How to Build an Efficient Filing System for Your Digital Contracts

Have you ever found yourself desperately searching for a digital contract through hundreds of folders and yet failed to discover it? The situation is even more annoying when you know for sure that the document is out there somewhere but are not able to find it. Precious business hours and invaluable energy go down the drain every time we try to sift through an unorganized filing system.   

When you start dealing with hundreds of files and documents, you need to come up with a way of storing them, so that each document is easily accessible. Every company, whether large or small, needs a filing system that is properly organized, searchable, and easy to understand.  

So what exactly constitutes the right type of filing system, and how can it be helpful for your business? We will explore it in detail throughout this article.

What Is a Filing System?

A filing system is a tool that enables an organization or entity to store its documents and necessary files in an organized way. A good filing system should clearly mention how the files are to be named and how the storage should be partitioned into smaller segments. Easy accessibility and searchability are also two important components of a filing system.

A filing system is a tool that enables an organization or entity to store its documents and necessary files in an organized way.

Without a convenient filing system, you will lose precious business resources just to locate the information you need. It may also create problems for your legal and taxation reporting.   

Before diving deeper into this topic, first let us tell you the reasons for which you will actually need a filing system in your company. 

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Why Do You Need a Filing System?

A well-organized and reliable filing system should boost the productivity of your organization and generate a good ROI. There are several benefits of having a filing system, such as: 

  • Being organized. Having a filing system enables you to keep all information well organized and systematic. This greatly contributes to the overall efficiency of the company.
  • Increased transparency. As all information is readily accessible, the overall operating system of the organization becomes a lot more transparent. There will be no more guesswork, and everyone will be able to make important business decisions based on factual data.  
  • High accessibility. People can access all the information right when they need it and in an inappropriate format. It reduces the searching time and allows people to invest that time in more valuable tasks.
  • Future referencing for teams. In a modern team-based organization, one file may be used and modified by a number of team members at different times. So it is quite helpful for future referencing if the changes can be tracked and preserved well. 

So far, we have highlighted several advantages of having a structured filing system in your business. Let’s now explore two major classifications of how to organize filing — papers and paperless.  

Papers vs. Paperless Systems: What Difference Does Digital Make?

Traditionally, for many years, office filing was done with paper documents and folders. There were massive piles of papers, folders, and cabinets in every office. However, once computers became a common tool for the workplace, digitalization also made it easy to handle and manage files. Cloud storage started taking the place of physical cabinets. Let’s explore some of the fundamental differences between paper-based and paperless filing systems.

Paper System

In a paper system, the entire documentation of an organization is structured and organized by filing papers, physical folders, numbered shelves, and office filing cabinets. The system has been widely used globally, and like every other system, there are certain pros and cons


There are several positive sides of a paper-based filing system, including: 

  • Ease of use. A paper-based filing system is very easy to handle without any need for technical know-how. Even the smallest businesses can set it up within a few hours. 
  • Copying. Any document can be easily replicated with a photocopier machine. You may also use a traditional fax machine to send a copy of a document to remote locations. 
  • Formal and legal compliance. It is a legal requirement in many places to preserve a paper-based original copy of any contract or agreement. Oftentimes, digital documents do not carry the same value as a paper document as evidence to the court. 


At the same time, the traditional system also has some drawbacks: 

  • Consumes space. It takes a great volume of physical space for the storage and organization of documentation in a paper-based system. As real-estate prices are always on the rise, it is very challenging for many businesses. 
  • Repetitive costs. Stationery items need to be purchased on a regular basis to keep things organized. Photocopying inks, papers, filing cabinets, folders, and accounting books become a regular recurring cost for the business. 
  • Slow-moving. No matter how fast and efficient the courier service you use to send a document from one place to another, it is no match for email or e-attachments. 
  • Damage potential. In case of a disaster, such as an earthquake, fire, or even flooding, your valuable documents can be ruined in seconds. It is not always feasible to back up all paper-based documents. Frequent handling may also damage your documents over time.
  • Human error. Last but not least, as documents are manually handled by humans, there will always be some possibilities of human error. Paper documents can get lost, misplaced, or accidentally organized into the wrong category, which complicates finding them.

It’s apparent that, despite being very easy to implement, a paper-based system may struggle to cope with the speed of modern communication technologies. Now let’s dive into the basics of the modern paperless system. 

