How to Create a Document Management System

woman organizing documents at her desk

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Document management is the process of handling documents in such a way that information can be created, shared, organized, and stored efficiently and appropriately. As such, learning how to create a document management system is critical for businesses.

For many businesses, the focus of a document management system is on the organization and storage of documents. They want to be able to store documents in an organized and secure way that still allows documents to be found easily. This article will show you how to create a document management system that does exactly that. 

The Challenge: Blending Old and New

If you type “document management system” into any search engine, you'll get long lists of document management “solutions,” many featuring software or apps that advertise the advantages of having a paperless office.

Document management software or apps, however, are designed to improve your business’s handling of electronic files. The problem is that many small businesses have to deal with a mixture of old-fashioned data on paper and electronic files—and, in some cases, the proportion of paper data is much larger.

One solution to the problem of a mixed data environment would be to use a document imaging system to convert all of your business’s documents to electronic form. But this is too expensive and time-consuming for many small businesses.

The good news is that you can put the basics of a document management system in place without purchasing any special software or going through wholesale document imaging. The system doesn't have to be complex; you just have to invest some time in planning and implementing it.

3 Steps to a Document Management System

Setting up a document management system involves three steps:

  1. Create a document management plan
  2. Implement the document management plan
  3. Follow through

The first step is the most detailed, so let's explore it further.

Creating a Document Management Plan

The first step involves answering these four questions:

1. What are the rules for creating documents?

Invoices, payment reminder letters, sales brochures, email, balance sheets, spreadsheets, reports—all businesses create a variety of documents in the course of doing and keeping track of business. And to keep things organized, all businesses need to establish rules for creating documents.

  • Are there in-house templates for some of your standard business documents, such as letters and invoices, and where are they located?
  • Is there an in-house style guide that needs to be followed?
  • Should new documents be dated or time-stamped?
  • What procedures should be followed for sharing or reviewing documents?

For some small businesses, the only point that matters will be where the templates for various business documents are located and how to use them. But if document creation within your business involves different people collaborating on, reviewing, or updating documents, you’ll need to spend some time deciding how these things should be done to ensure efficiency and consistency.

2. How will we store documents?

There are costs associated with storage—the largest of which, for most small businesses, is probably the cost of the time wasted when people are looking for documents. So the question is: How will documents be filed? The key to filing documents is to follow good file-management practices. A clear, easy-to-follow system is essential.

You also need to know how you’ll archive documents. How will you handle files that are out of date or just ready to be moved to the back burner in your document management system?

Near the beginning of each year, for instance, you should go through the various work-related files on your computer, weeding out those that are no longer current, and creating new folders labeled by year and subject, moving files as needed. You can do the same with paper files; it’s not difficult to remove old documents from a file folder and create a new one with “Old” in the title. Some software offers automatic archiving options.

3. How can retrieving documents be simplified?

This question is the heart of your document management system. In a survey conducted by Leger Marketing for Xerox Canada, Canadian small- and medium-business owners and managers on average said it cost $2,152 a year to manage and store documents and about one hour a day to search for these documents.

Once again, good filing practices can go a long way toward solving the problem. If you do things such as consistently follow strict naming conventions, for example, documents will be much easier to find.

And whether you’re a sole proprietor or a business owner with employees, you should create a file locations list, which will remind users where particular types of files go—and where to find them. Remember to include whether or not the file will be on your computer system, an in-house server, in the cloud, or filed in a physical location such as a filing cabinet. For instance, suppose that you use images, video, or even paper photos in your business. An entry in your file locations list might be:

  • Digital images/video: computer (or server)—drive E:/photos—file in the appropriate subject folder
    Paper photos: filing cabinet 3—Photos—alpha by subject

Shared network or cloud drives should be labeled according to contents, as should filing cabinet drawers.

4. How can we make and keep our documents secure?

The first line of defense for document security is physically securing the business premises themselves. All businesses, even home-based ones, need to have security systems installed.

Businesses may also need or want to invest in other security devices, such as window bars, security cameras, or patrol services. You can spend all the time you want creating passwords and encrypting files in an attempt to protect your electronic files, but it doesn’t matter much if someone can just wander in and steal your computer.

Additional document security measures include:

  • Locking all filing cabinets after business hours (and during lunch if no one reliable is present)
  • Backing up electronic documents regularly, preferably off-site to guard against having your business data wiped out by natural disasters
  • Restricting user access to certain documents, applications, and folders on any shared computers
  • Preventing employee theft by conducting background and reference checks as a part of your hiring process

Implement and Follow Through

Once you have created your document management plan by answering the questions above, you’re ready to implement it. Make sure all your entire staff knows the details of your business’s document management system and that everyone follows appropriate procedures when creating, storing, and retrieving documents.

You’ll also have to be sure that everyone who accesses and uses documents within your organization follows through by consistently naming and storing documents appropriately. Spot check on a regular basis to test whether particular files can be easily found and to guard against misfiling. Even occasional carelessness can throw off the entire system.

You can set up a document management system in a day, but implementing it consistently over time will be the key to its success. The rewards are huge—you'll save tons of time and gain peace of mind.