10 Absolutes for Records-Management Operations

By Cary McGovern

There are several very important issues that anyone operating a records-managementand storage business must know and understand. These issues are critical to the on-goingsuccess and profitability of your operation. This column explores why they are so stronglyrecommended.

Commercial records management and storage is an industry that has been in existence forseveral decades. Certain operating issues are considered imperative. Virtually allcommercial records centers follow these principals because they historically work well andreduce the company's liability. Please consider these as you begin your records-storageand management business.

Absolute #1: Always Require a Signed Contract With Your Storage Customer

Business records have value beyond the paper they are written on. However, records mayseem valueless and unimportant until something happens. Two things that occur very oftenare a tax audit and a lawsuit. Overnight, the records that you have been storing becomethe most important asset that your customer has. These records could show that yourcustomer acted properly and prove innocence or show guilt leading to conviction orpenalty.

Lost or missing records are commonplace in records management. The single mostprevalent records problem that exists in every business that I have been in (more than1,000 as a consultant) is missing or lost files. Commercial records centers deal with thisproblem constantly. Your only absolute protection beyond sound operating practices andbusiness systems with strong internal controls is a well-crafted contract that limits yourliability. A signed agreement is always a requirement. It must clearly state yourcustomer's requirements and your responsibilities.

Absolute #2: Always Limit Your Liability in Your Storage Agreement

The standard in the commercial records industry is to limit your liability to the costof the carton or a maximum of $2 per carton. Records reconstruction should never beconsidered your responsibility. Think of it for a moment. You receive a box said tocontain something based on the description on the outside of the box. You have no ideawhat it actually contains unless you index the box at the file level. If you index files,then you have no idea what documents are in the file unless you index at the documentlevel.

No one takes responsibility for contents of files or boxes. It could possibly costmillions of dollars to reconstruct a single business record. The commercial-recordsindustry trade association, PRISM International, publishes a standard contract agreementfor use by its members. This agreement has been tested in court and is a valuable resourcefor any commercial records center. A membership in PRISM costs $500 a year. PRISM'sstandard contract alone will save you that much or more in legal fees while drafting acontract.

Absolute #3: Never Let Your Customer Retrieve Their Own Files or Boxes FromStorage

As a self-storage operator, it is normal to rent a unit and allow your customer freeaccess to it at any time. When providing records-management services you are, in fact,providing inventory control. Think of it as bars of gold. When you take responsibility,you inventory the records, then you keep control over them. This requires a check-in andcheck-out system. If you allow your customer access to their records after you have takencontrol, every time something is missing, you will be blamed.

Absolute #4: Always Require Your Employees to Sign a Confidentiality Agreement

Records are considered confidential to the company that creates them. Your customercould be a hospital with patient records, or a bank with loan records. Your employee mustbe trained in handling confidential records. Typically, a commercial records center willrequire its employees to sign a statement annually that they regard the records asconfidential and understand the nature of  handling confidential files.

Absolute #5: Never Publish Your Price List

One of the most common mistakes that I see in the inexperienced commercial-recordscenter is to believe that you will have a single price list. Nothing could be further fromthe truth. Prices range greatly depending on volume and are almost always negotiated for alarge account. Many variations are possible. Some customers prefer fixed costs rather thanvaried costs because of their budgeting process. These customers will sometimes pay moreto be certain that they are never over budget. Additionally, prices are always kept"close to the chest." No one gives prices out on demand. It is common to quoteprices only after the initial survey is complete. Never quote prices over the phone or inany way on demand. There are just too many variables.

Absolute #6: Always Double-Check Every Transaction

My sister-in-law, an experienced social worker, recognized the need for extreme care inthe handling of transactions in the commercial-records business. She said what you reallyneed is a group of obsessive-compulsive people on the job. She is not far from the truth.Check and double-check each transaction with care, diligence and management control. It isa simple process, but carelessness can cause major problems.

Absolute #7: Always Use a Bar-Code Inventory-Control System From Your First Day

The primary tool for inventory control in industry today is a bar-code system. Nothingmatches its accuracy or portability. These bar codes are far more than an inventory tool:They can help you determine unit cost for each of your services, can ensure managementcontrol and depict manpower requirements.

Suffice it to say that you should never rely on anything but a bar-code file-managementsystem to serve as the heart of your operation. Manual systems almost always lead totrouble in the short run.

Absolute #8: Always Understand Your Customer's Logistics and RequirementsBefore You Set Pricing

Communication is the most difficult challenges to overcome in business. It is easy tothink that your customer understands what you explained to him. Remember that customerrequirements should be specified in detail prior to the initial pick up.

Additionally, there may be special logistic considerations, such asfreight-elevator-operating schedules or parking constraints in downtown locations. Be surethat you identify all of these and price your service based on these considerations.

Absolute #9: Always Use a Temporary Receiving Area for New Boxes or FilesComing Into Storage

When you design your facility, be sure to set aside an area or a unit that boxes can bebrought into as a temporary receiving area. Processing boxes into your system may taketime and is best done in batches. Temporary receiving areas allow for orderly schedulingof work.

Absolute # 10: Always Use Random Filing for All Box-Storage Customers

Random filing ensures that you have maximum density of storage in every unit that youconvert to records management. Of course, mixing customers' boxes requires the use of abar-code system. If you reserve space for a client, you will not only waste space but,also, I assure you will always will run out of room for that customer. Records grow at arate of 18 percent to 25 percent compounded annually and double every four years. Growthcan never be adequately planned Random filing insures a consistent growth from one unit toanother.

These issues are very important to the success of your business. Consider them well andbe profitable.

Regularcolumnist Cary F. McGovern is a certified records manager and owner of File Managers Inc.,a records-management consulting firm that also provides outsourcing services, file-roommanagement and litigation support services for the legal industry. For more informationabout records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, AbitaSprings, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected]   or Web: www.fileman.com.