What is document management? A complete guide
What is document management? A complete guide
Document management is the process of capturing, storing, organizing, retrieving, sharing, and securing documents across their lifecycle, whether digital files or scanned paper records. It includes creating and indexing files as well as controlling who can access, edit, or share them. Document management systems replace slow, error-prone paper filing with a searchable, secure, and centralized system.
This article will examine the benefits of implementing a document management system, the challenges companies face when managing documents, and how the right document management software can help overcome these challenges.
Key takeaways
Electronic document management systems are a paperless solution that helps companies to streamline their workflow while improving document control.
A good document management system should have key features like document storage and retrieval, security, collaboration, tracking and reporting, integration with other systems, scalability, and a user-friendly interface.
Choosing a system with these key features can help businesses improve their document management processes, increase efficiency, and reduce costs.
What is document management?
Document management is the systematic process of creating, storing, organizing, retrieving, and controlling access to business documents, whether they are physical or digital files. It gives every document a defined place, owner, and set of rules for who can view, edit, or share it.
Document management replaces the ad hoc storage approaches, like storing contracts in email attachments, personal folders, and filing cabinets. These informal systems can work at a small scale, but they quickly break down when your document volume grows.
That matters because documents are the operating layer of any business, from proposals and contracts to invoices, HR records, policies, and compliance files. Without an effective system, these will scatter across drives and inboxes, and it becomes harder to find, secure, or audit your files.
“Document management” refers to both the process and the software category built to support it. It’s commonly called a Document Management System, or DMS.
Document management vs. a shared drive
Most teams start a shared Google Drive, Dropbox, or SharePoint folder and call it a document management strategy. It can work well enough, until the business scales. Shared drives are built to store files, which is a good starting point. But a DMS is built to manage those files.
Here’s a comparison breakdown:
Capability | Shared drive | Document management system |
Search capability | Basic file-name search; finding content inside documents is hit-or-miss | Full-text search across document content, metadata, and tags |
Version control | Manual; relies on naming conventions ("Contract_FINAL_v3") and human discipline | Automatic version history, with the ability to roll back and see exactly what changed |
Access permissions | Folder-level sharing; hard to restrict access to specific documents or fields | Granular, document-level permissions tied to roles, users, or teams |
Audit trail | Little to no record of who viewed, edited, or downloaded a file | Full activity log of who accessed what, when, and what they did |
Workflow automation | None; approvals and routing happen manually over email or Slack | Built-in approval chains, routing rules, and status tracking |
Compliance support | Not purpose-built for regulatory requirements (GDPR, HIPAA, SOC 2, etc.) | Designed to support compliance with audit trails, retention rules, and access controls |
Document expiration tracking | Not supported; expired contracts or policies just sit there | Automated alerts and tracking for renewal or expiration dates |
A shared drive will tell you where a file is, but a DMS will tell you who touched it, when, under what approval, and if it’s still valid. That additional layer of workflow and control is what most SMBs are missing without even knowing it, until there’s a problem with a compliance audit or a lost contract.
If you’re weighing document management against contract lifecycle management tools, see Document management vs. contract management for that distinction.
Types of document management systems
Electronic document management systems come in several different forms, each with unique advantages and disadvantages. Here are the most common types of EDMS:
It makes my job easier! It’s easy to use, super simple, pretty intuitive, consistent, and supports our normal rhythm.
Cloud-based EDMS
A cloud-based document management system stores documents on remote servers and can be accessed from anywhere with an internet connection.
Companies that need to access documents from multiple locations typically use this system, as it eliminates the need for local storage and backups.
For example, the document management platforms PandaDoc and Contractlogix are both cloud-based.
These are the best fit for most SMBs, as there’s no infrastructure involved, they are accessible anywhere, and they have a lower upfront cost.
On-premise EDMS
On-premise EDMS is installed and run on a company’s own servers.
It is often used by businesses that have strict security requirements, as it allows them to control the location and access of their documents.
You can use EDMS software such as Docsvault that will only run on your enterprise server with easy access from your desktop or mobile device.
On-premise is best for regulated industries with strict data residency requirements.
