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Back Up Records to Avoid Digital Disasters
As Paper Trails Vanish, Computer Crashes Can Leave a Club Lost in Cyberspace
Like the malfunctioning computer HAL in Stanley Kubrick’s epic film “2001: A Space Odyssey” that refused to open the pod bay doors for astronaut Dave or the game-loving WOPR supercomputer hacked by Matthew Broderick’s character in “WarGames,” there have been no shortage of computer villains in film history, eager to wreak havoc on the best-laid plans of carbon-based humanoid life forms.
Most computer users have their own tales to tell of computer meltdowns and near-disasters, both hardware- and software-related. And yet most clubs don’t have an official plan for data backup and document storage.
Many banks and brokerage firms now offer to replace mailed monthly statements, trade confirmations and year-end documents with electronic equivalents. As clubs move increasingly toward computerized bookkeeping and operation procedures, they no longer have an automatic paper trail of records to be saved in manila folders and shoe boxes; as a result, they might find it easy to overlook the need to preserve and protect the club’s records. But just one computer crash is all it takes to wipe out years of documents in an instant, leaving you hurtling through the vast emptiness of cyberspace where your friends, family and club members can indeed hear you scream.
Several key components contribute to a sound backup and document storage plan for your club. The first is to ensure that you have access to all your club’s financial records going back at least seven years, pursuant to IRS regulations. Don’t rely on your bank or brokerage firm to provide access to your account records. Many firms make account statements and records available to customers only for a limited period, perhaps one to two years. After that, if you need to recover statements or transaction files, you may need to pay a hefty fee for the service.
Proper storage procedures don’t mean that you need to keep printed versions of all these documents — an electronic copy is fine as long as you’re confident that you can access it in later years. Computer operating systems, software programs, hardware devices and storage media all change over time, so consider how likely it’ll be that you can access a particular file format or hardware component five or six years down the road.
For example, consider that Lotus 1-2-3 spreadsheet and WordStar word processing software were both dominant in their markets in the 1980s but aren’t commercially available today. Although it’s possible to convert files from those programs into modern-day equivalents, it’s not always easy. Universally accepted file formats, such as Adobe Acrobat Portable Document Format (PDF), probably are safe, as are Microsoft Office file formats, plain text files and common graphics file types such as GIF, JPG and BMP files. If you can save your brokerage statements and club accounting reports in those formats, you can eliminate the need for many paper records.
The next piece of your document storage plan is to make sure you can store your electronic files on a device or other storage media that won’t become obsolete. It’s been nearly a decade since I’ve owned a computer that had a 3 1⁄2-inch diskette drive, and somewhere I have a box of Iomega Zip disks, each filled with a whopping 100 megabytes of data that are next to useless since I have no computer with the necessary parallel port into which I can plug the drive. Today, USB flash drives — sometimes called jump, key or thumb drives — are cheap, with a 1-gigabyte device selling for $10 or less. They’re much easier to use than burning CDs or DVDs each time you need to archive files, and at that price you can purchase several and reuse or rotate them as needed.
Next, consider your club’s computerized accounting data. If you use ICLUBcentral’s Club Accounting 3 program, for example, you can use the File > Export menu command to save a copy of all your data to a location on your computer that you can find later, such as your desktop. Then copy or upload that file — it has an .icf file extension — to a storage device or service.
If your club uses the online myICLUB.com site, don’t neglect the need for a backup. Although ICLUBcentral regularly backs up all the data on our website on industry-standard redundant drives, this will not protect you from your own mistakes! If a club treasurer accidentally deletes the club’s data or makes a mess while trying to enter or change a complicated transaction, ICLUBcentral won’t be able to easily restore your club’s data. Instead, it’s imperative that you use the “Export accounting records” feature in Accounting > Utilities to occasionally download copies of your club database and then copy that file to multiple secure locations as with all your other financial records.
In addition, you can use the Backup Manager in the Accounting > Utilities section to save versions of your club’s data in your myICLUB.com account. This saves an identical copy of your club data as is created with the Export function but saves it in your myICLUB account. This can be particularly useful when entering complex multistep transactions such as mergers, spinoffs or withdrawals. Make an online backup before you start entering the transaction and if you get tangled up in entering, re-entering, deleting and undoing, you can simply use the Recover feature to restore your data as it stood before you began working on the transaction.
When considering how often to make backups, think about how many transactions you’d be willing to re-enter if you lost data and arrange your backup plan accordingly. You probably don’t need to back up your data each month. But entering a year’s worth of investment club transactions would cause some serious pain, and having to reconstruct several years of data comes under the heading of “Nightmare Situations.” Most treasurers would consider it inconvenient, but not impossible, to re-enter a few months’ worth of data, so creating quarterly backups is reasonable.
The final piece of your storage and backup plan is to consider where you’ll store physical backups and electronic documents. Storing a CD or flash drive in the drawer next to your computer may be fine protection if your computer crashes, but it won’t do you much good if a disaster such as a flood or fire destroys your home, taking your backup along with all your equipment. It’s best to have a double- or triple-redundant backup plan for your investment club’s computerized data, keeping these files in several secure locations.
If you have a bank safe-deposit box, keep an annual copy of your data there. Keep a copy in a locked file cabinet at your office. Place one in the fireproof safe in your home. Upload a copy to an online file storage service. Whichever methods you choose, let other people know where the backups can be found and make sure that all locations are secure. You don’t want member Social Security numbers and club account numbers to get into the wrong hands.
Finally, you have many options for storing online files that can provide a relatively easy and secure method of archiving files. Google’s free e-mail service, Gmail, offers several gigabytes of storage, so you could e-mail a copy of your data and files to yourself — or to other members of your club — and thus archive the data effectively. Other online file storage services, such as Microsoft’s free SkyDrive, allow you to upload files in a secure, password-protected environment.
And online backup services such as Syncplicity or Carbonite are designed to save all the important files on your computer on an ongoing basis. This allows you to access, download and restore files as needed without having to manually upload individual files to a server or copy them to a remote storage device.
While proper document storage and backup planning won’t eliminate the impact of global thermonuclear war on your data, it can help preserve a treasurer’s sanity when lesser disasters affect your investment club.
Douglas is ICLUBcentral's product manager, helping develop the company's programs including Toolkit 6, myICLUB.com, and the Investor Advisory Service. He is also the author of several investing books, including The Pocket Idiot's Guide to Direct Stock Investing, The Complete Idiot's Guide to Online Investing, The Armchair Millionaire, and Investment Clubs for Dummies.