6 Reasons Why Documentation Is Important for Your Operations

December 9, 2020 - Doug Moromisato

If your investment firm struggles with inefficiency in its middle- and back-office processes, those struggles in part illustrate why documentation is important.


Whether you’ve lost key operational staff, or your reconciliation and reporting processes are disorganized, having good documentation can help eliminate some of the problems you’re facing.

Do you have any documented procedures? If so, when was the last time you and your team looked at them?

Whether or not you have any, and whatever your operational issues you face, proper documentation makes a difference.

Why Documentation Matters for Your Operations

Mitigate Risk from Employee Turnover

If you have no documentation, operational risk will increase when a talented member from your back-office leaves the firm, as the departed employee will take their portfolio accounting know-how with them.

As a result, you and your staff are left haphazardly scrambling to finish the daily reconciliation reports.

Documenting all procedures from start to finish will reduce risk when turnover occurs, and following process documentation best practices, as mentioned in our last blog, will have you feeling more secure the next time someone leaves your organization.

See Your Operations Process from a Fresh Perspective

When documenting the step-by-step processes, you see things differently from when you’re executing the steps according to memory and years of experience.

If you’re creating documentation from scratch, you’ll notice how it could take several hours to produce a thorough, step-by-step operations processing guide. Transferring knowledge from your head into a hard copy or online document is not a simple task.

Taking screen shots, then documenting all of the side notes, scenarios, exceptions to the rules, and warning messages takes a lot of time, but having a detailed guide is necessary if you’re serious about reducing future operational risk.

If you already have documentation, albeit outdated or inaccurate, you might realize the workflow is inefficient:

In addition, by looking at everything, you might realize steps or details were left out because:

Execute Reporting Processes More Consistently

When performing tasks relying solely on memory, there is always the possibility of forgetting something. For example, you might not remember to create backup files, or you’ll forget to remove or edit certain data points.

We’re human. People make mistakes. If you have process documentation that reminds you not to ignore the aforementioned missed points, then you’ve taken another proactive step to mitigate risk.

By having that guide, all someone has to do is follow the instructions, and there will be a consistent and predictable outcome every time: accurate, error-free reports that are ready for the client, performed in the way you want them done.

Give Your Operations a More Professional Image

Having documentation not only promotes consistency in your processes, but it also sets a standard. Documented procedures indicate a clear goal to be achieved and the steps to achieve that goal.

Having standards in print and/or electronic form shows you have control over the work, and it conveys to others a sense of confidence, authority, and trust in your operations.

When you set standards in documented format, it enhances your credibility and professionalism to those that matter most:

Read More: Investment Performance Reporting Best Practices

Use as a Training Tool for Future Hires

Not only does a good documentation help prevent operational risk in case of turnover, but it serves as an excellent resource to train new members of your organization.

A straightforward, easy-to-follow set of instructions for your processes will save you time, effort, and resources in getting the new hires up to speed.

In turn, you’ll see how effective the documentation is when someone uses it for the first time. If they struggle with your instructions, you’ll learn how to improve the document so that when the next new hire arrives, things will be easier.

Err on the Side of Compliance

Having documentation should be considered following best practices. Not only have you set standards and step-by-step instructions to meet the goals, but you’re increasing the transparency into your back-office operations.

Should your investment firm be audited, documenting your reconciliation and reporting processes is one more way to show your organization takes protocol and compliance seriously.

Section 404 of the Sarbanes Oxley Act (SOX) requires management and auditors for publicly traded companies to establish internal controls and reporting methods on the adequacy of those controls. Even if the provisions in SOX do not apply to your firm, let the regulations serve as a guide for broader and stricter reporting rules to come.

With the adoption of GDPRregulatory reporting changes and incoming Biden administration, the trends point to more, not less, “scrutiny” on wealth and asset management operations reporting and data management practices.

Thus, erring on the side of compliance never hurts.

Get Started

Operations management and executive teams can clearly see why documentation is important.


1) mitigating the risk
2) having a fresh perspective of the work
3) staying consistent
4) showing professionalism
5) having a training tool
6) being compliant

… you are reaping all the benefits of what good documentation can bring to your operations.

Documenting the procedures shows the maturity of your operations, and it shows that you as a firm know what you’re doing.

Empaxis helps investment firms run an efficient, scalable, and cost-friendly operation by managing their middle- and back-offices. ISO-27001 compliant, and SOC I and SOC II certified, we can help you create documentation around all procedures, promoting transparency and compliance.

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