Proving Document Management ROI

Since your business relies heavily on careful documentation, the way you manage documents will naturally have a major impact on how efficiently you operate. If it can be done in a quick, cost-effective way, it will be well worth the investment it takes to make changes to your document management practices. Digitizing documents and creating an electronic filing system to sort them out can yield massive returns in savings.

Perhaps one of the main obstacles to making those changes is the upfront investment involved. It can be a costly process to convert all of your stored documents into an easily sortable digital format, and that cost may deter your company from actually making the change.

But, there is a way…

The key is to pitch the idea in a way that showcases the benefits of document management changes. In other words, you must demonstrate the ROI of document conversion.

Okay, so how can you prove document management ROI?

Let’s start with a few facts about document management overall. These will provide a strong background to create a presentation that will convince your company to adopt a digital strategy for document management.

Use This Easy ROI Calculator To Determine Document Conversion ROI

15 Quick Facts You Need To Know About Document Management

Pointing out the facts about how your current document management systems work (and how much they cost you) can help you get started. The truth of the matter is that using paper will cost your company far more than converting it all to digital format would, so those costs provide a convenient backdrop for proving ROI on document management. Here are some quick facts that you’ll want to consider:

  1. Your average 4-drawer filing cabinet takes up about 21 square feet of space

  2. Each of those cabinets can hold about 36,000 pages

  3. On average, employees take roughly 20% to 30% of their time to search for documents

  4. It takes about 4 days for a single employee to eliminate archived documents from a single filing cabinet

  5. For every 20 minutes an employee will spend reading paper documents, they will spend an hour searching for it

  6. Employees will spend, on average, about 10 hours per week searching for documents that they never even find

  7. The cost to maintain a single filing cabinet is $2,100 per year

  8. About 3% of all paper documents are misfiled

  9. 7% of paper documents are completely lost

  10. An employee will spend, on average, 1 hour to find a misfiled document

  11. It takes about 3 hours to recreate a lost document

  12. Filing each document takes about 15 minutes

  13. 9 out of 10 documents that are handled in an office each day are only shuffled

  14. Paper demands of most offices increase by 25% each year

  15. Offices must retain documents longer now than in previous years, and they tend to access them more often

The amount of time that goes into filing and searching for documents becomes astronomical considering the volume of documents a company will produce and handle each year. That, plus the risks involved in handling that much paper, will provide the basis of proving how switching to paper documents can save your company time and money.

Assessing Costs and Risks

Simply put, paper costs money. In addition to paper, you use ink or toner to print important information on that paper. You spend time filing that paper away, and you pay money to keep that paper stored. Expenses here might include the costs of filing cabinets, folders, rented storage space, shipping documents to other locations, and so on. Then that paper needs to be accessed, which takes additional time.

Documents are also lost, which can become incredibly expensive. If a particularly sensitive document is compromised, it will not only cost money and time to recreate it, but it can also represent a massive cost to the company in the form of lost customers, stolen revenue, injured reputation, and restoration expenses. Recovering from this type of loss is extraordinarily difficult in many cases, and some businesses never recover from it at all. Thus, keeping paper documents secure is an additional cost that should be considered.

Taking this information into account, you can assess total costs by figuring out how much your company spends on each of the following aspects of working with paper:

  • Paper purchased each year

  • Toner, ink, and printer maintenance costs

  • Acquiring filing cabinets and folders to hold and archive documents

  • Time (wages) needed to organize filing systems

  • Rental costs for document storage

  • Costs of security measures needed to protect documents

  • Costs of potential losses if sensitive documents are compromised

  • Restoration costs should disaster strike and destroy information

  • Total hours used to physically file documents

  • Total time taken to find needed papers

  • Total forms lost or misfiled each year

  • Total hours for finding misfiled forms

  • Total hours used recreating lost documents

  • Time used to dispose of archived documents

  • Money and time used to ship documents to clients or off-site storage facilities

  • Copying costs

  • Amount of storage space needed for all documents, including copies

  • Plus other costs specific to your business and system

These are all expenses that can be virtually eliminated by the use of digital document management. In many cases, hundreds of thousands can be saved each year, and millions in losses can be prevented if a company switches over to digital.