Hybrid EDMS
Hybrid EDMS combines the best of both cloud-based and on-premise systems.
Businesses can utilize the remote access and scalability of cloud-based systems while storing important documents on their own servers with this kind of system.
Platforms like LogicalDOC offer a hybrid system that combines cloud and on-premises storage.
Hybrid systems are best for enterprise teams that need both cloud-based and on-premise system benefits.
Mobile EDMS
Mobile EDMS allows users to access and manage documents from their mobile devices.
It is especially useful for businesses that need to access documents while on the go, as it provides easy and convenient access to critical information. This means it works great for field teams and distributed workforces.
This feature is becoming more and more common, and many EMDS software like PandaDoc, Docsvault, or LogicalDOc offer this option to allow users to access documents from their smartphones and tablets.
Open-source EDMS
Open-source EDMS is a free and customizable system developed and maintained by a community of developers.
Businesses that need to integrate their EDMS with other systems favor this type of EDMS, allowing them to tailor the system to meet their specific needs.
For example, software such as OpenDocMan or Kimios are open-source document management systems.
Open-source systems are especially great for technically capable teams that need custom integrations.
How companies manage their documents
Regarding document management solutions, there are two systems mainly used by companies: the traditional way that involves the use and storage of docs in paper format and the other one based on the digitization of all business documentation — corporate, legal, marketing, sales, HR, etc.
Traditional paper-based systems
Traditional paper-based systems refer to the process of managing documents in a physical format.
These systems involve the use of paper documents, folders, filing cabinets, and dedicated floor space or separate storerooms to store, organize and manage important records.
In this system, documents are created, printed, and manually filed in a specific location, where authorized personnel can access them later.
Yet paper-based systems have several inherent limitations.
First, physical documents are susceptible to damage, loss, or theft.
Second, paper-based systems require considerable storage space.
Third, employees must spend substantial amounts of time searching for and retrieving documents.
These drawbacks of paper-based systems waste valuable company time, cost money in storage space, and are prone to human error (incorrect file classification).
And, even worse, going this route has an ongoing negative impact on the environment.
Case in point: PandaDoc once worked with One Tree Planted, a global nonprofit organization that promotes reforestation.
Previously, the company was making agreements the old-fashioned way: print, scan, sign, repeat.
This required printers, ink, and lots of paper, which was a waste of resources that was against the company's environmental message. In addition, tracking documents was often difficult.
Since the switch to using PandaDoc formats and the DocX converter, One Tree Planted has the option to make and send non-disclosure agreements and partner contracts with just a few clicks.
Partners can now make suggestions and leave comments in real-time while finalizing the agreements, which greatly eases the process and saves time.
It makes my job easier! It’s easy to use, super simple, pretty intuitive, consistent, and supports our normal rhythm.
Chloe Ketteling
Operations Team Exec Assistant
By partnering with us, One Tree Planted was able to decrease both time and money spent on paperwork while leveling up consistency across all docs within their organization. Every stakeholder wins (including trees!).
See also
How to go paperless to save your business’s budget
Electronic document management systems
EDMS are digital solutions that help organizations to manage their documents and records electronically.
These systems involve the use of software and hardware tools to create, store, and manage electronic documents in various formats.
EDMS offers many benefits over traditional, paper-based systems, including improved efficiency, enhanced security, and reduced costs.
With EDMS, documents can be scanned, converted to electronic formats, and stored in a central repository, making them easily accessible to authorized personnel anywhere.
Electronic documents are indexed in the EDMS, making them easy to find.
Electronic documents are also encrypted, password protected and stored in the EDMS.
Take a look at one example of an EDMS, what we offer at PandaDoc. You can easily set up a unique passcode or SMS code for each document recipient.
There is no need for additional physical space for storage since all documents are available in digital format, reducing overall cost.
In addition, implementing an EDMS can help organizations comply with regulatory requirements by ensuring that documents are stored in a secure and organized manner.
Pros | Cons | |
Traditional paper-based systems | Tangibility | Space |
Electronic document management systems | Space-saving | Dependence on technology |
Some sectors use both systems since, for legal reasons, certain documents must remain in paper format.
