A Comprehensive Document Management Guide for Business Owners

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Documents are a critical component of any business. From business and customer records to marketing reports, documents are essential in all operational aspects, allowing businesses to thrive and stay competitive.

That said, having access to these documents isn’t enough. Without effective management, these documents are just a bunch of papers. This is where document management comes in. This article shares a comprehensive guide about the basics of document management and its benefits. Plus, you’ll also learn more about a document management system and several tips to help streamline your document management efforts.

What Is Document Management?

The term document management refers to the process of capturing, storing, and managing electronic versions of your documents.

We are living in the AI era now. And AI is helping us in many ways regarding document management. For example if you take a look at the AI legal document analysis by LegalOn you’ll be surprised how quickly and automatically a legal contract can be checked and verified. 

In general, you’ll need to use several tools and systems, such as a document management system, word processing files, PDFs, document comparison tools, digital images, and eSignature software to manage these digital documents.

The Benefits of Effective Document Management

There are numerous advantages to having a proper process for managing your business’s documentation. Here are some of them.

It Saves Money And Time

Managing paper files can be time-consuming and expensive. When files and documents are not properly managed, employees spend hours to source files.

In fact, statistics show that the average office worker spends up to 40% of their day searching for documents. In addition, businesses spend US$20–US$220 in labor for filing documents, finding misfiled documents, and reproducing lost documents.

It only becomes worse if you have a remote or hybrid workplace. After all, your remote employees won’t have easier access to data. They will have to send a message to their coworkers and wait for hours to hear back from them.

The wasted time and costs in managing documents can reduce productivity, budget, and overall growth potential. Adopting a smart document management strategy can help save time and resources that you can use for more business-critical tasks, such as marketing.

It Provides Security

Cyberattacks and data breaches have become the norm in this modern world. Such attacks can expose your business documents or critical employee or customer information which can be detrimental to your business’s reputation.

Implementing proper document management and using cybersecurity tools can help reduce the risk of breaches. For instance, a document management system can encrypt digital documents and assign security protocols, preventing security issues such as insider hacks. Also, with effective document management, you have access to a secure storage location to store and file sensitive documentation while ensuring seamless and reliable file transfers.

It Provides Easier Access

One of the biggest issues with paper-based documentation is that it can only be in a single place at any given time. Making copies isn’t always secure or efficient. However, switching to digital copies and implementing good document management allows access to documents, wherever you are and whenever you want.

It Helps You Stay Compliant

Regardless of what industry you’re in, you may have a set of data compliance requirements. Without proper document management, it can be difficult to comply with these requirements. Failure to comply can set you up for legal trouble and hefty fines. It also ruins the tour business’s reputation.

With good document management, you can empower your business to tick the boxes and demonstrate regulatory compliance while also boosting visibility and control. You can easily organize and secure your documents per regulations, storing them without hassles.

For instance, most document management systems are designed to be compliant with tax laws, Occupational Safety and Health Administration (OSHA) standards, and other federal or state regulations. In terms of contracts and document authenticity, document management tools like a handwritten signature generator can help prevent fraudulent transactions on digital documents, protecting your business against legal and regulatory compliance issues. When using eSignature software, experts recommend using a tablet with a stylus for the best results. For businesses that require a more comprehensive solution for managing contracts, implementing contract management software can streamline the entire process from creation to signature to renewal.

What Is a Document Management System?

At the core of any effective document management is a centralized software solution that captures, digitizes, secures, and manages all digital documents and files. And choosing the right documents management software (DMS) for your business can help streamline the whole process.

It allows your employees to collaborate and provide an overview of all data and documents related to a specific project and ultimately improve productivity. The best software can also integrate with other relevant tools like document capture software and eSignatures. It can help automate your document management, providing a seamless experience and more convenience in organizing your business documents.

Types of Document Management Systems

There are several factors to consider in choosing the best DMS including security, features, cost, and integration capability. You’ll also have to choose between two types of DMS.

On-Premise DMS Platform

This type of platform is hosted in your company’s IT infrastructure. This means you need to provide your servers and storage and you’ll be in charge of their maintenance and security. With an on-premise DMS, you get full and direct control over the system.

That said, it requires significant upfront costs—from hiring an IT professional to manage your system to the hardware needed to house the system. Thus, on-premise DMS is more suitable for larger businesses with enough resources and a dedicated IT department to accommodate the high technical demand.

Cloud DMS Solution

A more practical choice for small businesses, a cloud document management system is hosted by the software’s vendor and is accessible via the internet. Most cloud-based solutions charge a monthly or yearly fee to access the platform. Pricing varies by vendor and the features included in the plan.

The biggest benefit of a cloud DMS is that you don’t have to worry about hiring an in-house team or purchasing hardware requirements to maintain the system. The platform is hosted in the cloud so you simply log into the internet to access your documents.

However, while it is convenient, cloud solutions remove control from your hands. This means you’ll have to rely on your vendor to keep the software functional and secure. While generally cheaper than on-premise solutions, a cloud DMS tends to have storage limits. The more document you need to store, the more expensive it will be.

Take your time to compare several solutions, and choose a platform that best aligns with your business goals and existing process.

Document Management System Best Practices

Investing in the best document management system is only half of the formula. While a DMS can help streamline your document management efforts, you still need to implement certain best practices to maximize its use and benefits.

Have a Uniform Directory and File Structure

With a DMS, users can create their own file names and folder structures. While they may have the best naming intentions for their own convenience, this can create complications when folders and files are in a centralized data center. There’s a risk of forgetting the original naming structure, or some employees may be unfamiliar with the suitable filing process.

Thus, you want to create a standard naming convention. Make sure to create one that works best and can be easily implemented across teams and departments. Don’t forget to create a template, instructing your employees on how to name and file documents properly to ensure consistency and uniformity.

Implement Strict Access Control

Not every employee will need access to every document and data. With a large collection of documents and data in your document management system, it’s important to control who can access what. This is where the access control setting comes in.

Most DMS offers access control features. Take the time to categorize your users and create access permissions for each category. This way, you can ensure that employees can only access documents they need for their job.

Keep Up with Version Control

Other than access control, version control is another aspect you need to get right for effective document management. If your business constantly updates its documents, you need software with an effective version control feature. The best platforms allow you to get access to previous document versions and restore them as needed.

Most systems also have automatic document change tracking for audit trail, providing comprehensive details on who made the change and when. Plus, it also allows you to quickly track the movement of various documents within your company.

Set Up Automations

Automation is something that you should add to your document management strategy. They can help make your life easier while remaining consistent in managing your documents.

Depending on the DMS you have, you can set automated notifications when a document is edited or created. In addition, you can also set automated document approvals for certain documents. Some software can also allow you to set up or allow integration with automated invoicing software if your business has recurrently worked with suppliers or clients.

If you’re using an advanced DMS, you can expect to have more automation options. If you do, make sure to use them.

Run a Regular Audit

A DMS can help make it easier to manage business documents. However, you still need to perform regular audits to mitigate process failure and potential breaches. Comprehensive document auditing allows you to learn what documents you have, know who has access to these documents, and determine compliance.

In general, it’s recommended to do internal audits every 3–6 months and external audits every year.


Modern businesses produce so much data and information that traditional paper-based filing system is no longer practical. Thus, businesses are switching to digital documents to handle data and information output and management.

While organizing and managing your business electronic documents may not be the most exciting task, you shouldn’t neglect them. Implementing an efficient document management process and sticking to the above document management best practices can help simplify your workflow, ultimately revolutionizing your business.

I'm Allison Dunn,

Your Business Executive Coach

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