Is It Time for Year-End Backups Again? FileSlinger™ Backup Reminder 12-29-06

We interrupt this program for a special announcement: 2006 is at an end! Okay, you knew that, and I knew that, but I was all set to write the next installment of the website backup series when it finally hit me that this was the last posting of 2006 and therefore time for me to say something about archiving your data at the end of the year.

This is the fourth December of the FileSlinger™ Backup Reminder. That leaves me wondering whether I can say anything new on the subject of making special end-of-year copies of your financial and business data to put with your tax archives. In any case, since not everyone has been reading since 2003, it won’t hurt to start with a little review.

If you already create yearly archives of your paper files for tax purposes, you’ll have a pretty good idea of what needs to go onto your year-end backup CD or DVD. (And remember: use brand-name media for anything that needs to last, and don’t use rewritable CDs or DVDs for archiving, especially if you’ve written and erased data from them before.) You can also keep year-end copies on a network drive or external hard drive, but it’s easier to put CDs into the same files as your paper. (Put them in jewel cases first to protect them from dust and scratches.)

In the United States, the IRS requires you to keep all tax-related financial records for seven years in case they decide to audit you. The popular recordkeeping programs Quicken and QuickBooks both allow you to create a special end-of-year backup. There’s even a QuickBooks Year-End Center to help you do this. (If your fiscal year starts in July, you’ll be doing this at the end of June rather than the end of December.)

In Quicken for Windows, this function is found under File|File Operations|Year-End Copy.

For more help with archiving financial data, see About Financial Software.

If you filed your 2005 taxes online or used tax-preparation software, be sure to put a copy of the returns onto a CD with your 2005 files.

If you shop online and get receipts by e-mail, make sure you save those. If you print them out and save the printed version, that works just fine. You don’t have to save the receipts separate from your other e-mail, though it can be useful to keep them in their own mail folder.

If you have QuickBooks or another program automatically generate your invoices, you don’t need to make a separate copy. If you create your invoices manually, make sure you include copies of them in your archive.

For me, at least, switching to online billing was something of a mistake, because I always end up printing the bill (or at least the first page) and the payment confirmation. That means I have just as much paper to manage, and I have to pay for the ink. Because I do have the printouts, I don’t worry about saving the e-mail notices. If you don’t print the bills, make sure you save the bills in electronic form. It will be much easier to produce them in the event of an audit than if you have to get them from your vendors.

Even if the IRS doesn’t want it, you’ll want to keep copies of your client projects. If the project is finished, move everything off onto CD or DVD and file it. (Look at all that free space on your computer.) If the project isn’t finished, you’ll want to keep a copy of the files on your hard drive so you can continue working on them, but this is a good opportunity to make sure you have proof of what you’ve accomplished for the year.

You definitely want to keep copies of contracts. While old-fashioned contracts require signatures and usually manifest on paper, these days contracts often go back and forth as PDF files and e-mail messages can act as contracts. Make sure you have copies of these in case you need to refer to them or to re-negotiate them.

If you’re subject to Sarbanes-Oxley and other data retention rules, you have my sympathy. Even if you aren’t required to keep track of absolutely everything, you’ll want to keep copies of business-related e-mail. You can create a special Outlook archive file just for your 2006 business mail and put that onto a CD.

Because you might not have all the same software installed seven years from now, it’s a good idea to keep a copy of your financial, e-mail, and other programs on CD along with your data. (Backwards compatibility only extends so far.) Make sure you have the serial number or registration number for the program available, too.

Most of what you need to archive at the end of the year is confidential or at least private. That makes it a good idea to password-protect any files or folders you are backing up. Outlook, Quicken, and Quickbooks have this function built-in. For other files and folders, you might want to use a compression tool like WinRAR which allows you to put a password on the archive file. You’ll also be able to fit more data on one disk this way.

And that’s it for this week’s backup reminder. I do recommend making your year-end backups before the New Year’s Eve party, rather than after, at least if you plan to celebrate in the traditional manner. Computing under the influence may not be illegal, but it can be dangerous.