“The uploading of large amounts of data to the data room often results in a clumsy process. Everybody starts with good intentions, but at some point, the data room will look messy.”
— Jan Hoffmeister, corporate finance expert
No matter your business, a well-organized file system is crucial for success. Luckily, virtual data rooms provide an easy way to manage, access, and share data. However, you also need to implement a streamlined data room index to ensure every document is clearly laid out and available at the click of a button.
What is a data room index?
A data room index is a table of contents for a virtual data room. It lists all the available documents of each involved party. Similar to the index in a book, a virtual data room is a handy online tool that can be used to find information.
Why use a data room index when organizing documents?
During due diligence, buyers and sellers have to collect a vast amount of documents and paperwork. Thanks to virtual data rooms, this process is much more efficient than it would have been in a physical data room. However, you need to index your documents properly if you genuinely want to expedite the due diligence procedure.
Thankfully, this is easy to do. Most data rooms will automatically index your information for you. Afterward, you can rearrange the index if necessary.
A data room index makes your entire collection files much more searchable. As such, users with the correct permissions can find relevant documents quickly.
In addition, some virtual data rooms offer an index PDF which links the entire room, including any folders and documents.
Virtual data room folder structure
Much like a library system, you can organize your documents in several ways, so you can find exactly what you’re looking for simply by searching for the correct folder.
The best way to organize a data room is to use a series of folders and tiers that make all your information accessible. These folders should be named in a way that guides the user to the documents they need.
How to index a folder
There are several ways to organize a business folder structure:
- Start by creating folders that align with each step of the due diligence process.
- Limit the number of top-tier folders as this will make the data room more scannable.
- Utilize subfolders within your main folders. You can also create subfolders within these folders to be more specific.
What to include in a data room index?
There are lots of folders you can include in your data room index. Some examples are:
- Corporate governance
- Claims and disputes
- Intellectual property
- Government and regulations
- Human resources
You can then assign additional subfolders to each index folder.
With a data index in place, your business will be in great shape for the due diligence procedure. While there is no definite method for organizing your data room, we would recommend keeping everything simple and easy to find. The fewer questions posed by your layout, the faster you can get your deal over the line.