Importance Of Adequately Storing Business Account’s Data

Over the years, business owners in Singapore have been quick to realize the benefits of opening a business account. The biggest benefit is the convenience of accessing financial tools made exclusively for businesses. However, access to convenience comes with responsibilities, like adequate data storage, which businesses often overlook. Transaction data should be adequately stored by all businesses in industries with strict compliance and regulations.

Don’t banks record transactions by default?

While recent transactions are automatically registered, older data is usually archived by banks to save on storage and operational costs. The exact definition and magnitude of ‘older’ here depends on policymakers. For example, some may consider a time threshold of 10 years, which means that all transaction details older than ten years will be archived. Even though archival isn’t synonymous with deletion, the process of extracting archived data from banks can be cumbersome. This can be troublesome for businesses that often find their older financial data relevant, such as those in highly regulated industries. Thus, locally storing a copy of old transactions can come in handy to highly regulated businesses in these situations:

  • Transfer of company ownership:

Transferring or diluting the company’s ownership can be a big decision for both the present owner and the acquirer. Before finalizing the acquisition, some acquirers may want to get a complete overview of the company’s financial operations since its inception.

For instance, some acquirers may want to verify the accuracy of financial statements from randomly selected financial years. In this case, only the business account data will be able to provide the granular tracing of individual transactions that corroborate the financial statements. Without access to the raw transactional records, it can become challenging for acquirers to validate the legitimacy of the financial claims made in the company’s books. Here, the business account data acts as the underlying evidence trail that supports the higher-level financial reporting. Subsequently, it helps acquirers become confident about their deals and believe that the valuation is accurate.

  • Disputes with the legislature or other business:

Although unlikely, there can be a time when a company has to justify their transactions to come out clean of legal disputes. For instance, consider a transaction that was done ten years ago with a business that was later found to be involved in deceptive practices. Investigators may want to scrutinize that decade-old transaction to determine if the company was aware of or complicit in any wrongdoing. There could be a chance that banks would’ve already archived this data. Having locally stored business account data from that period would allow the company to provide a transparent and detailed record of the transaction in question. Without such historical records, the company may struggle to defend its position, potentially facing penalties or reputational damage.

How to adequately store data?

  1. Businesses should explore cloud-based business information storage software. The ideal choice would be software with stricter safety policies than publicly available cloud storage software. Alternatively, the storage system can be made in-house, though it may require more effort and investment.
  2. Older data should be kept encrypted because it won’t be possible to routinely check who accessed them and if the information was breached. Encryption would prevent unauthorized individuals from making sense of the data. Additionally, if third-party software is being used, its security should be periodically inspected.
  3. Financial data can be compressed for more optimal storage. A business may even archive it if they’re confident that retrieval would be straightforward. Data can also be labelled for easier identification.

Considerations:

Storing old data can be just as financially and operationally challenging for businesses as it is for banks. Thus, businesses should be mindful of whether the cost incurred in storing this data will be justified if a future dispute arises. Some businesses may want only to save high-volume transaction details or those that constitute a big chunk of the financial statements. Nonetheless, if a business chooses to store individual transaction details, it should adequately train the team to handle the reporting and storage software.

The Bottom Line:

Even though it may be tedious, storing details of individual transactions from business accounts is essential for businesses that face strict regulatory requirements in their industry. Businesses can decide their own timeline on how long and where they want to store this data. Nonetheless, if such data is being stored, the security of the storage system should take the highest priority.

By admin

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