The digital archiving of documents is an increasingly important topic in today’s world. The terms “archiving” and “digitalisation” now go hand in hand and make it necessary for companies to finally say goodbye to piles of paper and dusty file folders. However, many still shy away from this step, as it obviously brings uncertainties and challenges with it, for example the topic of “audit security”.
This article brings more light and clarity to the topic of digital as well as audit-proof archiving and addresses the following topics:
Table of Contents
- What is archiving?
- Analogue vs. digital: What is digital archiving?
- Why digital archiving?
- What needs to be archived?
- Retention periods
- Challenges in digital archiving
- Audit-proof archiving according to GoBD
- Archiving and the GDPR
- How does digital archiving work?
- Digital Archiving in the Cloud with Microsoft 365 and SharePoint Online
What is archiving?
The term “archiving” originally comes from antiquity and is derived from the Latin word “archivum”, which roughly describes the place where deeds and documents are kept. In the second half of the 15th century, the term archive or archiving then entered the realm of chancery language and became further established.
Since then, the basic idea of collecting and archiving has been preserved and is therefore still used in many institutions today. However, this is not always justified by internal company guidelines on archiving, but is usually subject to legal requirements.
Today, the definition of archiving means the temporally unlimited and unchangeable as well as usually controlled, systematic storage of documents and data. This can be done in analogue as well as digital or electronic form. The aim of archiving is to store data and documents in such a way that they are always accessible and ready for retrieval.
Although documents that have already been archived are usually no longer highly relevant for day-to-day operations, certain types of documents still have to be stored for a prescribed period of time according to certain guidelines. This is required by law.
Analogue vs. digital: What is digital archiving?
Archiving documents can generally be done in two ways, analogue or digital. Analogue describes the physical, material storage of files and documents in paper form. In contrast, digital document archiving stores information and data on a digital storage medium. There are three possibilities: Hard disk systems (NAS – Network Attached Storage), which allow continuous access, are widespread. Alternatives still in use store the data on a tape or optical media such as CD or DVD, but these are not always accessible. A third variant that has emerged in recent years is so-called cloud storage or cloud-based storage.
Those who work with digital documents and data do not necessarily have to have them in their original digital form, as is the case with emails, for example. Scanned paper documents that have been digitised subsequently, such as classic letters, can also be archived electronically.
Initiated by digitisation, companies in general are increasingly focusing on digitised processes, while their classic counterparts such as paper archives are fading into the background. In the process, terms such as digital workplace and paperless office are increasingly emerging. In addition, with the digitisation of documents, digital document archiving, often referred to as electronic archiving, is also becoming more and more important.
The two terms document management system (DMS) and document archiving are often mistakenly used synonymously or confused regarding the digitisation of documents, especially their management and processing. However, a DMS primarily aims at the structured filing of documents and the storage of additional document properties in order to simplify retrieval for the user. Document archiving, on the other hand, is usually already part of a document management system, as is the digitisation of paper-based documents or the automation of document-based processes. The task of document archiving is the long-term storage of documents. However, the boundary between DMS and archive is becoming increasingly blurred, so that users hardly notice the difference in the daily work routine.
Why digital archiving?
For companies, archiving documents constitutes the working basis and legal security in relation to administrative bodies and the legislator. Nevertheless, the topic of archiving is not exactly popular among entrepreneurs as well as employees, as it can be very time-consuming, complex and involves a high commitment of resources in the first place, depending on the type of storage method. In addition, archiving does not directly contribute to the company’s profit.
To minimise these expenses, it is worthwhile to invest in a digital archiving strategy or concept and to switch from analogue to electronic archiving. Concrete advantages compared to the analogue variant are:
Advantages of electronic archiving
- Saving space: Papers and file folders no longer have to be physically stored in a specially created archive, but are stored with database support. Cloud servers are particularly advantageous here.
- Immediate access: (Online) documents and files are available immediately, everywhere and at any time for all employees.
- Time saving: Documents are immediately available through full text searches and do not have to be manually searched for in archives by employees.
- Transparency & clarity: Users can view the most up-to-date data, including authorisations. In addition, the transparency means that there are no unnecessary copies.
- Cost savings: Both the rental costs of a room as well as material and personnel costs are significantly reduced and ensure cost savings in the long term.
- Continuity & uniformity: Due to the digital archiving of all media, there is no media discontinuity. If documents exist in paper form, they should be digitised.
- Scalability: With good archiving software, scaling upwards is no problem. This means that large amounts of data can be archived.
