns and supporting documents

7 Years (Under the Sarbanes-Oxley Act):

Financial documents
Audit workpapers

Variable Retention Periods (Dependent on specific regulations):

SEC-regulated records for publicly traded companies
HIPAA-regulated healthcare records
Industry-specific records, such as those for banking, insurance, and healthcare

It’s important to recognize that document retention requirements can differ significantly based on factors such as the nature of the documents, the industry, and specific legal or regulatory obligations. Therefore, it is crucial for U.S. businesses and organizations to carefully assess their unique circumstances and seek advice from legal and regulatory experts to ensure compliance with applicable laws and regulations.

Beginning of Retention Periods

The retention period begins at the end of the calendar year in which the respective document was created. For example, the retention period for an invoice issued on January 2, 2019, starts on January 1, 2020, and ends on January 1, 2030.

Important: The decisive factor for the retention period of a document is its function within the company. The designation alone cannot be used to make a statement about the retention period.

Challenges in Digital Archiving

It’s essential to recognize that transitioning from analog to digital archiving isn’t something that can be achieved overnight. Apart from the time commitment, this forward-thinking move often brings about various uncertainties and hurdles. One critical aspect that gains relevance for businesses in the realm of “digital archiving” is safeguarding against unauthorized access to the digital archiving system. Additionally, it’s crucial to consider the lifespan of storage media to ensure that documents can be archived for many years in compliance with retention periods (long-term archiving). Both of these aspects are outlined in the principles for proper management and storage of books, records, and documents.

Moreover, there is a substantial upfront cost and resource requirement for the initial implementation. While these costs will soon be offset by savings, what remains is the need for expertise and specialized knowledge since digital archiving can be intricate and extensive. Topics like “compliance with regulatory requirements” and “archive that can withstand audits” often lead to significant uncertainties for entrepreneurs. But what exactly does audit-proof archiving involve?

Audit-Proof Archiving in Accordance with U.S. Regulations

Audit-proof archiving of documents is a unique aspect of document archiving, involving the storage of documents subject to retention requirements with commercial and tax relevance in an electronic archive system while adhering to the relevant retention periods. In the United States, there are guidelines and regulations governing this process, which ensure compliance with record-keeping standards. These regulations aim to maintain the integrity and accessibility of archived records.

The specific regulations may vary depending on the jurisdiction, but some common principles include:

1. Record Retention and Accessibility: Documents and records should be retained and organized in a manner that allows for easy retrieval and audit trails.

2. Completeness: Business transactions must be thoroughly and consistently recorded without omissions or gaps.

3. Accuracy: Records should accurately and truthfully reflect the actual transactions and circumstances.

4. Timely Documentation: There should be a clear and reasonable timeframe for documenting transactions and maintaining records.

5. Organized Record-keeping: Records and books must be maintained in an organized and structured manner.

6. Data Immutability: Once a record is created, it should not be altered or tampered with, except in compliance with legal requirements and documented procedures.

Failure to comply with these regulations can result in various penalties, which may include financial fines and legal consequences. The severity of penalties can vary based on jurisdiction and the nature of the violation. It’s advisable to seek legal counsel to ensure full compliance and understanding of the specific regulations in your jurisdiction.

Article “Audit-Proof Archiving with SharePoint“

Read in our guest article by Markus Olbring, Managing Director of comdatis it-consulting GmbH & Co. KG, how audit-proof archiving works with Microsoft 365 and SharePoint Online.

Archiving and GDPR

The General Data Protection Regulation, known as GDPR, is a European Union regulation that governs the processing of personal data. Especially in the context of retention periods in archiving, GDPR often poses challenges for businesses. Many wonder which rule takes precedence, GDPR or the retention obligation. The answer is: neither takes precedence because both rules apply concurrently. According to GDPR, documents containing personal data must be deleted once the original purpose of archiving no longer exists.

On the other hand, there are the legal retention obligations and periods defined in the GDPR. They represent the new purpose of archiving. These data can continue to be archived but must be deleted after the retention period expires. Failure to do so can result in substantial financial penalties*.

Article “Audit-Proof Archiving with SharePoint“

Read in our guest article by Markus Olbring, Managing Director of comdatis it-consulting GmbH & Co. KG, how audit-proof archiving works with Microsoft 365 and SharePoint Online.

How Does Digital Archiving Work?

To ensure audit-proof archiving according to GDPR, businesses increasingly utilize comprehensive Document Management Systems (DMS) with archiving software, alongside specialized archiving systems. Within a DMS, all corporate documents, such as invoices, delivery notes, or balance sheets, can be digitally stored. The software assists users in meeting legal requirements, often through workflows and reminders for document deletion. It also provides information on the respective retention periods.

Given the wide array of digital archiving systems and DMS available, the choice should align with the specific needs of the business. A well-known provider of cloud-based software, for example, is Microsoft, offering products like Microsoft 365 and SharePoint Online.

Digital archiving in the cloud with Microsoft 365 and SharePoint Online

Microsoft offers a wide range of security templates for businesses through its “Compliance & Security” guidelines, which cover aspects like retention requirements. These security templates are regulated within Microsoft Purview (formerly Microsoft 365 Compliance) and Microsoft Azure Purview. They encompass areas such as big data and performance, data privacy, data security, encryption, and archiving.

When using a document management system (DMS) based on these guidelines, you automatically have an archiving system included. Microsoft has already considered the revision security of archiving with SharePoint Online, making it easy to implement. For instance, in the SharePoint standard document library, you have the option to lock documents for editing. Among the compliance details you can select there, you’ll find the retention period and its expiration date.

However, Microsoft 365 and SharePoint Online have their limitations when it comes to comprehensive Enterprise Content Management (ECM) and complex solutions. This is where we come in with the Shareflex ECM Online product suite. Shareflex Documents, for example, offers a complete DMS with predefined file structures, document types, permission controls, a workflow system, and interfaces to various ERP systems. Shareflex Contract focuses on managing contracts and their complete lifecycle, while Shareflex Invoice provides a predefined workflow for digitizing, reviewing, and approving incoming invoices.

The capability for revision-secure archiving is ensured because all Shareflex solutions are based on SharePoint Online and utilize the extensive Microsoft 365 “Compliance & Security” features. If you’d like to learn more about us and our solutions, please feel free to reach out. We’ll help you find the right solutions to digitally support and advance your business.

Legal Disclaimer

All information in this article is provided for informational purposes only. It does not constitute legal advice and cannot replace individual legal advice that takes into account the specific circumstances of each case. When we report on cases, especially court decisions, it should not be assumed that the outcomes will necessarily be similar in other cases.

We strive to select all information provided in this article with care and to update or supplement it as needed. Nevertheless, we cannot guarantee the timeliness, completeness, and accuracy of the information in this article. This is especially true when there are changes in legal regulations or jurisprudence.