As more and more businesses move to a paperless environment, it is important that appropriate procedures and systems are in place to capture and safeguard electronic business records. Individuals and businesses are now relying on computers to perform daily activities, mission critical functions and to store and hold valuable pieces of information.  But only 1% of data on home and home/business computers is backed up daily.  Some data is backed up ‘occasionally', a little is backed up once a month, and the rest is never backed up at all. 

Are businesses breaking the law by not having adequate backups of their electronic records?  Yes.  Under the Tax Administration Act it is an offence if a taxpayer does not keep books or records required to be kept, or does not provide information that the Inland Revenue requests.

The Inland Revenue have issued a draft practice statement, ED0026, which provides guidelines on the retention of business records, where those records are in electronic form.   Some of the key points of ED0026 include:

• Backup and recovery procedures must be sufficient to guarantee availability of electronic records for the required record retention period (currently 7 years, unless extended to 10 years in a specific case situation).

• If business records originate electronically, the taxpayer must be able to demonstrate that their systems are secure from both unauthorized access and alterations.

• Internet transactions and e-mails may be business records and so are required to be kept for business purposes

• Electronic copies must be readily accessible and capable of being produced upon request to Inland Revenue

• If taxpayers transfer information from paper to an electronic form, the two must be identical.

The simplest way to meet these requirements is to take a daily snapshot of your electronic records and store them securely at a remote location.  Sites such as this provide a secure backup service where your data can be safely stored for 7 years, it happens automatically each day, is encrypted, and the data ‘as it was on any individual day' can be restored by you at any time via the internet.  Furthermore the data is stored here in New Zealand ensuring compliance with our privacy legislation. 

Paul Gadd, an ex Partner of the international accounting firm Deloitte Touche Tohmatsu said in developing the service, he and his team were looking for technology that served two purposes.  First it had to meet ‘best practice standards' with regard to delivering a data backup service, and second it had to be able to meet the data retention requirements of New Zealand businesses.

Using technology previously only available overseas to large corporates, DataWorks have developed a service that uses a secure internet connection to automatically backup data from your PC or server, to their secure data centres on a daily, basis.  Using advanced technology, only the changed data is sent each day to the backup server, reducing the volume of data sent by over 90% (compared to traditional backup technologies) and providing a daily snapshot of the data - for each day you backup.

Remember - "my hard drive crashed", is not an excuse the IRD will accept when they ask you to produce electronic copies of your records.