- Legal security: Archived documents serve as a reference and proof of compliance with legal regulations such as the GoBD and GDPR.
Another reason that makes electronic archiving not only reasonable but also necessary is the significantly increased frequency with which documents are created and distributed and the exponentially growing volume of data that goes along with it. With an analogue, manually administered solution, this workload is hardly manageable, especially in large companies. In addition, the switch from an analogue to a digital strategy results in the modernisation of the already existing IT infrastructure. This in turn also benefits the company as a whole.
What needs to be archived?
Companies archive all kinds of documents and data. This can include everything from correspondence with customers and invoices to year-end reports that arise in the company. However, when it comes to archiving business documents, there are legal regulations where this voluntary nature of archiving no longer applies and retention is mandatory. In Germany, the retention obligation is based on the “Principles of Proper Accounting (GoB)” or, in the case of digital storage of data, on the “Principles for the Proper Keeping and Retention of Books, Records and Documents in Electronic Form and for Data Access (GoBD)”.
The decisive factor for the archiving obligation is that the documents are relevant for tax purposes. However, not every document must be kept for the same period of time. Here, too, the legislator has created precise specifications in the form of retention periods.
The primary business records that are subject to mandatory archiving according to the law include:
- Books and records
- Annual financial statements, consisting of balance sheet and profit and loss account
- Management reports
- Opening balance sheet
- Work instructions and other organisational documents necessary for understanding these documents
- Received commercial and business letters (e.g. email)
- Reproductions of commercial and business letters sent out
- Accounting documents
- Documents accompanying a customs declaration made by means of data processing pursuant to Art. 77 (1) in conjunction with Art. 62 (2) Customs Code. Article 62(2) of the Customs Code, provided that the customs authorities have waived their presentation or have returned them after they have been presented
(Source: Handelskammer Hamburg)
For companies, as well as for self-employed entrepreneurs, there are prescribed “minimum periods” of archiving for certain documents, so-called retention periods. In most cases, these are six or ten years for business documents. These archiving periods are regulated both in the German Commercial Code (HGB, § 257), which covers commercial law, and in the German Fiscal Code (AO, § 147), which deals with tax law.
The following is an exemplary list of business documents defined according to HGB and AO and their retention periods:
- Bills of lading
- Declarations of assignment
- Reminders & dunning notices
- Pay slips for interim, final and special payments
- Investment allowances (documents)
- Settlement documents
- Outgoing invoices
- Bank receipts
- Operating cost invoices
- Balance sheets (including opening balance sheet)
- Incoming invoices including adjusting documents
- Commercial books
The end of the respective calendar year always marks the starting point for the retention period. This means that a tax document from the year 2022, such as the opening balance sheet, must be archived until 31 December 2032.
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.
A detailed overview of the main types of documents and their retention periods can be found here for example: Handelskammer Hamburg – ABC der Aufbewahrungsfristen
A retention period only starts with the end of the calendar year in which the respective document was created. For example, the retention period for an invoice that you wrote on January 2, 2019 starts on January 1, 2020 and ends on January 1, 2030.
Challenges in digital archiving
It should be clear to everyone that a strategic changeover from analogue to digital cannot be implemented immediately. In addition to the time required, such a forward-looking step often involves many uncertainties and challenges. One point that becomes relevant for companies when dealing with the topic of “digital archiving” is the protection against unauthorised access to the digital archiving system. Attention should also be paid to the lifespan of the storage media in order to be able to archive the documents for many years in accordance with the retention periods (long-term archiving). Both points are specified in the GoBD.
Furthermore, a significant amount of costs and resources is necessary for the initial implementation. The expenses will quickly be amortised through the savings. However, there is still the requirement for know-how and expert knowledge, as digital archiving can be complex and extensive. Especially the topics of “GoBD conformity” and “audit-proof archiving” repeatedly cause great uncertainty among entrepreneurs. But what exactly is audit-proof archiving?
Audit-proof archiving according to GoBD
Audit-proof archiving of documents is a special case in document archiving. It describes the archiving of documents subject to retention (with relevance to commercial and tax law) in an electronic archiving system, taking into account the retention periods that apply. In November 2014, the Federal Ministry of Finance introduced the “Principles for the Proper Keeping and Retention of Books, Records and Documents in Electronic Form and for Data Access (GoBD)”, which came into force for the first time on 1 January 2015. In addition, the requirements of the HGB and the AO exist for audit-proof archiving.