Here are the main industries that employ a dual model of using both a traditional system and an EDMS:
Healthcare
Financial Services
Legal
Education
Government
Manage documents with ease
Our management software allows you to automate these repetitive tasks using customized workflows that free up hours of your day.
Why document management software matters for your business
Electronic document management systems offer a range of benefits over traditional, paper-based systems that can greatly improve the efficiency and effectiveness of document management processes in businesses of all sizes.
Here are some of the key ways in which EDMS can improve upon traditional systems:
Increased efficiency
Research shows that poor document systems can cost real time. McKinsey Global Institute found that interaction workers spend nearly 20% of the workweek searching for internal information. Making information searchable can cut that time by up to 35%. A DMS does that for your documents.
EDMS automates many of the manual processes involved in document management, such as filing, retrieval, and distribution.
This not only saves time but also reduces the risk of human error.
Improved accessibility
With EDMS, documents can be stored and retrieved electronically, making them easily accessible from anywhere at any time.
This is especially important for businesses with remote employees, as it allows them to work together more effectively, regardless of their location.
Better security
Electronic DMS stores documents on secure servers and uses encryption to protect sensitive information.
They also provide automatic backup and recovery options to ensure that documents are always available, even in the event of an on-premises disaster.
Enhanced collaboration
EDMS allows multiple users to access and edit documents from anywhere, at any time.
This greatly improves communication and collaboration among team members and helps ensure that everyone is working from the same information set.
AIIM's data shows that collaboration is one of the leading investment drivers of document management. This is because many companies are focusing on serving customers better, working smarter, and moving faster.
Streamlined workflow
Using an EDMS can automate many document-related processes, such as classifying and storing documents, updating and distributing documents, and tracking changes.
This helps to streamline the workflow and ensures that all stakeholders have access to the latest information.
Increased compliance
By providing secure storage and tracking of sensitive information, EDMS can assist businesses in meeting regulatory compliance requirements.
They also provide an auditable trail of all document-related activities, which is a must in the event of an audit.
Document management use cases by team
Document management looks different for each team across the business, as the types of documents and priorities will differ depending on the department.
Sales teams
Sales mainly works with proposals, contracts, NDAs, and quotes, which means speed matters most of all. The faster a rep can generate, send, and get a document signed, the faster a deal can close. Sales teams need fast document creation, built-in e-signature capabilities, and full CRM syncing so that contract data automatically transfers without manual entry.
See CLM for sales teams to learn more about managing contracts across the stages of the document lifecycle.
HR teams
HR manages offer letters, employment contracts, onboarding documents, policy acknowledgements. These are documents that carry legal weight and need to be traceable for years to come. Version control and compliance tracking are especially important here.
Operations teams
Operations primarily deals with vendor agreements, SOWs, SLAs, and lease agreements. If they are managing dozens or hundreds at once, each with its own renewal date, it’s important to have renewal tracking and bulk organization. This prevents quiet expirations.
Contract management for operations teams covers this in more depth.
Legal teams
Legal deals with contracts, compliance documents, and regulatory filings, where stakes are high and it’s important to be audit-ready. The most important feature here is a full audit trail, tight access controls, and a way to track ongoing contractual obligations. Simply storing signed documents and moving on just doesn’t cut it.
Finance teams
Finance handles invoices, payment terms, and vendor agreements. In these cases, there is a risk of a document sitting unapproved or a payment getting missed. This is where approval workflows and payment milestone tracking are especially helpful, so nothing can move forward with payment without the right sign-off.
What features should a document management system have?
Any competent DMS should have the following key features:
Document storage and retrieval
A good system should allow organizations to store and retrieve docs quickly and easily, regardless of their format.
PandaDoc includes document search functions, categorization, and version control features to achieve this.
With the PandaDoc’s document repository, you have access to a centralized storage solution that your team can easily consult for all your digital files.
Security and access control
Having a system with strong security features to protect sensitive docs from unauthorized access is essential. That's why PandaDoc offers user authentication and authorization features to grant permissions.
In addition, the PandaDoc e-signature feature ensures that all your electronic documents are legally binding with your partners.
Also, you will be able to create documents that comply with the GDPR, HIPAA, and FERPA guidelines by providing ESIGN and UETA-certified electronic signatures.
