Documentation - Why its important!

Documentation - Why its important!

Documentation is an important way for a business to protect itself from litigation, audits and the unexpected.

What is Documentation?

The term documentation covers several different areas.  It can refer to a person’s medical charts, a contract, an invoice, a check or an instruction manual.  Basically, documentation is a preserved record that can be reviewed at a later time.  In the business world, documentation is kept in written form, usually on paper.  However, with the advances of computers, this is not always the case.

What Is Documentation Used For?

Documentation for businesses usually falls in one of four categories:

  • Instructions
  • Contracts
  • Inventory
  • Financial


This documentation can be used for a job, piece of equipment or a process.  It lists out the steps of how to do something or use a machine properly.  This documentation is very important to make sure that the same results are achieved regardless of who is following the instructions.

Most companies keep a copy of the instruction manual for each machine in one area since a company usually has several of the same machine.  Instruction manuals for a job are often written up by the person leaving that position for use by his or her replacement.  However, more companies have been putting together manuals for job as a precaution for unexpected illnesses or other emergencies so that the workplace continues to work smoothly.

Instruction manuals should be reviewed annually.  Manuals for machines the company no longer owns should be disposed of and job duties and instructions should be updated as necessary.


Every company has multiple contracts.  Rental contracts, agreements with distributors, insurance information and employee documents all come under this heading.

These papers are very important to keep in a safe place.  These documents are used in litigation and insurance claims for robberies, fires and floods.  Losing these papers during an emergency can easily result in the loss of money and even the business itself.


This type of documentation includes orders, deliveries and sales. It is how a company tracks what they have in stock and what they need to be paid for or to pay for.

Proper documentation of what a business orders or receives will prevent loss of money from being overcharged.  If a business orders eight items and a distributor delivers ten, proper documentation of what was actually ordered allows the business to return the unordered items.  Without this documentation, the business could be forced to pay for this unplanned and unwanted expense.

Sales of items should also be properly documented, particularly if it is a large ticket item that payments will be made on.  Without documentation, judges may not enforce payments owed.


Businesses are required to keep track of their income and expenses for two years by the IRS.  Lack of this documentation if the IRS demands it results in lengthy litigation and massive fines.

Over all, proper documentation is not an option when it comes to business.

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David Peterson

David G. Peterson is a business consultant and author of Handling the Remedy. He has extensive international experience managing projects and operations for large financial institutions. He has worked in North America, Europe, Middle East and Asia skillfully managing business and technical requirements, core systems enhancement and support, merger and acquisition integration's, business process reengineering, off-shoring and outsourcing.