FAR (Federal Acquisition Regulations) allows contractors to scan their original source documents and dump their hard-copy records. The policy is laid out in FAR 4.703(c).
FAR 4.703(c) allows contractors to duplicate and store original records in electronic form. Contractors are not required to maintain or produce original records during an audit if they provide photographic or electronic images of the original records and meet certain requirements. Those requirements include
- Established procedures to ensure that the imaging process preserves accurate images of the original records, including signatures and other written or graphic images, and that the imaging process is reliable and secure so as to maintain the integrity of the records.
- An effective indexing system to permit timely and convenient access to the imaged records
- Retention of the original records for a minimum of one year after imaging to permit periodic validation of the imaging systems.
The biggest problem in meeting the foregoing requirements is the second bullet; maintaining an effective indexing system to permit timely and convenient access to the imaged records. Contractors will need to put a lot of thought and consideration into an indexing and retrieval system well before embarking on a record scanning program.
Take vendor invoices for example. In a traditional accounting system, vendor invoices are probably organized in a filing cabinet by name or by year then name. If an auditor asks to see Invoice 12345 from ABC Company dated January 1, 2011, it a simple matter to go to the file and find the invoice. Now consider how you would find an electronic (scanned) copy of the same invoice. You make a PDF copy of the invoice, you give it a descriptive name and put it into a folder (the electronic version of the filing cabinet). That, to us, sounds labor intensive and for small companies, not very practical. Its much easier to, at the end of the year, put your hard copies in a couple of storage boxes and throw those boxes into your back room for the next few years.
Some accounting software applications make this a little easier. QuickBooks, for example, allows you to link a scanned vendor invoice to a specific transaction. Third party add-ons make the process a little easier. Larger companies (where paper record storage can be a problem), can afford some of the higher-end (and costly) applications that streamline the electronic storage and retrieval process but even these require a fair amount of in-house labor.
If you are contemplating an electronic record storage and retrieval system, make sure you do your homework and decide whether there is a business-case for doing so.