AI data extraction
Document management platforms can automatically read uploaded documents and extract key fields like renewal dates, party names, and payment terms, without anyone having to manually enter them.
This removes a major source of manual data entry and human error, especially when dealing with high-volume document types like contracts and invoices.
See AI data extraction for more on how this works.
Collaboration tool
PandaDoc makes it possible for multiple parties to work together on a single document or data room.
Within the same location, you can tag team members in particular lines, collect feedback, and leave comments in real-time.
Keep all fundamental partners informed with report cooperation capacities that improve cross-group and outer-client correspondence.
Workflow automation
A DMS should be able to route documents for approval, trigger notifications, and automate the routine tasks that usually depend on someone remembering to follow up.
This keeps documents moving through their lifecycle from draft through review, approval, and signature, without having to manually chase each step.
Document tracking and reporting
It is important that your DMS has detailed tracking and reporting capabilities to help organizations monitor document usage, identify trends and make data-driven decisions.
To give you a better idea of how powerful streamlining docs with an EDMS can be, here is how InSync Healthcare Solutions, a company that provides cutting-edge technology in the medical field, used PandaDoc to track documents.
Previously, sales representatives started in Excel to draft proposals, contracts, or quotes.
After that, a representative had to copy and paste client information from their CRM, resulting in several mistakes and more editing time.
Reps were forced to spend time away from selling activities when the Excel sheet was converted to a PDF file.
In addition to emailing the PDF as an attachment, a rep also had to include video links and ROI analysis in the email body.
The company reached out to PandaDoc; with our EDMS, they successfully transformed the way they carry out business operations.
PandaDoc provides my sales team with the ability to stand out helping us win more business and ensuring our customers receive a top-notch product and service.
Alex Sandkuhl
Director of Sales
InSync began using PandaDoc's library of content templates so that representatives could quickly create and edit documents.
Now the company can simply drag and drop their video links and ROI analysis into a proposal, quote, or contract instead of attaching them to an email.
Integration with other systems
In addition to its DMS qualities, it should integrate easily with other systems, such as Microsoft, Dropbox, Salesforce, Paypal, etc.
Thus, your company will be able to streamline these workflows, eliminate duplication of data and reduce manual data entry.
User-friendly interface
Another feature that any electronic DMS must have is a user-friendly interface that is easy to navigate, even for non-technical people.
Such as drag-and-drop document creation, intuitive navigation, and customizable dashboards. Plus, you can save your documents to any device (desktop or mobile app).
How to choose a document management system
Choosing the right DMS depends less on which platforms have the most features and more on which one matches how your team works.
Here’s a checklist to help guide your decision:
Start with your primary use case
Before comparing your options, figure out what the DMS needs to do for you first. Sales-heavy teams need proposal creation and e-signature capabilities. Contract-heavy teams need renewal tracking and approval workflows. Document-heavy teams need bulk storage and AI extraction for their high volume.
Your primary use case should drive your decision, not the “nice to have” features.
Consider your team size and technical resources
A cloud-based DMS requires no infrastructure and can be up and running in the same day. An on-premise system needs IT support to install, maintain, and secure your files. Most SMBs without dedicated IT support should default to cloud, since the operational overhead of on-premise likely won’t pay off.
Check for integration with your existing tools
If a DMS doesn’t connect to your CRM, HR system, or existing storage tools, you’ll end up with another silo for documents to live, disconnected from everything else. Before committing, confirm the platform integrates with the tools your team uses every day.
Evaluate compliance requirements
Teams in healthcare, finance, legal, and government need specific compliance certifications like HIPAA, SOC 2, or GDPR, depending on the industry and geography. Verify these certifications exist before you commit to a platform, not after your documents are already migrated.
Prioritize the features your team will actually use
A DMS with fifty features is only going to be useful if your team actually adopts the few that matter most. For most SMBs, ease of use and short learning curve matter more than feature depth. A powerful platform that nobody uses will be less valuable than a simpler one that the entire team uses.
Check out Best document management software for a full tool comparison.