The GoBD apply to companies subject to accounting requirements, freelancers, self-employed entrepreneurs and small entrepreneurs not subject to accounting requirements. This means that both large corporations and small and medium-sized enterprises (SMEs) have to deal with this.
The GoBD principles proceed according to the following guidelines:
- Traceability and verifiability: The documents and records must be verifiable by means of receipts and be comprehensible to third parties.
- Completeness: Business transactions must be recorded in full and without gaps.
- Accuracy: Business transactions must be recorded truthfully and correctly according to the actual circumstances of the transactions.
- Timely entries and records: There must be a chronological connection between the transactions and their recording in the books.
- Order: Books and records must be kept in accordance with certain principles of order.
- Unchangeability: A booking or a record may not be changed without an exact record and within the legal framework.
If these principles for audit-proof archiving are not adhered to, high penalties may be imposed. A breach represents a deficiency in accounting as well as a breach of the accounting and retention obligations. The penalties range from high costs for the company and fines to personal imprisonment*.
Read our expert 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 the GDPR
The General Data Protection Regulation, or GDPR for short, is a European Union regulation that governs the processing of personal data. Particularly against the backdrop of retention periods for archiving, the GDPR often poses problems for entrepreneurs. In this context, companies often ask themselves which rule takes precedence, the GDPR or the retention obligation. The answer is: Neither, because both rules apply side by side. According to the GDPR, documents with personal data must be deleted as soon as the original purpose of archiving is no longer given.
On the other hand, there are the legal retention obligations and periods of the GoBD. They represent the new purpose of archiving. Thus, archiving of this data can continue, but must be deleted after the period has expired. Failure to do so can result in enormous financial penalties*.
Data protection and contract management, how do they fit together? In our white paper on “Shareflex Contract and the EU Data Protection Regulation”, we show how our contract management solution supports you in implementing the European General Data Protection Regulation.
How does digital archiving work?
In order to be able to guarantee audit-proof archiving according to GoBD, in addition to special storage systems, holistic document management systems (DMS) with archiving software are now being used more and more frequently. In the DMS, all business documents such as invoices, delivery notes or balance sheets can be stored digitally. The software supports the user in fulfilling the legal requirements, for example, through workflows and corresponding reminders for the deletion of documents. Or simply through a note on the respective retention period.
Since there is a wide range of digital archiving systems and DMS on the market, a decision must be made on which system best meets the company’s own needs. An example of a well-known provider of cloud-based software is Microsoft with its products Microsoft 365 and SharePoint Online.
Digital Archiving in the Cloud with Microsoft 365 and SharePoint Online
With its “Compliance & Security” policies, Microsoft already offers a wide range of security templates for companies, for example with regard to retention obligations. These security templates are regulated in Microsoft Purview (formerly Microsoft 365 Compliance) and Microsoft Azure Purview. The aspects of mass data & performance, data protection, data security, encryption as well as archiving are completely covered.
Anyone who uses a DMS which is based on this is automatically supplied with an archiving system. Audit-proof archiving with SharePoint Online is already taken into account by Microsoft and is possible without any problems. Among other things, the SharePoint standard document library offers the option of blocking documents for processing. Under the selectable compliance details, the retention period and the expiry date of the period are displayed, too.
However, you quickly come up against your limits with Microsoft 365 and SharePoint Online as a DMS when it comes to holistic Enterprise Content Management (ECM) and complex solutions. This is where the Shareflex ECM Online product suite steps in. Shareflex Documents, for example, is a fully-fledged DMS that includes predefined file structures and document types, permission control, a workflow system and interfaces to various ERP systems. The Shareflex Contract solution focuses on the management of the specific document type of contracts and the complete life cycle of a contract. Shareflex Invoice offers a predefined workflow for digitising, checking and approving incoming invoices.
The ability of audit-proof archiving is ensured by the fact that all Shareflex solutions are based on SharePoint Online and use the extensive Microsoft 365 “Compliance & Security” functions. If you would like to learn more about us and our solutions, please feel free to contact us. We will help you find the right solutions to digitally support and advance your business.
All information in this article is for information purposes only. It does not constitute legal advice. In particular, it cannot replace individual legal advice that takes into account the specifics of each case. Insofar as we report on cases, in particular court decisions, their results may not be used to infer a necessarily similar outcome in other cases.
We strive to select all information provided in this article with care and to update or supplement it as necessary. However, we cannot guarantee that the information in this article is always up to date, complete and correct. This applies in particular to changes in legislation or case law.
Hamburg, May 23, 2022
Author: Sara Glöckner
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