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Paperless System

On the other hand, a paperless system lets you utilize a computer-based filing system and database management to safeguard your files. It could be on your local computer’s hard drives or in the cloud from a remote location.

There are both advantages and disadvantages to having a paperless or digital filing system. Let’s check those out. 


  • Time and resource efficiency. It takes minimal time and resources to store a document or file in a digital format compared to a traditional paper-based system. You can simply take a photo of a document using your phone camera and store it in the cloud. 
  • Faster searching. You will be able to locate any files from terabytes of storage space in seconds through proper indexing and searching algorithms. 
  • Quality. Digital formats store files in the same quality over a long period of time. There is none of the regular wear and tear that is common for paper filing. 
  • Instant updates. Files can be updated and replaced in real time for all users. 
  • Easy data retrieval. With text-based searches you can navigate the content of your contracts in seconds and quickly pull the necessary data from the right contract.
  • Backups. You can create copies of the most valuable files if need be, which won’t consume any space (other than maybe a few kilobytes).
  • Sustainability. Many companies are on their way to greener operations, and limiting the use of paper documents is one of the easiest ways to gain more sustainable workflows.


Despite having many positives, there are some drawbacks to paperless systems: 

  • Data security. At present, data security is one of the most discussed issues of digital filing systems. There are many ways a hacker may gain unauthorized access to your valuable organizational documents, even from a remote location. Data security managers work around the clock to keep files secured. 
  • Steep learning curve. Operation of a digital filing system may often require some technical knowledge. It is particularly a challenge for organizations with tight budgets for training. 

Looking at the pros and cons of each, it is evident that storing your files digitally has some clear edges over paper-based options. Businesses that operate across several geographical regions may especially find the paperless filing system very convenient to use for easy coordination. 

Classification of Filing Systems

After knowing the pros and cons of each of the filing systems, let’s now move on to take a look at filing categories. Each of the categories has distinctive characteristics, and organizations need to consider their own operational and record-keeping processes to identify the most suitable one. 

Alphabetical Topical Filing Systems

Also known as the dictionary system, this method allows for grouping information according to their topics at first, and then sorting those in alphabetical order under each specific topic. This is suitable for handling and storing small amounts of information. Small businesses, such as your local restaurants, may opt to organize their filing and contracts this way. 

Alphabetical Encyclopedia Filing Systems

These categorize information into general broad categories, similar to an encyclopedia, and then divides it further into smaller subcategories. The subcategories are sorted alphabetically. Users start by searching in the general categories first when they try to locate a specific file or document. Schools can adapt this method for categorizing students’ data. 

Alphabetical Geographic Filing Systems

Derived from the encyclopedia filing system, the broader categories are divided based on geographic locations. Users can use this to easily find out information related to a specific location, such as the performance of a branch office. You can organize contracts based on the governing law they refer to (for example, California’s laws or Germany’s laws). 

Straight Numeric Filing Systems

This method greatly relies on an index in which numbers represent a particular file. Each file is labeled with a unique number from the index, and users can identify the file’s location using the index. Indexing may often lead to congestion if numbers of close proximity are frequently used. This method is frequently used by small community clinics. 

Duplex Numeric Filing Systems

This is commonly practiced by libraries around the world; an example is the Dewey Decimal system. Each number has a different meaning assigned to it through indexing. There are multiple subcategories as well under each broad category. The system demands technical knowledge to understand and operate. It is popularly used by libraries. 

Chronological Filing Systems

Information is sorted based on time or chronology under this process. Usually, it follows the sequence of categorizing by year at first, then by month, and lastly by day. Email listings that display the most recent ones at the top typically utilize this system.  Many businesses organize their contracts chronologically to comply with regulatory requirements. 

Alphanumeric Filing Systems

These closely resemble the encyclopedia system; however, additionally, they also include numeric indexing for each category. As a result, one can incorporate more categories compared to what the encyclopedia system and numeric filing system can allow individually. Alphanumeric filing is used by the Library of Congress and sometimes even referred to as the ‘Library of Congress system.— 

After discussing the fundamentals of filing system ideas, you may be wondering where to begin when creating your own filing system. Here are a few steps to get you started on your journey.

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5 Steps to Organize Your Filing System

Numerous alternatives will become apparent once you begin researching how to employ a modern file system in your business. Understanding and adhering to the methods for organizing a file system can save you a great deal of time. These are the processes necessary to implement a digital file system, which is the choice the majority of businesses will ultimately make.