How PandaDoc handles document management
Most SMB and mid-market teams don’t need a full enterprise content management system. They need a document workflow that doesn’t come with a complicated enterprise-scale deployment. PandaDoc is built for just that: creation, collaboration, signature, storage, and retrieval, in one platform.
Here are the features that make PandaDoc a top choice:
Centralized storage and search
Every document lives in a single document repository that’s searchable by content, not just file name. This means nothing gets lost in folders or personal drives.
AI data extraction
PandaDoc's AI data extraction reads uploaded documents and pulls out key fields like renewal dates, parties, and payment terms automatically. This means nobody has to manually re-enter details from every contract or invoice.
Version control and document history
All edits are tracked, so your team can see exactly what changed, when, and by whom, and roll back to a prior version if needed.
Access controls and role-based permissions
Permissions can be set at the document level, so sensitive files like contracts, HR records, and financials are only visible to who should see them, not the entire organization by default.
Workflow approvals
Documents will route automatically through workflow approvals. This means nothing moves forward without the right sign-off, and nobody has to manually chase down an approver over email.
Built-in e-signature
E-signature is native to the platform, so all your documents can be sent, signed, and finalized without leaving PandaDoc or bouncing between separate tools.
Compliance
PandaDoc supports the standards regulated teams need to meet, including SOC 2 Type 2, GDPR, HIPAA, and FERPA. Full details are available on the security page.
CRM integrations
PandaDoc connects directly to the CRMs and the tools that your team already uses every day, allowing contract and document data to flow automatically instead of requiring manual re-entry. See the full list on the integrations page.
See PandaDoc in action by booking a personalized demo to see how it fits in your document workflow. Or, start a free trial to create, send, and sign your documents today.
Disclaimer
PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDocs services are governed by our Terms of Use and Privacy Policy.
Frequently asked questions
Document management is the systematic process of creating, storing, organizing, retrieving, and controlling access to business documents, whether physical or digital. It gives your documents a defined place, owner, and set of access rules, replacing ad hoc storage in email attachments, personal folders, and filing cabinets.
A document management system is the software that supports the document management process. It handles storage and retrieval, version control, access permissions, workflow automation, e-signature, and compliance tracking. These tools are used by businesses to help manage documents at scale instead of relying on manual processes.
File storage is just that: a location with basic folder organization to put files. Document management offers version history, access permissions, audit trails, workflow automation, and search across document content. Storage holds your file, whereas document management shows you who can access it, what’s happened to it, and if it’s still valid.
Many small businesses benefit from one when their document volume outgrows what their shared drive can handle. A DMS is worth adopting when your business is regularly dealing with contracts, approvals, or compliance requirements. It’s also helpful when you deal with situations where knowing who accessed a document, when, and under what version is important.
Any document that’s tied to a business process or legal obligation can be managed by a DMS. That would include proposals, contracts, NDAs, invoices, offer letters, employment agreements, vendor agreements, SLAs, policy acknowledgments, and regulatory filings. Documents with renewal dates, approval requirements, or compliance implications will benefit most, since these are the kind of details a DMS automatically tracks.
AI can automatically read uploaded documents and extract key fields like renewal dates, parties, and payment terms, without manual data entry. This cuts down on the human error caused by manual entry. It can also support smarter search across document content, flag anomalies or missing terms, and route documents through approval workflows based on what they contain.
Not exactly. Google Drive is a cloud file storage and sharing tool that handles storage and basic collaboration, but lacks the workflow features of a dedicated DMS. That means it doesn't have version-controlled approval routing, automated renewal tracking, audit trail for compliance, and it has limited metadata management. For teams that need simple storage, it can be sufficient. But for teams that need workflow automation, compliance controls, and document-level analytics, a dedicated DMS is better-suited.
What is document management? A complete guide
Author
Jenny Pak
Director of Program Management at PandaDoc
Jenny Pak is the Director of Program Management at PandaDoc. With 10+ years in the technology sector, she boasts extensive experience in both B2B and B2C SaaS environments. Her expertise encompasses program management, strategic initiatives, experiential marketing, and product launch/campaign management. In her free time she enjoys spending time outdoors with her dog and exploring the city of Los Angeles for the perfect spicy margarita.
