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Document Management Systems: A Buyer's Guide

If you are in the market for a document management system, one of the first questions you must answer is whether you want to house the system inside your business or have it hosted in the cloud. While both options provide a framework for storing and organizing your electronic documents, each has its own advantages and disadvantages.

Our guide will help you understand the differences between self-hosted and cloud-hosted document management systems, as well as the features they include and the benefits they offer. Plus, our guide offers tips on what to look for when choosing a document management system.

Ready to choose a document management system? Here's a breakdown of our complete coverage:

  • Document management systems are electronic filing cabinets that provide a framework for organizing all digital and paper documents.
  • These systems work in tandem with scanners, which convert paper documents into digital versions.
  • Through sophisticated search engines, document management systems allow for quick access to any document or file.

The functions you can use these systems for include:

  • Storing various document types, including word-processing files, emails, PDFs and spreadsheets
  • Searching an entire library of files by individual keyword
  • Restricting access to certain documents
  • Monitoring who is viewing documents and when
  • Tracking edits being made to documents
  • Retrieving previous versions of edited documents
  • Controlling and regulating when out-of-date documents can be deleted
  • Accessing, editing and sharing documents via mobile devices

What the experts say: Jeff Pickard, CEO of Lucion Technologies, a provider of document management solutions, said these systems help businesses organize all of their paper and digital files in one central location, where everyone in the office has access.

"It's a challenge for companies to keep up with all the paperwork and electronic files that come into a home office or business every day," Pickard told Business News Daily. "It generally starts slowly – an email here, a receipt there, incoming invoices and customer correspondence. And before you know it, you've got a mountain of paper and no way to find the documents you need."

Now that you know what a document management system is, you should decide which type best fits your needs – a self-hosted or cloud-based solution. Both systems offer the same features, but they do have several key differences.

Editor's Note: Looking for a document management system for your business? If you’re looking for information to help you choose the one that’s right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:

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  • All the software is stored inside your business on your company's own servers.
  • Self-hosted systems allow you to store as many documents and files as your server allows.
  • The software has a one-time cost that's based, in part, on the number of users. Self-hosted systems typically cost at least several thousand dollars. Some systems charge an initial fee for the software, as well as license fees for each user. In addition, some charge an installation fee.
  • There is an optional yearly charge for ongoing support and software upgrades.

Pros: The biggest benefit of a self-hosted document management system is that you are always in control of your system and not relying on anyone else to keep it up and running. You're not dependent on the internet either. If your online connection goes down, you still have access to all your documents.

Cons: The downside comes in the large upfront costs, as well as the extra yearly expense of software updates. In addition, it's up to you to make sure you have a proper backup system in place, since your files aren't being automatically saved in the cloud. Another possible negative is that not all self-hosted systems work with both Windows and Mac computers. Many are compatible with only one or the other.

  • All the software is hosted by your provider and accessible online.
  • You can log in to these systems from any computer or mobile device connected to the internet.
  • You pay a monthly fee for each user. Costs range from a few dollars to close to $100 per user, depending on the provider, the number of features you choose and the amount of storage you want.
  • The system's provider, for no additional cost, handles the software upgrades and maintenance.

Pros: The biggest benefits are that you don't need an IT team to install the software and keep it running properly, and that there aren't any large upfront costs. You also can tap into these systems from anywhere that has online access, and you don't need to back up your files, since they are automatically saved in the cloud.

Cons: The downside is that you are at the mercy of your provider to keep the system up and running. If your provider has a problem with its data center, it could prevent you from accessing your files until the situation is resolved. In addition, if your internet connection fails, you won't be able to get to your files. Cloud solutions also have storage limits.

What the users say: Sara Sutton Fell, CEO and founder of FlexJobs, said storing all of her files digitally and in the cloud allows her to get her documents anywhere she is, which is especially important because she works remotely.

"Having access to all our documentation, no matter where we're physically working from, is amazing," Sutton Fell said. "I know that if I go to a conference or even just the coffee shop to work for the afternoon, all my documents come with me."

Still unsure about exactly what a document management system does? No problem. Here are some questions and answers that may provide some more clarity.

Q. Are document management systems valuable only to large organizations, or can small businesses benefit from them too?

A. Although they may not have the extensive number of files that larger organizations do, small businesses can still benefit from using document management systems, said Jesse Wood, CEO of eFileCabinet.

"A document management system is a great way for businesses to become more effective in their respective industries, regardless of the size of the company or how many clients it has," Wood said.

Q. I often see references to document management systems, document management software and document management solutions. What are the differences?

A. Despite the different names, they all accomplish the same tasks. Mary Williams, marketing communications director for DocuWare, said the differences are a matter of semantics.

"Our industry does a good job confusing the public, because there are many terms out there that are interchangeable," she said.

Q. What's the difference between cloud storage and cloud-based document management systems?

A. While cloud storage serves simply as a place to house documents in the cloud, cloud-based document management systems are a much more robust solution to help businesses manage their important documents, Wood said.

"As a mere storage repository, cloud storage lacks the collaboration, security and diverse automation features of a document management system, namely in the form of audit trails, user permissions, templating, versioning and bank-grade encrypted file sharing," he said.

Q. How do you get documents stored in the system?

A. There are several ways to add files, such as uploading them from your computer and scanning paper documents directly into the system. Pickard said scanning capabilities are a huge part of a system.

