Virtual Data Room Index: What You Need to Know

Erik Mills

2 min read

#Data Room News Update: Feb 21, 2023

“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 virtual data room index to prepare documents and ensure every file is clearly laid out and available at the click of a button during due diligence. 

What is a data room index?

A data room index is a data room table of contents for a virtual data room. It lists all the available documents of all the parties involved. Much like an index inside 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 large volumes of important 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 and verify they are named properly if you genuinely want to expedite the time-consuming due diligence procedure.

Thankfully, this is easy to do. Most data rooms will automatically create the due diligence data room index for you. Afterward, you can rearrange the VDR index if necessary. 

A clear data room index makes your entire collection files much more searchable. As such, authorized users with the correct permissions can quickly find the documents needed. 

In addition, some virtual data rooms offer a data room index in PDF which links the entire room, including any folders and documents.

What is folder structure in virtual data rooms and why do you need it?

A data room folder structure is a set of neatly organized folders and tiers within the data room index that logically guides users to the necessary documents. When creating a folder structure, it is vital to have a sound understanding of the company’s business model. With this in mind, a responsible person can make a document tree fully comprehensive for every virtual data room user.

For example, a clear and logical structure of financial data is the data index containing the cash flow statement, income statement, balance sheet, and stockholders’ equity. 

The importance of folder structures lies in easy and quick access to all the files during due diligence, no matter how many there are.

How to index a folder in virtual data rooms?

There are several ways for organizing documents in 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 specific folders to be more specific.

What to include in a virtual data room index?

There are lots of folders you can include in your due diligence data room index. Some examples are:

1. General business information

• Corporate structure (incorporation documents, M&A agreements, list of shareholders)
• Intellectual property (trademarks, patents, domain names, copyrights)
• Products and services (trade licenses, market share values, customer information)
• Material assets details (real estate, physical assets)

2. Financial statements

• Balance sheets
• Investment policies
• Profit and loss statements
• Insurance coverage
• Tax information

3. Legal documents

• List of agreements (vendors, distributors, loans)
• Information on current litigation
• Antitrust and regulatory issues

4. Human resources

• List of company benefits
• Employees contracts
• Compensation claims
• General information about employees

5. Technology

• Information about company software
• Details on previous and upcoming IT projects
• List of all the company’s IT resources

6. Marketing materials

• Marketing and advertising plans
• Information on upcoming product improvements
• Products descriptions

You can then create subfolders for each data room index folder.

How should you organize a data room folder structure?

For a clear folder structure in the virtual data room, consider how your team prefers to see the document organization. As a rule, the due diligence index is as follows:

Top-level directory

• Create a folder that can define the transaction stages, starting with a main topic.
• Organize multiple main folders that cover documents on a specific topic to logically separate information.
• Determine the ideal minimum number of top-tier folders to ensure a neat and organized look and streamline viewing data during due diligence.

Sub-folders 

• Select subfolders for each of the top-level folders based on content.
• Create more subfolders within each subfolder, keeping consistent storage structures and naming.

More data room opportunities: Project index and Automatic document indexing by Ideals

Ideals virtual data room offers advanced indexing options for simplified document management throughout due diligence — project index and automatic document indexing.

Project index

Project index is a tool to export the list of files and folders from data rooms to your device as an Excel file. In two clicks, you get a project index on your computer with the following information:

• Document Type
• Size of each document
• Date of submission of each document
• The number of pages in each document
• The path of documents within the data room
• The current size of the data room

Only administrators can view the entire project structure, including the recycling bin. Also, you can see how much data is uploaded to a particular project, including documents removed from the bin, by checking the storage usage report.

Automatic document indexing

Automatic document indexing is a function to arrange documents in numerical or alphabetical order, which you can enable in general settings.

The documents are numbered consecutively when indexing is enabled.

Note: 

With automatic document indexing disabled, the virtual data room arranges files in 0-9, A-Z order. 

If you disable automatic document indexing, folder reordering is unavailable.

Final thoughts

With an accurate due diligence index in place, your business will be in great shape for the due diligence procedure. While there is no definite method for organizing your virtual data room table of contents, we would recommend keeping everything simple and easy to find. The fewer questions posed by your layout, the faster you can get your due diligence process over the line.