Record Keeping:
Maintaining Non-Financial Records

 Source: Managing a Small Business

This guide deals with records about people and things. The temptation is to refer to these as "non-financial" records, but they do relate to financial considerations either directly or indirectly.

There are many reasons to maintain accurate, reliable personnel records. Of obvious importance is the maintenance of payroll-related records to use in computation of employees' pay and withholding and employer obligations (when required), and various income tax and other withholding deductions. Personnel records are also needed for potential workers' compensation or unemployment claims; employee appraisal, promotion, or dismissal actions; and insurance information.

Classification

Personnel records can be classified in four ways: present, recent past, past, and future. Categories commonly used for personnel records are: pay related, performance related, developmental, other personnel actions, and non-confidential medical records.

There are several ways that personnel files can be maintained and stored, but the simplest is in individual employee records which are divided by the five main categories and kept in alphabetical order by employees' names. All present employees' files would be stored in a present section and past employees' files in a recent past section. This allows easy access for answering questions which often arise during the first several months following termination of employment. A past file would be maintained in storage in order to provide information that may be needed less frequently. A future section can be maintained in one of two ways: 1) a separate section in the rear of each current employee's file, or 2) a separate file for each employee for future required action.

Personnel record policies must be established and administered fairly and in compliance with the law. Check with an attorney to be sure that your policies are in compliance with all regulations.

It is important to note that when personnel records are maintained correctly, the chances of becoming involved in legal actions relating to hiring, supervision, or dismissal of employees decrease. Employee management decisions can be made based on accurate information that reduces both conflict and costs.

Job Description

As a small business grows and the need for additional employees becomes evident, the first step in the personnel process is the development of a job description. A job description clarifies the duties and responsibilities of the person employed in a particular position and aids in identifying the skills an individual needs to perform the job, serves as a basis for evaluation of an employee's performance, and clarifies organizational interaction by specifying reporting relationships. Here is a sample job description:

Under general supervision of a designated supervisor, but with some independence, to perform duties as an accounts receivable bookkeeper.

Responsibilities

1. Responsible for all cash receipts and deposits:

a. Prepare bank deposits daily.

b. Maintain cash receipts ledger.

2. Responsible for the maintenance of records on all memberships:

a. Issue billings and notices to members.

b. Post all receipts to permanent membership records.

c. Inform membership office of payments and balance membership records to cash receipts monthly.

3. Reconcile all bank accounts except payroll.

4. Prepare payroll bi-weekly through all phases.

5. Responsible for maintaining employee annual and sick leave records.

6. Assist in the pre-registration for the annual convention.

7. Issue, balance, and be responsible for petty cash.

8. Balance subsidiary ledger monthly.

9. Proofread budgets.

10. Perform other duties as assigned.

An application for employment serves several purposes. First, it provides data on job applicants in a standard format that aids in identifying individual strengths and weaknesses. A well designed employment application is also valuable in insuring that laws governing fair employment practices are observed. And, when an individual is hired, the employment application becomes the basic document for creating a personnel file for that person.

Personal information is normally the first category of information listed on an employment application. The applicant's name (and maiden name, if applicable), present and past addresses, and telephone number are needed. Also, the applicant's Social Security number should be included under personal information because it would be needed in the permanent file of an employee.

The application should also include a category identifying the educational background of the person. In addition to traditional degree and diploma information, it is valuable to know if the applicant has any specialized training that relates to present or future job responsibilities.

The next category to be included on an Employment Application is the applicant's work history.

Information regarding references is also useful in the employment process. It is advisable to request both personal and professional references. The information provided should be sufficient to allow you to contact the references.

The final category of information includes general information:

military service, foreign language proficiency, health related questions (especially the name and telephone number of a person to contact in any emergency), and any other information appropriate for the particular job being applied for. Once an applicant has been hired, the Employment Application becomes a part of the personnel file.

Pay-Related Records

Records relating to employee pay need to be maintained. At the minimum, a copy of an Employee Tax Withholding Form, needs to be completed and maintained on each employee. This form can be used to determine federal income tax withholding required. In addition, any state or local withholding requirements should also be included in the pay-related records.

Compensation to employees for services performed can be handled in a number of ways. The most common are: salary, hourly, commission and a combination of commission plus salary/hourly. Most management positions are based on a salary and do not provide for overtime (over 40 hours weekly) payment. Many lower mid-level administrative and clerical are based on a salary classified as non-exempt. This classification of employee is paid overtime for all work performed that exceeds 40 hours per week. Therefore, that weekly/annual salary must be computed to equal an hourly rate, and accurate rates must be maintained for each work week.

When compensation is based on commission, the sales records for the employee must be transferred to the personnel/payroll office. There are many different types of agreements for commission-based pay and can require several types of records. It is important to make a complete study of commission pay systems and to access the recordskeeping involved in each if you are using such a plan.

There are consulting firms that specialize in compensation plans and provide payroll servicing. You may wish to consult with one or both types of services. They can be helpful and often times more cost effective then providing the work internally.

Personnel Benefits Records

This category includes information relating to employee benefits. Complete up-to-date records should be maintained regarding vacations, military leave, sick leave, compensatory time, etc. This information can be recorded on the time card on a daily basis.

Performance Related Records

The employee appraisal process may also be used as documentation for firing an unproductive worker. It is very important to maintain and use employee performance appraisal records consistently. Using performance appraisals only on a problem employee may backfire if litigation follows.

