By Cary McGovern
There are several very important issues that anyone operating a records-management and storage business must know and understand. These issues are critical to the on-going success and profitability of your operation. This column explores why they are so strongly recommended.
Commercial records management and storage is an industry that has been in existence for several decades. Certain operating issues are considered imperative. Virtually all commercial records centers follow these principals because they historically work well and reduce the company's liability. Please consider these as you begin your records-storage and 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 may seem valueless and unimportant until something happens. Two things that occur very often are a tax audit and a lawsuit. Overnight, the records that you have been storing become the most important asset that your customer has. These records could show that your customer acted properly and prove innocence or show guilt leading to conviction or penalty.
Lost or missing records are commonplace in records management. The single most prevalent records problem that exists in every business that I have been in (more than 1,000 as a consultant) is missing or lost files. Commercial records centers deal with this problem constantly. Your only absolute protection beyond sound operating practices and business systems with strong internal controls is a well-crafted contract that limits your liability. A signed agreement is always a requirement. It must clearly state your customer'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 cost of the carton or a maximum of $2 per carton. Records reconstruction should never be considered your responsibility. Think of it for a moment. You receive a box said to contain something based on the description on the outside of the box. You have no idea what 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 document level.
No one takes responsibility for contents of files or boxes. It could possibly cost millions of dollars to reconstruct a single business record. The commercial-records industry trade association, PRISM International, publishes a standard contract agreement for use by its members. This agreement has been tested in court and is a valuable resource for any commercial records center. A membership in PRISM costs $500 a year. PRISM's standard contract alone will save you that much or more in legal fees while drafting a contract.
Absolute #3: Never Let Your Customer Retrieve Their Own Files or Boxes From Storage
As a self-storage operator, it is normal to rent a unit and allow your customer free access 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 and check-out system. If you allow your customer access to their records after you have taken control, 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 customer could be a hospital with patient records, or a bank with loan records. Your employee must be trained in handling confidential records. Typically, a commercial records center will require its employees to sign a statement annually that they regard the records as confidential 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-records center is to believe that you will have a single price list. Nothing could be further from the truth. Prices range greatly depending on volume and are almost always negotiated for a large account. Many variations are possible. Some customers prefer fixed costs rather than varied costs because of their budgeting process. These customers will sometimes pay more to 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 quote prices only after the initial survey is complete. Never quote prices over the phone or in any 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 in the handling of transactions in the commercial-records business. She said what you really need 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 is a 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. Nothing matches 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 management control and depict manpower requirements.
Suffice it to say that you should never rely on anything but a bar-code file-management system to serve as the heart of your operation. Manual systems almost always lead to trouble in the short run.
Absolute #8: Always Understand Your Customer's Logistics and Requirements Before You Set Pricing
Communication is the most difficult challenges to overcome in business. It is easy to think that your customer understands what you explained to him. Remember that customer requirements should be specified in detail prior to the initial pick up.
Additionally, there may be special logistic considerations, such as freight-elevator-operating schedules or parking constraints in downtown locations. Be sure that 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 Files Coming Into Storage
When you design your facility, be sure to set aside an area or a unit that boxes can be brought into as a temporary receiving area. Processing boxes into your system may take time and is best done in batches. Temporary receiving areas allow for orderly scheduling of 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 you convert to records management. Of course, mixing customers' boxes requires the use of a bar-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 a rate of 18 percent to 25 percent compounded annually and double every four years. Growth can never be adequately planned Random filing insures a consistent growth from one unit to another.
These issues are very important to the success of your business. Consider them well and be profitable.
Regular columnist 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-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected] or Web: www.fileman.com.