Document Management Systems Explained

What is a document management system?

A document management system is software that provides an automated way to store, manage and track electronic documents and electronic images of paper documents. DMS started as a way to convert paper documents into digital documents, which is why a DMS may sometimes be called an electronic filing cabinet, but a DMS has many more sophisticated features these days.

A document management system can be used to capture, distribute and track documents and to manage channel workflows, output systems and information retrieval systems.

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What are some types of document management systems?

Not all document management systems are created equal. “DMS” is a broad term representing several different software capabilities. Your business type and productivity needs determine the best DMS for your company.

These are the DMS offerings you could choose for your business:

• Content management system (CMS): This type of DMS is designed to manage any type of content your business produces. You can upload and share a variety of media through a CMS, including videos, audio clips, text and images. The CMS helps businesses create and upload content directly onto their websites. Examples of a CMS include WordPress and Drupal.
• Records management system: This type of DMS is usually necessary for medical offices, as it stores and manages sensitive records in accordance with the applicable federal compliance rules, including Health Insurance Portability and Accountability Act (HIPAA) laws.
• Digital file system: A company normally needs this type of DMS when converting from paper to digital records. The program should allow you to save text and images from paper to a digital format through a scan feature.
• Cloud-based system: In this category, the DMS operates through a cloud computing system. All files are stored in the cloud and protected in the case of network failure. Cloud systems permit higher levels of document storage and unlimited user access.
• Private server system: Instead of a cloud program, you can choose a DMS hosted on a private server located on your business’ own premises. Your business is responsible for the security and management of the DMS network.

>> Learn More: File Management Tips for Small Businesses

How do document management systems work?

The three main functions of a document management system are to capture, store and distribute documents. Here’s how it does that.

1. Document capture from any source

A document management system must be able to capture a document from any source, be it paper, email, CRM applications or reports, so that the document can be indexed for easy searching later. Indexing is a way to classify a document by adding terms to its metadata, such as tags, order numbers or customer information. Document capture varies by the type of document you are trying to capture:

• Paper documents: High-speed scanners are typically used for paper documents. The DMS takes documents from the scanner and indexing can then be added by hand or by an enterprise resource planning (ERP) integration, zonal optical character recognition (OCR) or barcoding.
• Emails: Email being a key part of day-to-day business, the ability to capture and store email documents is vital. With a DMS, you can create a setting to automatically import email messages or attachments into the specific folder of your choosing.
• External applications: You may also have external applications, such as customer relationship management (CRM) or ERP software, which produce documents you need to A DMS allows you to easily import these documents, then route them to or share them with others in your organization. [Related article: The Best CRM Software of 2024]

2. Central document storage

Proper document storage is the second most important part of a DMS. Having all your documents stored in one central location allows all employees who need access to the documents ― both static (documents your company creates every day like invoices) and dynamic (webpages, forms and emails) ― to get to them quickly and easily.

Central storage also helps protect your documents from error and malicious intent. A DMS typically comes with version control, which tracks the changes made to a document and identifies who made them. You can also set permissions to control who has access to which documents and who can make which types of changes. 

3. Document retrieval and distribution

The third most important aspect of a DMS is the ability to easily retrieve and distribute documents. A DMS lets you search any document for a keyword and bring it up quickly. This is where the importance of thorough indexing comes in.

You will then be able to send out documents in any manner that you need, such as through email or file transfer protocol and automate manual business processes and workflows. For example, you can integrate your DMS with your ERP, setting it so that when an order originates in your ERP, it will trigger a workflow in your document management system that moves the order through an approval and fulfillment process automatically.

What are document management systems used for?

Document management systems automatically organize, secure, digitize and index your company’s documents, making them easy to access, edit and share.

Many companies have shifted from traditional paper filing services to DMS because an automated system saves time, money and space. A DMS also eliminates the need for multiple programs to handle your workflow, as all necessary functions are housed under a single interface. [Related article: Rethinking Your Document Management]

What are the key features of an effective document management system?

When looking for a DMS, you should keep an eye out for several key features:

• Version control: Also known as versioning, version control allows users to safeguard and track changes made to documents within your DMS. Version control ensures that all new edits are tracked and saved and that older versions of documents are archived in the system for reference.
• Integration: Many document management systems integrate with email programs such as Microsoft Outlook, but if your business uses a CRM application or ERP database, you should look for a DMS that integrates with these programs as well, as this will make your daily life much easier. You can use DMS software that does not integrate with your CRM or ERP, but this may limit your workflow capabilities, as compatible software allows you to access, edit, back up and monitor documents created within your CRM or ERP.
• Regulatory compliance support: If you operate in a regulated industry, you may want to choose a DMS that offers regulatory compliance support for your industry, such as HIPAA, Sarbanes-Oxley, Current Good Manufacturing Practices by the United States Food and Drug Administration or ISO 9000/9001. This capability can provide your business with invaluable protection and peace of mind as you process critical or sensitive documents.
• Scalability: When you’re choosing a DMS, try to look beyond your current needs to see which advanced features you may want as your business grows. It is important to choose software that can grow with your business so that you do not have to switch software later.
• Security and disaster recovery: It is vital to find software that prioritizes security and protects your information and files, since a data breach or storage issue could be disastrous for your business. Look for a provider with an established, flexible plan that can adjust to fit your unique needs.
• Usability: Because the DMS will likely be used on a daily basis by employees across all areas of your business, it needs to be easy to use and experience little to no downtime. Everyone in your company should be able to easily access, manage and navigate the necessary files.
• Collaboration: Your DMS should make it simple for users to share and collaborate on documents. Look for tools such as live editing, file sharing, plugins and access restriction.
• Scanning: A DMS should have the capacity to scan and save any paper files and records your company has on the premises. Once the file is uploaded, the system converts it to a DOC, PDF or JPG format.
• Archiving: Not all DMS options provide unlimited storage. Give preference to systems that can automatically archive files after a set period of time. Archiving also helps you locate the timeliest files in the system.
• Inventory management: With expanded capabilities, the DMS could also help you track and replace any inventory for your business. Cloud programs even allow different locations to share inventory details.

What does document management software cost?

Pricing for document management services depends on the type of hosting and how many people in your company will need access. The two main types of hosting are cloud-based and on-premises:

• Cloud-based: Cloud-based document management software is an increasingly popular option. It is generally more flexible and charges a monthly subscription, which ranges from $15 to $250 per month. With cloud-based plans, look for included technical support and regular updates. 
• On-premises: On-premises document management systems typically have an initial one-time fee plus an annual subscription for technical support and updates. These fees average about $1,000 per user plus the annual subscription fee of around 20% of the initial cost.

What are the benefits of using a document management system?

A DMS should make your work easier and more efficient, saving you and your employees hours of repetitive tasks and the frustration of not finding the documents you need.

Here are some of the many benefits of using a DMS system.

More time to devote to other work

If you currently use a manual or paper document management system, you are costing yourself hours that you could devote to more pressing matters of your business. A DMS automates many aspects of document management, taking that responsibility off your hands.

Document security

As the world continues to go digital, keeping your information and documents secure becomes a higher priority. Document management systems have built-in security and access controls so that you can control exactly who can access which documents, as well as track and see all activity on any given document.

In the event of a disaster, such as a fire or flood, your files are stored safely in the cloud, away from physical harm.

Easy scaling

A DMS is more flexible than a traditional paper filing system. It grows easily along with your business, and you can adjust your indexing system with a few clicks. It also reduces the need for physical storage space for files and paper documents.

Better regulatory compliance

Compliance requirements for many business documents can be complex and demanding. A DMS can help you avoid fines, revoked licenses or even criminal liability by automating key documents to meet the requirements. For example, HIPAA and Sarbanes-Oxley both have strict security and policy regulations regarding documents and records; a DMS will automatically follow those guidelines for you.

Quick and easy document retrieval

Searching for the right document when you have an entire business’ worth to go through can be difficult and time-consuming and can even cost you money. Proper indexing lets you find a document in mere seconds and it also allows employees to remotely access the documents they need.

Improved collaboration

A DMS makes sharing information and collaborating easy, allowing documents from different sources to be accessible from multiple locations. You can share documents, monitor workflows, grant or deny access to certain documents and see what changes have been made.

What are the best document management systems?

Here are the top document management software options for businesses needing to digitize and organize documents. Factors such as cost, ease of use and storage capacity, play a role in these software choices:

• Revver: Revver is a cloud-based document management solution suitable for large teams with heavy document needs. It offers 20 terabytes of storage, automated workflows, electronic signature capabilities and easy importing from email and cloud storage services. Pricing varies depending on storage options, features and other factors. [Learn more in our Revver review]
• M-Files: M-Files is an intuitive and easy-to-use document management software solution that offers a familiar Windows File Explorer-like interface to users. With its Metadata technology, users can quickly find and manage electronic documents. The solution is available in both cloud-based and on-premises versions, allowing for easy collaboration and integration with other tools. [Learn more in our M-Files review]
• FileHold Express: FileHold Express is a scalable document management software solution that offers a variety of service plans and features to meet specific business needs. Its standard features include advanced search methods, version control, OCR and indexing, electronic forms and Microsoft Office integration, with the option to add on more advanced tools like document workflow and automatic importation. The software is available in both cloud-based and on-premises versions and users can take advantage of free trials, online resources and customer support to maximize its potential. [Learn more in our FileHold Express review.]
• DocuWare: Software that specializes in integration, with more than 500 applications including Microsoft Outlook, Microsoft Dynamics and Oracle. The software offers easy integration options to provide consistency and organization with real-time data. DocuWare also includes secure storage and workflow automation capabilities to help increase productivity and offers a free trial for testing before making a commitment. [Learn more in our DocuWare review]

Sean Peek contributed to this article.