An important consideration to the successful operation of any business is the job performance of its employees. Below is a sample Employee Performance Appraisal form. All employees should be evaluated on a regular basis using consistent criteria to measure their performance. Every effort should be made to keep the appraisal job-related, avoiding personality differences as much as possible. The primary objective of an employee performance appraisal process should be a continuing effort to improve performance. Positive, constructive suggestions for improvement should be identified and discussed with the employee.

Name _________________ Date of Hire ______________ Date of Review _________________

Department ___________________________ Job Title/Grade ___________________________

Instructions: Use this form to evaluate the performance of all employees on their regular review as scheduled by personnel policy. Part I should be completed by the employee and Part II by the immediate supervisor. Be sure that the current job description has been reviewed prior to completing this evaluation to ensure accuracy of the description and a complete understanding of the job. Performance evaluation and subsequent counseling are an important part of a supervisor's responsibilities and merit serious thought and prompt attention. Upon completion of this form, the employee and supervisor should discuss and sign the evaluation.

Part I: Employee

1. Briefly describe your duties and responsibilities during the period covered by this evaluation.

______________________________________________________________________________

2. Evaluate your performance of these activities. Where can improvements be made

______________________________________________________________________________

by you? What have you accomplished since your last review?

______________________________________________________________________________

3. In order to improve your performance in your present position and/or to prepare yourself for the future, what help, training, assistance, or materials do you need?

______________________________________________________________________________

4. List the specific job related goals you have set for yourself. State your plans for accomplishing them prior to your next review.

______________________________________________________________________________

5. Name areas you would like to be considered for as your abilities develop:

Immediate _____________________________________________________________________

Long-Range ___________________________________________________________________

6. Additional Comments:

______________________________________________________________________________

 Part II: Supervisor

1. Has the employee stated current duties and responsibilities correctly? If not, explain.

______________________________________________________________________________

2. Comment on the employee's acceptance of responsibility, the ability to learn and follow directions, judgment and dependability. How many months in the present position?

______________________________________________________________________________

3. Comment on the employee's job performance with emphasis on technical knowledge and competency, quality and quantity of work, and accuracy.

______________________________________________________________________________

4. Discuss the employee's accomplishments of previously established goals or discussion items requiring attention.

______________________________________________________________________________

 5. Describe this employee's best area of performance.

______________________________________________________________________________

6. Describe those areas of job performance that need more attention to achieve greater effectiveness.

______________________________________________________________________________

7. What are you doing to help the employee become more effective?

______________________________________________________________________________

8. Comment on the nature of the employee’s ability to work and get along with supervisor(s), co-workers, and customers.

______________________________________________________________________________

9. Do you consider this employee well placed in this particular job? Why? If not, what alternatives would you suggest?

______________________________________________________________________________

10. If this employee has shown the capacity for increased responsibilities, reassignment, or promotional consideration, what specific position(s) or general areas should be considered?

Position/General Area: ___________________________________________________________

Readiness (In Months): ___________________________________________________________

Salary Grade Level: _____________________________________________________________

11. Considering the employee's personal habits, relationships with others, technical competency on specific assignments and with proper consideration for the period of time covered by this review, provide an overall rating of job performance for this employee. Check the appropriate rating box below. Explain your response.

___ Inadequate ___Commendable ___Competent

___acceptable ___Marginal ___Distinguished

The above evaluation has been reviewed with my supervisor

Signature of Supervisor/Date: _________________ Signature of Employee/Date: _____________

Development Records

Records relating to continuing employee development should be maintained. Employees who participate in specialized training programs or who continue their formal education can benefit the business. Decisions in the areas of pay raises and promotions can be influenced by information indicating an employee's willingness to continually improve job skills.

Medical Records

Maintaining records on suppliers is important for ensuring the adequate supply of appropriate merchandise in a timely, cost effective manner. Supplier records should include the supplier's name, address, telephone number, and Fax number. Try to obtain and maintain a catalog indicating the principal products or services available from each supplier. A special notation should be made on the supplier record regarding the primary contact person(s), including telephone numbers.

Helpful information to have about suppliers includes the number of employees; size; and location of their facilities; adequacy of production equipment; references from other customers; and financial status.

There are several reasons to maintain customer records, the most obvious being to maintain billing information for credit customers. Even if credit sales are not involved, however, information on customers can be helpful for advertising, pricing, and deliveries.

Records should include customers' names, addresses, and telephone numbers. Demographic data like age group, family status, and income can be especially useful in selecting merchandising and planning marketing strategies. Credit account information should include credit references, checking account references, items purchased, date of purchase, and complete records of payment.

Inventory records are vital for ensuring that adequate quantities and types of merchandise are available for sale. There are two basic methods. The first, the perpetual method, keeps track of each item available for sale. As each item is sold, the inventory is reduced. The perpetual method works well with big ticket items.

More suitable for businesses selling large quantities of inexpensive items is the periodic inventory method. This method relies on a physical count of all merchandise available for sale periodically with inventory records adjusted to reflect the actual counts. The difference between the items on hand and the items purchased for sale represents the amount of items sold (although adjustments for shrinkage-shoplifting, employee pilferage, and the like - have to be made).

Inventory records should include the name, description, amount, and cost of merchandise in stock and on order. Also needed is supplier information, the dates items were ordered and received, and the name of the person who placed the order. For periodic inventory systems, the records should also include the date of the last physical inventory count and the names of the persons who conducted the inventory.

As noted earlier, there is a growing trend to use computerized inventory systems. Many software programs exist which are designed for specific businesses. You should make a complete study of available programs and check with individuals using the systems before making a decision to purchase a standard software inventory program or to have a custom program designed.