The Need for Formal Systems Grows
Computer technology has brought us a long way from the days when managing and maintaining a vast collection of documents meant a back storage room filled with shelves of file boxes. A common misconception among CPA firms today, however, is that a formal firm-wide approach to document management is unnecessary. Instead of adopting a formal strategy, many firms rely on whatever informal structure has developed, using the different electronic tools that have been adopted over the years, and patching and mending those systems only when necessary. These firms have yet to address the need for a definitive system or assessed the risks of not having a formal document management program.

This might be acceptable for small firms, where only a few members handle the volume of documents, but for a large firm, it is a critical issue. It may be tempting to take a "do nothing" approach because it requires no monetary investment and avoids the hassles of change, but the real costs are lost productivity, inadequate security and misplaced documents. An undefined strategy also generally means no single person is responsible for central management or enforcing protocols for how documents are organized. The result: Documents can be difficult to find, being scattered among multiple locations and in multiple formats. Firms in this situation can only hope that everything keeps working and their employees follow procedures. In many cases, these firms also have not developed and implemented disaster recovery or record retention plans.

As new industry rules and regulations take effect, and as more firms grow through mergers and acquisitions, the need for consistent document management systems will only increase. Today's technology developments allow for a document management system that can provide a valuable means of storing, accessing, tracking, searching and retaining all information. With new technology developments, however, comes the challenge of figuring out which systems best meet the demands and resource limitations of individual firms.

In-House Systems: Benefits
The first option for document management is to deploy a formal, in-house system. This involves creating a dedicated, internal department and supplying it with all the necessary resources to formulate, implement and run a defined document management system using an electronic repository. The department develops all organizational processes and procedures, such as whether client documents will be scanned and stored, how individuals input data, how documents are backed-up and retained, and what search mechanisms are in place. Additionally, all the technical aspects, such as installing, deploying, supporting and maintaining the system across the firm's network are handled internally by the IT department. Benefits include increased security, greater and faster accessibility, planned and maintained structure, and a firm and client comfort level that all documents are readily available and controlled by the firm.

In-House Systems: Drawbacks
While many believe an in-house system is the most effective and secure approach for document management, they also need to be aware that the strength of an in-house system depends upon the resources they commit to it. The skill sets of the people creating the system and the amount of investment the firm puts into it directly determine the system's level of security, compatibility, accessibility and searchability. If an element is lacking, it will be reflected in the system. Ownership costs also can be high, and long-term costs are almost always greater than originally expected. For example, an in-house system creates a large internal resource cost in the burden it places upon the IT department to keep all components updated to the latest version, functioning properly and backed up. Also, in-house systems do not typically provide the most effective fit for today's disaster recovery strategies. If something happens to the firm's office or if documents cannot be accessed for whatever reason, there is no work-around.

Web-Hosted Systems: Newer Approach
Web-hosted services are fast becoming a popular alternative for document management. Instead of housing a system internally, document management can be housed off-site and hosted in a data center by a service provider. Hosted documents then can be securely accessed from anywhere over an Internet connection. Based on the same premises as an internally deployed system, a Web-hosted system provides all of the benefits of an internal system, while requiring minimal up-front investment in hardware, software and personnel to implement and maintain. All in-house responsibilities regarding system maintenance, administration and other technical aspects shift over to the external service provider. This type of service allows the firm more time to do what it does best -- accounting, tax and consulting -- while leaving the document security, integrity and reliability to the outside IT experts. The service company's experience and expertise provide a greater skill set and more resources centered on perfecting the system's various components, such as security and compatibility. Additionally, because service providers handle document management for multiple firms, complete system duplication and disaster recovery strategies are typically in place, so documents can be recovered.

Web-Hosted Systems: Drawbacks
The only notable limitation of a Web-hosted system is that it relies on the Internet to operate. Thus, if an Internet connection fails or is unavailable, it may not be possible to access the system. Due to the nature of these circumstances, the end-user should consider having a back up Internet connection if the main connection fails.

Overall, the accounting and business worlds are moving toward electronic, paperless processes, and the trend toward Web-hosted models only continues to grow. Given the evolving demands and resources of accounting firms, the Web-hosted document management system can provide great value and scalability.

JOE HARPAZ is Executive Vice President of Immediatech Corporation (www.Immediatech.com), a provider of electronic document management solutions for CPA firms and other financial organizations. He can be reached at jharpaz@immediatech.com