Choosing a Document Management System

Document management software helps organize your digital records and allow teams to make edits on the fly.
User permissions allow certain users to view or edit documents based on their role in your organization.
Document management software comes in on-premises and cloud-based systems; you can choose whichever implementation works for your business.
This article is for small business owners who want to organize their digital documents for easy access and revision.

Gone are the days of paper storage. A good document management system is essential to any small business. You can set your business up for success by storing your important documentation digitally and securely.

But where should you start when choosing a document management system? After all, it's a crowded field with a lot of different vendors. This guide will help you understand the basics of document management systems and provide you with a roadmap for the procurement process. If you want a reliable shortlist to choose from, you can always check out Business News Daily's best picks for document management software.

What is a document management system?

Document management systems are essentially electronic filing cabinets your organization can use as a foundation for organizing all digital and paper documents. Any hard copies of documents can simply be uploaded directly into the document management system with a scanner. Oftentimes, document management systems allow users to enter metadata and tags that can be used to organize all stored files.

Most document management software systems have a built-in search engine, which allows users to quickly navigate even the most expansive document libraries to access the appropriate file. Storing sensitive documents as well? Not to worry – most document management systems have permission settings, ensuring only the appropriate personnel can access privileged information.

Choosing the right document management system starts with accurately assessing your organizational needs. The main choice you'll have to make right off the bat is whether you want an on-premises or cloud-based solution. Each type of system offers the same functionality, but there are several key differences in the way maintenance is performed and data is stored.

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Types of document management systems

When choosing a document management system, you will have the choice between on-premises and cloud-based software. So, which should you choose?

On-premises document management systems

An on-premises solution requires you to use your own servers and storage, which means you need to perform your own maintenance. You'll also be responsible for the security of all your data, so it's important to back it up. This option typically makes sense for larger companies with dedicated IT resources because of its higher technical demands, but it also places you in direct control of your own system. Technical support and software updates from the vendor are usually contingent on whether you continuously renew an annual subscription package.

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 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.

Cloud-based document management systems

Cloud-based software is hosted by your provider and made accessible to your organization online. Typically, cloud-based solutions charge a monthly or annual fee, which includes all maintenance and software updates. Depending on the system you choose and the features you require, pricing for cloud-based systems can range from a few dollars to more than $100 per user per month.

Pros: The biggest benefits are that you don't need an IT team to install the software and keep it running properly, and 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 automatically save in the cloud.
Cons: 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 typically have storage limits.

Document management system features

These are some of the most important document management features:

Document storage: The most basic and important function of a document management system is storing your company's documents safely and in an easily searchable manner.
Keyword search: A good document management system has a broad keyword search option so you can simply access any document based on specific keywords. Some systems include metadata and tags that make it easier to recall a document or group of documents. For example, tagging all your invoices as "invoice" makes it easy to review all documents of this type with a simple search.
Permissioned access to certain documents: By creating tiered permissions, you can provide certain employees access to certain documents and bar everyone else from viewing or editing them.
Document access monitoring tools: These tools allow you to monitor who in your company is accessing what documents. This is an essential security feature for small business owners to ensure their confidential documents are safe.
Document edit history and restoration: A document management system should have edit history and restoration options so you can see who edits documents. Versioning allows you to recall old versions of documents that have been revised and to see precisely which changes were made at what time by which users.
Auto-delete on outdated documents: Document management systems come with regulation controls for automatic saving and deletion to free up storage space.
Mobile device access: You should be able to access your company documentation through your mobile device. Mobile document management capabilities should include viewing, editing and sharing documents.

Benefits of using a document management system

There are several benefits to using a document management system. Overall, it should be simple and effective, allow you to run your business more efficiently, and make your life easier.

Saved time: By using a document management system, you can devote the time you previously spent organizing and managing your documents to more important parts of your business.
Security: Cybersecurity is more important now than ever. By backing up your documents in the encrypted cloud or a secure on-premises server, you can protect important and sensitive company information and protocols.
Scaling: As your business grows, so can your document management storage and features. One of the major benefits of document management software is its ability to scale up and down to meet your business's ever-changing needs.
Easy document management: Keyword search allows you to find your company's important information quickly and easily. Gone are the days of riffling through file cabinets to find the information you need; document management systems allow you to access any document more efficiently.
Collaboration: Teamwork is the backbone of any successful business. Document management software can improve collaboration by allowing multiple people to work on the same file at once, tracking who makes what changes and retaining your access to older versions of the document.

Document management system costs

Pricing for document management systems depends largely on which company you work with and which type of service you sign up for. The two main types of document management system software are cloud-based and on-premises storage.

On-premises storage is significantly more expensive than cloud-based storage. The pricing structure is usually a one-time setup fee, and then a subscription fee for services. These fees usually average around $1,000 per user. The annual subscription fee is usually 20% of the initial setup cost.

Cloud-based management systems have a more familiar subscription rate structure. You pay a subscription fee ranging from $30 to $250 per month, depending on the type of services you sign up for.

What to look for in a document management system

When choosing a document management system, you should keep an eye out for a few key features. Discuss your needs at length with any sales reps you contact, and be sure to get technical specifications and pricing in writing. We recommend ensuring that any document management system you consider has the following:

Simple file structure: The system should have 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 content, date it was last modified, file type and more.
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 your staff, which will disrupt your day-to-day operations and lead to confusion.
Mobile access: You want a document management system that is always accessible via smartphones and tablets, allowing you to view, edit and share files from anywhere.
Integration: The system should easily integrate with the programs you already use, such as your email client and customer relationship management software. Ask about open APIs (which allow you to add your own integrations) when discussing any solution with a sales rep.
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.

Document management system FAQs

Document management systems can be sprawling and complex. If you're still not sure where to start, consider these answers to frequently asked questions.

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

Although they may not have the extensive number of files that larger organizations do, small businesses can still benefit from document management systems, especially ones that deal with a lot of paperwork or create a lot of content.

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

Despite the different names, they all accomplish the same tasks. The terms can be used interchangeably to describe the same platforms.

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

Cloud storage serves simply as a place to house documents in the cloud. Cloud-based document management systems are much more robust solutions to help businesses manage their important documents.

How do you store documents in the system?

There are several ways to add files. You can upload them from your computer, import them from an integrated solution, or scan paper documents directly into the system.

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

These systems offer many ways to locate documents quickly, including by searching the file's title, the name of the author and when it was added into the system. Many of these solutions also allow you to search for content within each file or by file type. Similarly, you can add metadata and tags to each document to aid in retrieval.

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

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 custom integrations.

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

Yes, and one way is with workflow tools, which help businesses keep assignments and projects on track and are included in some systems. These tools 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. Additionally, versioning tools allow users to view and collaborate on edits in real time, much like in Google Docs. The versioning function keeps track of changes over time and allows users to call up older versions of documents if needed.

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

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. For example, you could set personnel contracts to be available only to HR staff rather than every member of the organization.

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

A big benefit of the cloud-based solutions is that your data is safely stored offsite. On-premises solutions often rely on your own servers and storage, however, so it's important to back up all your data when using an on-premises server.

Matt D'Angelo contributed to the research, reporting and writing in this article.

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