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The Importance of a Virtual Data Room Index and Folder Structure

With any business, keeping great records and staying organized is essential for success. Thanks to virtual data rooms, teams now have an easier way to store and access organized data. With a virtual data room index, you can have every document you need neatly organized and just a click away.

A virtual data room index includes all the files and documents inside the room. Within the data room index is the folder structure that determines how the files and documents are organized. This article covers how to set up a folder structure and data room index.

So, what is the data room index?

A data room index is an index of documents. It lists all of the documents inside the VDR made available by the parties involved. Much like an index inside a book, this virtual data room index is used to locate information and can be an incredibly useful tool. 

Data room index example

virtual data room index & folder structure

This is an example of what a data room index looks inside our virtual data room, DealRoom. Notice how each of the folders are organized and include subfolders.

Why use indexing while organizing documents during due diligence

During due diligence, copious amounts of information and paperwork is collected. This process is faster and more efficient in a virtual data room compared to if it would be if done with an actual paper trail. While it is faster to use a virtual data room, it can take longer than necessary if you don’t properly index your documents. 

Indexing your documents when you upload them is simple to do, thanks to a data room technology that automatically does it for you. And you can rearrange the index if needed.

By correctly indexing your documents you make them searchable. This allows for users to find the documents much faster later in the process. 

Similar to a public library system, by organizing books by genre, author, or numerical order, you can easily find exactly what you want by searching for it. By taking the time to organize your documents in your VDR, you can find the documents you want any time that you may need them.

How virtual data rooms organize your documents

Inside a virtual data room, there are many things happening at once. With different users all doing the different tasks that they’ve been delegated to do, and all of the documents that come along with it, it can get hectic. 

A good virtual data room will allow administrators to organize, control and track documents throughout the entire process from start to finish. (read "How to Choose the Best Virtual Data Room")

Different features may include:

  • Control the security level of the document, only allowing those with the right security level to access them.
  • Tracking to see which users are viewing, downloading, and uploading specific documents and which ones are being used for the longest amount of time.  
  • Allow members to see other groups, hide members from each other, invite new members, etc.
  • Set and edit the data index
  • Rename files and folders
  • Set requests as low, medium or high priority
  • Create custom request statuses

Besides the benefits of these security Virtual Data Room features helping to keep documents safe, this information can also help with M&A deals. The company can view what the seller is looking at and gain better knowledge and insight on what they are interested in. This can help them to close a deal faster and more efficiently as well.

What is virtual data room folder structure?

A data room folder structure is a series of folders and tiers used to better organize the documents and information so that it is more conveniently accessible to its users. They should be named and created in a way that it naturally guides a user to the information that they need. 

Making a folder structure requires an understanding of the company. It helps to know the business model, industry and structure of the company to better set the structure in a way that makes sense and is efficient for everyone.

Here is an example of a virtual data room folder structure:

You can download a sample data room folder structure together with due diligence checklist by clicking the link Download Due Diligence Checklist

How should you organize a data room folder structure?

To organize a data room folder structure, consider how your team likes documents and files to flow together.

  • Top-level folders
  • Start with a main category or topic, create a folder, ideally ones that can define the steps of the business transactions.
  • Have a few different “main folders” that vaguely cover each and every document within it is a great way to separate the information. 
  • Limit the number of top tier folders helps to make everything easier for scannability and keeps everything looking neat and well-organized.
  • Subfolders
  • Become a little more specific, choose subfolders to go within each of the top tier folders.
  • These subfolders will help to better organize the topic.
  • Inside each subfolder can be more subfolders that follow the same naming and storage structures. 

When all is said and done, you can have dozens of folders containing different information, but because they were all neatly organized within their folders and indexed appropriately, they will be easy to find at a moment's notice.

What to include in a data room

Some examples of different folders that could be included in your data room index would be:

  1. Contracts
  2. Corporate Governance
  3. Claims and Disputes or Litigation
  4. Finance
  5. Government and Regulations
  6. HR (Human Resources)
  7. Intellectual Property
  8. Technology
  9. Marketing/ Brand and your product

After you’ve figured out which top tier categories work best for your company and the business transaction at hand, you can organize the subfolders and topics underneath.

For example, under the finance folder, you can have:

  • Banking Documents
  • Taxes
  • Acquisitions
  • Financials and Models
  • Financings
  • Insurance Information
Download sample virtual data room index template

About due diligence index

Some virtual data rooms have a downloadable index PDF that live links the entire room, including all files, folders, and documents. 

Due Diligence Index

With the M&A data room index in place, you will have a successful due diligence index ready to help you throughout your business transactions. You can now easily find any tax records or past quarterly statements that may be relevant to your deal because they are so well organized in your index.

While there is no single way to organize a data room, keeping it as simple and organized as possible could be the best answer to helping everything to run more smoothly. The fewer questions people have to ask to find the proper paperwork, the faster the deals can close and the better things can work out.

virtual data room sign-up

Read More

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