DOCUMENT MANAGEMENT SYSTEMS
By Gary A. Porter, CPA
Technology is already being used to solve many of the common problems within associations. For instance, technology is being used to operate security systems, guard gates, as well as handle routine accounting functions. The use of local area networks within associations is becoming much more common than in the past.
However, one area where associations have been slow to use technology is in establishing a document management system. Instead, most associations have continued to rely on storage of the hard copy or paper documents that are created. However, for large associations, this becomes a daunting responsibility simply because the documents consume so much space. Most associations don’t have to pay for outside storage space. Instead, utilizing storage rooms somewhere on association property. However, ultimately, you will run out of storage space, and for some associations, if they can free up storage space, they can convert that into useable office or recreational space that would be of much better benefit to the association.
Many have thought that the cost of operating an electronic document management system is simply so high, that it could never be cost effective. Then the other question is, “when do you start?” Do you convert all of the old documents to electronic media so that they can be safely destroyed?
This points out the fact the association needs to have a carefully considered plan in approaching this document management system. The first part of this is establishing a records retention policy. Some associations have records retention policies with respect to paper documents, but those policies will change as you convert to electronic storage of documents.
It should also be pointed out that the cost of operating and electronic document management system has reduced considerably in the last few years. Many associations initially opted for microfiche storage of records because it was a much less costly method, and are now finding that the money spent on the microfiche storage system is money that in part may have been wasted just because they now need to convert these microfiche images to an electronic image that may be used and retrieved by computer and so they are having to convert these images a second time at a cost that is equal to the conversion from paper to electronic media to begin with. In other words, there was no savings from going to microfiche first, and the microfiche document management system is much more cumbersome than storing documents electronically on either a hard disc or CD-ROM.
So after you have created your records retention policy, and determine what records you want to convert to electronic media, how do you make it happen? You basically have two choices. You can either use an outside third party vendor to scan all of the documents in, or you can buy the scanning equipment yourself and have your own staff scan documents in. While their are advantages to both, the approach that I have seen used most often is that a third part vendor will be used to perform the initial scanning functions, meaning to scan in all the documents that you would like to have scanned to begin with, and then using in-house staff to keep the system current by scanning new documents as they are generated or received. You should be aware that you will not want to use your $200 flat bed or hand held scanner to perform this task. That will be far too cumbersome and will make the job so labor intensive that it will be a prohibitive cost. You will need to invest several thousands dollars in a high speed scanner with automatic document feeding capability. Several manufacturers make these machines with speeds available from approximately 22 page per minute to 50 page per minute in capacity with prices ranging from approximately $3,000 to $7,500.
So if you determine that you want to digitize your documents into an electronic format, what should you digitize? The answer is any documentation that you wish to save. I recommend that you go about the process in a very organized manner. For instance, the first thing you should determine is which documents will need to be searched on a word basis, such as minutes and the governing documents of the association. Those documents should be scanned in on an Opticle Character Recognition (OCR) basis so that they can be word searched. All other documents may simply be saved as images. However, you need to make sure that the documents are organized, as the electronic index linking these documents is the key to retrieval of the documents. For instance, if you want to see a paid invoice for a roofing contractor dated on a specific date, you would need to make sure that your index contains the name of the contractor, identifies it as an accounts payable invoice, and contains either the invoice number and/or invoice date. If your index is not at least this detailed, you will not be able to retrieve the document in the manner in which you would logically think to find the document.
Several vendors sell turnkey document imaging systems that generally range in price any where from $12 to $25,000. It is much less expensive if you build the system yourself. However, the key to operating a self-built system is still going to be the document imaging software that will allow you to either store the image, or store the OCR image and provide the database that allows the connectivity to the stored documents. If your hard paper documents are disorganized, it will be extremely expensive and very difficult to build a digitized documents database that will provide the organization that you desire.
You may also wish to consider other features that are available in some turn key document imaging systems. For instance, many legal systems offer redaction capability, which is the ability to either black out or white out certain confidential portions of a document. In addition, many systems have the ability to highlight with yellow or another color the most important passages of particular documents so that you don’t have to search through the entire document to find the portion that you have already identified as being important.
Note: A modified version of this article was published in CAI’s “Ledger Quarterly,” Winter 1998 Issue
Gary Porter, CPA began his accounting career with the national CPA firm Touche Ross in 1971. He is licensed by the California Board of Accountancy and the Nevada Board of Accountancy. Mr. Porter has restricted his practice to work only with Common Interest Realty Associations (CIRAs), including homeowners associations, condominium associations, property owners associations, timeshare associations, fractional associations, condo-hotels, commercial associations, and other associations.
Gary Porter is the creator and coauthor of Practitioners Publishing Company (PPC) Guide to Homeowners Associations and other Common Interest Realty Associations, and Homeowners Association Tax Library. Mr. Porter served as Editor of CAI’s Ledger Quarterly from 1989 through 2004 and is the author of more than 200 articles. In addition, he has had articles published in The Practical Accountant, Common Ground and numerous CAI Chapter newsletters. He has been quoted or published in The Wall Street Journal, Money Magazine, Kiplinger’s Personal Finance, and many major newspapers.
Mr. Porter is a member of Community Associations Institute (CAI), American Resort Development Associations (ARDA), and California Association of Community Managers (CACM). Mr. Porter served as national president of CAI in 1998 – 1999.