Electronic Records Management

It is a beautiful Saturday afternoon in April 1950. You are at the Trites-Wood General Store on 2nd Avenue (where IGS is today), where you have just finished your weekly shopping. The clerk totals your purchase on the cash register and writes the sale in the purchase ledger. You pull out your pay packet from the Crow’s Nest Coal Company and count the cash to settle your purchase. 

In many ways, this was not so long ago and for some in our community they don’t have to imagine such a day; they remember. Business record-keeping was done with pen and paper, transactions were settled in cash. 

As we fast forward through the decades, the pen and paper have been replaced by computers and payments are most commonly made electronically through debit, credit, e-transfer and even via smartphones! Business transactions are made online, invoices sent through smartphones, contracts signed electronically, deposits are made directly. Increasingly source documents never see the stroke of a pen, or ink on a page.

In our ever-changing digital world, Electronic records and the management and storage of electronic records is becoming increasingly important. Whether you have made a conscious decision to try and reduce paper records and the associated costs of storage and management, or simply find today that more transactions originate electronically, it is important to understand your responsibilities related to electronic record-keeping.

Let’s begin with a quick look at who is required to retain records, what constitutes a record, and how long records must be retained and accessible.
According to Canada Revenue Agency (CRA), all individuals who are required to file a tax return and all persons carrying on a business or a commercial activity must retain records for a minimum period of six years from the end of the last tax year to which the records relate. Records are used to evidence the existence of transactions and include items such as ledgers, bank statements, receipts, invoices, cancelled cheques, work orders, contracts, tax returns, and emails to name a few.

Records can be in paper format or in a readable electronic format that is accessible and usable. Electronically accessible and usable means that the information must be able to be made available upon request from CRA and CRA must be able to view the information contained using standard software programs. With the fast pace changes in technology, this is an important point. Software programs, operating systems, and computer hardware are ever changing. As operating systems are updated, some older software programs are no longer supported. Hardware components and storage devices also change. How many computers are able to read a floppy disk today? 

When using electronic record-keeping systems, it is your responsibility to ensure:

Backup files can be restored in a format that is accessible and usable by CRA
That data is actually being saved to the backup device
Procedures are in place to ensure data is not overwriting prior back-ups
Back-ups are labeled, identifying
what is stored on the back-up and the software and version used to store the data
Backups are tested to ensure they can be restored
As mentioned earlier, CRA considers records in both paper format and electronic format to be acceptable. Records that originate in paper can be converted to accessible and readable electronic format and provided that the electronic imaging has produced an accurate reproduction of the original, the original paper document can be destroyed. The Canadian General Standards Board (CGSB) has an Electronic Records as Documentary Evidence publication that specially defines the standards that must be met for imaging. If you are thinking of destroying paper support documents you should ensure that the imaging and backup systems meet the defined standard. What is interesting is that records that originate in electronic format, must be kept accessible in that format, and cannot be replaced by paper printouts. 

Another important fact is that the use of a third party service provider to manage record-keeping does not relieve a person of their record-keeping responsibilities. Therefore if you have contracted out record-keeping to a third party such as a bookkeeper, Internet transaction manager, or application service provider, you are still responsible to ensure you have access to the documents if CRA asks for them.

For more information on the requirement for electronic record retention and management please consult with your professional tax advisor.