"Now, scanning takes just seconds, and if you get the right technology package, you can automatically create editable, keyword-searchable files in a universal format, like PDF, while you scan," he said. "A good scanning solution even makes bulk scanning easy, recognizing where separate documents begin and end in a stack and sending them to the right folder, like a virtual file clerk."

Q. How do you find documents in the system after they're filed away?

A. These systems offer many ways to quickly locate documents, including by searching the file's title, the name of the author and when it was added into the system. In addition, many of these solutions allow you to search for content within each file.

"If you find a solution with integrated search features, you can simply conduct a keyword search to pull up documents in seconds [and receive] a preview to make sure you've got the right file before opening it," Pickard said.

Q. Do document management systems work with other programs I am already using?

A. While most systems feature integrations for Microsoft Office, Salesforce, DocuSign, QuickBooks and several other popular programs, some also include an application programming interface (API) that allows for customized integrations.

"A document management technology with an open API extends this adaptability to organizations wishing to further tailor the document management system to their specific initiatives," Wood said.

Q. Besides keeping you more organized, can document management systems help you get work done in other ways?

A. Yes, and one way is with workflow tools, which help businesses keep assignments and projects on track. These tools, which are included in some systems, notify employees when it's their time to work on certain assignments and help ensure that tasks never get lost in an employee's inbox, said Errick Anthony, project manager for LSSP Corporation, a document management system provider.

"Workflow means the ability to let a person or group of people know that action needs to be performed on a file to complete the process," Anthony said. "Workflow management also contains the ability for the tracking and managing of those files by a manager."

Q. With document management systems, do all users have access to every file?

A. Most document management systems have security restrictions that can control which employees have access to which files. This ensures that employees see only the documents they should.

"Security has such a vital role in the document management system," Anthony said.

Q. What happens if a disaster strikes my business? Are the files and documents stored in the system lost for good?

A. A big benefit of the cloud-based solutions is that your data is safely stored off-site. "Document management systems enable an instant business contingency plan, as your backups are stored off premise in the rare case of damage or destruction to your location," Anthony said.

Businesses we spoke with reported a few advantages to using these systems. Here are some of the largest pluses they pointed to:

  • Easy access: John Bustrum, CEO and founder of My403bCoach.com, said having such software in place means he's no longer forced to stockpile loads of files on his desk. Instead, when clients call, he can instantly find the documents he needs on his computer.
  • Easy to search: Being able to easily search through her company's documents is a huge benefit, said Karen Walker, founder of One Team Consulting. She said the ability to quickly search for and retrieve presentations and notes is invaluable.
  • Better collaboration: Getting rid of hard copies of documents makes it easy for employees to work with each other, said Gary Tuch, founder of the Professor Egghead Science Academy. When multiple employees are working off one document and editing is constantly happening, document management systems ensure workers always have the most up-to-date copy. Employees waste no time on printing revisions or double-checking to make sure they have the current version, Tuch added.
  • Added security: Increased security is a huge advantage of document management solutions, said Andrew Southard, general manager of the Indiana-based Data Management Shredding Inc. The technology has given his company the option to track who is viewing and editing each document, and designate which employees have access to which files.
  • Saves space: Exchanging paper documents for digital versions can save a tremendous amount of physical space, said Randy Jourgensen, owner of Digital Office Solutions. Since transforming his office to a paperless environment more than 15 years ago, Jourgensen has been able to convert space that was formerly used only for file storage into space that can generate revenue.
  • Disaster recovery: Businesses that have all of their documents stored in physical filing cabinets face the risk that these papers might be destroyed, or that the business may lose access to them should a disaster occur, said Alan Baker, president and chief consultant at Spitfire Innovations. If a water pipe bursts or there is a fire, business owners can still operate with little impact, since their critical documents are stored online and spared from any destruction.

We asked our experts to highlight what they think are some of the most important features and functionalities that small businesses should look for when choosing a document management solution.

  • File structure: The system should offer an easy-to-use file structure that makes sense to users, such as a cabinet-drawer-folder approach.
  • Searching: You want a wide variety of options for quickly finding files. You should be able to search not only by the file's name, but also by the content inside the file.
  • Ease of use: The system should be simple for employees to use. If it is too difficult, you won't get complete buy-in from the staff, which will make the system less effective.
  • Mobile access: You want a document management system that is accessible via smartphones and tablets.
  • Integration: The system should easily integrate with the programs you're already using, such as your email client and customer relationship management software.
  • Scanning: The solution should be compatible with a wide variety of scanners.
  • Security: The system should allow you to restrict who can see specific folders and files. You should be able to set access permissions by employee.

Now that you know the types of document management systems available and what each offers, you need to determine which solution is best for you. To help you narrow down your choices, check out our best picks roundup page.

 

Editor's Note: Looking for a document management system for your business? If you’re looking for information to help you choose the one that’s right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:

buyerzone widget

Additional reporting by Chad Brooks

Andreas Rivera

Andreas Rivera graduated from the University of Utah with a B.A. in Mass Communication and is now a B2B writer for Business.com, Business News Daily and Tom's IT Pro. His background in journalism brings a critical eye to his reviews and features, helping business leaders make the best decisions for their companies.