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Document Management System Due Diligence

How to Use a Document Management System for Due Diligence

An online Document Management System (DMS) is a repository of documents that can be organised to suit the needs of an organisation.

A DMS is often used to replace the paper-based filing of an organisation and lends itself very well to being used for time-limited due diligence projects.

A DMS is typically used by the seller of a company to organise all the public and confidential information required by a purchaser to complete their due diligence.

How does a Document Management System help?

A DMS provides a number of clear advantages over paper-based filing.

An online DMS provides a single place to store and access information for both sellers and buyers. This removes the problem of paper-based documents being stored in different locations and possibly being lost or misfiled. Storing the information in digital format helps speed up the due diligence process.

The information held in the DMS is only accessible by those who have been assigned a user ID. This ensures the security and confidentiality of the due diligence process. Particular information can be made available to specific individuals. For instance; access to sensitive financial data may be given to a senior executives involved in a transaction but not made available to general staff.

A DMS offers fast searching of information – text searches across all files can be quickly entered. There is no more laborious trawling through paper-based files to locate information.

An online DMS can be setup within a matter of hours and documents can be uploaded right away to be available for review. This is considerably quicker and more cost effective than setting up a secure data room in an office.

Collect and organise your documents

Before a seller sets up their online DMS, they need collect all the information required for the due diligence process. This will most likely be a combination of paper based and electronic documents.

It is recommended all paper documents are scanned and saved in a common format such as PDF. Wherever possible, the text of the document should be searchable (this may require paper documents to be scanned by Optical Character Recognition (OCR) software to identify the text on each page.

Draw up a list of the main categories of documents for due diligence. This will assist the filing and searching of information. Use a clear and consistent method to name all your documents.

Managing your documents during Due Diligence

During the due diligence process, the seller will be responsible for managing all the documents for all the prospective purchasers.

User IDs have to be assigned to each purchaser and the correct level of access to document given. Some documents, because of their confidential nature, will only be made available to some users.

Any new documents must be uploaded to the DMS and purchasers advised of the document’s location.

If at any point a purchaser does not wish to proceed, the seller can immediately revoke their user ID and prohibit access to the information in the DMS.

 

For many organisations, an online Document Management System is the ideal technology to support the due diligence process. It offers ease of use, setup and management at a cost much lower than organising a dedicate data room to store information.

Docurex is the preferred DMS of many companies who require secure access to their confidential digital documents.