  1. Create an Online Database

    You need to begin with selecting a quality service provider for your online contract management and storage system. While choosing from a range of available options, you need to closely consider your budget and requirements. There are many legal tech software options, such as AXDRAFT CLM, that offer built-in customizable databases.

  2. Decide on a Naming System

    Before you start building your contact database, the first thing you will need to decide on is how to name or label your documents. Choosing a perfect labeling scheme will save you from a lot of hassles and delays later on. Also, make sure everyone in the organization has a clear understanding of the naming system. 

  3. Make a Folder System

    Next, you will need to decide how to categorize your documents into different folders. It will depend entirely on the nature of your operations and the type of documents you are dealing with. Having a structured folder system will help you keep things organized. On some occasions, you may also find it convenient to make a file available in multiple locations or folders. 

  4. Share Selectively

    There might be hundreds of documents in your file repository; however, an administrator should selectively share documents with relevant people. The level of permission may also vary in terms of editing, printing, or just viewing.  

  5. Remove Expired Entries

    For larger organizations, the number of expired documents or contracts will continue to make the storage system complicated over time. Often, the involved officials may ignore the necessity to remove unnecessary and outdated files from the system. If you fear deleting important files in the process, you may at least keep the expired or outdated files in a separate folder. 

So far, we have covered most of the technicalities you will need to deal with while building up an efficient filing system for your documents and contract management. The next question is which tool may help you automate the building of your filing system and gain all the benefits listed above.  

How CLM Software Helps You Build a Solid Filing System

AXDRAFT is document automation software for legal and business teams where you can easily draft, create, template, collaborate, and analyze everything document-wise in a single convenient interface.

It can considerably save your employees’ time and increase efficiency by automating routine processes and letting you focus on the rest. 

Here are the main features and benefits to consider: 

  • Projects. All of your documents can be categorized into projects based on different criteria. It makes the overall storage and retrieval mechanism simpler.  
  • Metadata. AXDRAFT lets you assign any specific data to your contracts to simplify navigation.
  • Full-text search. The full-text search feature of AXDRAFT offers greater convenience for the users compared to standard database searching. 
  • Contract labeling. Label contracts and other documents to help you group and manage them conveniently. 
  • Custom reports. You will be able to generate any customizable report in real time effortlessly with customizable metadata, allowing you to view and share your team’s performance.
  • Seamless integrations. The software allows for seamless integration with external databases and other software. You won’t have to worry about the validation and synchronization of data.
  • Role management. Role management will help you avoid unsolicited access to your filing and contract database.  
  • Cloud storage. Everything on AXDRAFT is accessible from the cloud and on the go. You will be able to access everything you need right from your phone.
  • Strong security. Cloud security is one of the top priorities of AXDRAFT with the use of SOC-2 certification. It offers bank-level security. 

So you can easily see how an efficient filing system with the help of AXDRAFT can be a game-changer for your organization. The convenient and scalable pricing options will come in handy for businesses of any size. The 24/7 cloud access is going to make life a lot easier for you! 

Final Thoughts

Understanding what a filing system is, its classification, and the main steps on how to create it can help you improve your business management. As you get ready to take on a digitally managed system, you will find that your office life becomes less cluttered.

Try an instant demo of AXDRAFT automation software, and you will quickly see how to make your document workflow easier! 

Frequently Asked Questions (FAQs)

How do you create a filing system?

To create a filing system for your company, you will need to begin with a documentation plan and choose a storage provider. Next, you will need to integrate file management software for automation and ongoing maintenance. 

What are manual filing systems?

Manual filing systems are the paper-based traditional ones that use a typical indexing system to locate information. One common example is the yellow pages. It may use binding folders and file cabinets for storing large volumes of information. 

What filing system is suitable for a small organization?

Even small businesses need to deal with a significant amount of paperwork, and as a result, investing in a digital file system may be the best course of action.

How can I improve my filing system?

To improve an existing filing system, you can begin by discarding outdated and duplicated documents from your repository to declutter it. Labeling the categories with specific color codes may be helpful in searching. 

What might be the value of a good filing system?

A good filing system will help you keep your valuable documents organized and ready whenever you need them. For legal reporting and documentation, it will save you precious business hours. You will also be able to protect your sensitive data easily.

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