Inefficient or ineffective document management results in unnecessary costs, but it also puts many companies at serious risk of a compliance nightmare.
Broken document processes have led to significant business risks and compliance incidents for three out of four companies, according to research by the International Data Corporation (IDC). The IDC survey found that 75.9 percent of respondents “suffered severe consequences.” Broken down further:
- 36.2 percent failed to meet compliance requirements
- 30.2 percent lost key employees
- 24.9 percent lost major customers
- 24.8 percent had a major IT breach
- 20.4 percent were pulled into a major audit
- 19.1 percent suffered a major PR crisis
While specific document compliance requirements vary by industry, country and other factors, three areas present common challenges: taxes, contracts and healthcare regulations. Here are three examples of how an effective document management system helps companies reduce or even eliminate these problems.
- Tax regulations: A country’s taxation authority typically requires organizations to retain certain financial documents for specific time periods. In Europe, companies are also required to provide government auditors with automatic access to these documents. Companies that fail to retain the records necessary to comply with tax regulations may incur fines commensurate with the severity of the infraction. Combined with the time the company must spend to resolve the issue, these fines are often quite costly. With an electronic document management system, it’s possible to eliminate the risk of losing or misplacing these documents, helping ensure financial compliance. All of your documents, including correspondence, are safely stored in a central repository. This centralized storage makes finding documents fast and easy while eliminating the problem of tracking down documents that were filed incorrectly. With a document management solution, you have 24/7 access, so you don’t have to rely on employees to remember what they did with an important document.
- Contract management: Companies may be required to follow specific regulations for documenting and managing contracts. In the event of a dispute or lawsuit with a customer or supplier, you must be able to show which contract was used at a certain time and track signatures and updates. If you’re using a paper-based filing system, locating old contracts and all of the related correspondence and documentation is time-consuming and expensive. Document management software improves visibility into processes such as contract management. With a couple of mouse clicks, you’re able to see the complete history of a contract, including dated versions, along with supporting documentation and correspondence. Instead of having to search through separate email, paper and electronic filing systems, document management gives you a single view of any project, case or discussion.
- Healthcare regulations: Each country has certain process and documentation regulations that apply to companies working in the healthcare and pharmaceutical industries. For a pharmaceutical company in the United States, for example, the Food and Drug Administration (FDA) requires specific types of documentation for drug development, testing and manufacturing. Failing to comply with these regulations could result in losing an essential certification, putting the future of the company at grave risk.
A good way to ensure compliance for specific processes is to build workflows in a document management system. These rule-based workflows help ensure that all of the steps are followed correctly, such as sending a document through quality assurance or to another department for approval.
As these three examples illustrate, using an effective document management system helps companies reduce or even eliminate many common compliance problems.
Learn more about avoiding compliance issues with a digital audit trail and electronic documents in your accounting processes.