One way to work out how much these will cost is by basing document management ROI calculations on the average employee’s salary. Let’s begin with the following theoretical situation:

  • Each employee earns about $14 per hour.

  • You have 10 employees who handle documents.

  • Each person retrieves 10 documents each day.

  • Each person creates and files 4 documents each day.

  • Each document must be copied twice for filing in multiple departments.

Using the same statistics above, let’s look at the possible costs in hourly wages alone for this level of workflow:

  • If retrieving a document takes 3 minutes, each employee will spend about 30 minutes each day searching for paper documents. With 10 employees, that comes out to 5 hours each day (searching for a total of 100 documents), or $70 daily just to rifle through filing cabinets.

  • 3 of those 100 documents will be misfiled according to statistics, adding an extra 3 hours and totaling around $42 each day.

  • If 7 out of every 100 paper documents have been lost, the 3 hours of time it takes to recreate each one will amount to 3 hours x 7 document x $14, or $294 per day.

  • With 10 employees each producing 4 new documents daily, you have 40 new documents, each taking 15 minutes to file. Forty documents x 15 minutes is 10 hours, which translates to $140 in wages each day for filing documents—and that’s just the original copies.

  • If you have 2 copies of each, that means 80 more documents to file, totaling an extra $280 each day. Add the half-minute it takes to make a copy, and you have roughly $10 more to add to the cost (and that’s not counting the walk to the copier).

If we add all these together, we have a total of $836 in wages spent filing, retrieving, and re-creating documents each day. Assuming we have 20 work-days each month, that’s $16,720 per month, or about $200,500 per year. That figure represents money (and hours) that can be easily put to better use.

And that’s just wages. Add in the costs of paper and printing themselves, you’ll see an even higher figure. We have the costs of filing cabinet maintenance to figure in as well. If you have 15 filing cabinets and each one costs $2,100 each year to maintain, you add on $31,500 to your yearly paper document management costs. The total is just over $232,000 in yearly costs with filing maintenance factored in.

This still isn’t complete, but it gives you an idea of how to calculate your annual costs when it comes to managing paper documents and filing systems. Also note that this is an example scenario showing how this would look in a fairly small business, so the figures you’ll be dealing with could be much larger. Take time to figure out how much each document management process is costing you each year, then use the total to set up your argument in favor of going digital.

Comparing Costs and Risks

Naturally, converting all of your company’s documents to digital format will cost money. However, it will save you money in the long run, especially considering the expenses we examined above. When calculating the approximate costs for digital conversion and filing, consider these factors:

  • Costs of the conversion process (depends on the volume and types of documentation you have)

  • Indexing and filing system development costs (depends on how the data will be stored)

  • Cost per square foot of storage for servers or discs

  • Software and hardware costs for scanning, creating, and/or indexing future documents

  • Employee training costs to adapt to the new system

  • Time taken to access and store each document (far less than working with paper)

  • Storage devices, whether in the form of CDs, DVDs, hard drives, servers, cloud storage, or some combination of these

  • Implementation and maintenance of digital security measures, including firewalls, virus scanners, passwords, and limited access protocols

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There are also risks involved in digital conversion, but they can be mitigated by proper handling of the data. Potential inaccuracies or data losses can be easily prevented with the proper methods. A company that can handle these types of challenges and guaranteed full security of your data will be able to keep the overall risks of data conversion down, even if it might cost a little more upfront.

These costs and risks, when compared with those of paper filing, represent an upfront investment that might look a little intimidating at first, so it’s important to present it within the context of the massive yearly costs associated with paper document management. To show the relative difference in costs, let’s revisit the small business example:

  • If each of your 10 employees still accesses 10 documents every day, the time taken for digital indexing and storage will be about 30 seconds (0.5 minutes). For them to pull up a total of 100 documents daily, they use less than an hour total, or just under $12 worth of company time.

  • When producing about 40 documents total each day, they take less time to file those as well. Again, it’s only about 30 seconds to save each document, so it takes around 20 minutes total to file everything each day. This comes out to just over $4.60 each day.

  • Costs for misfiling or losing documents are irrelevant since they are stored and indexed in digital format (assuming everything is backed up properly).

  • Multiple copies are also unnecessary since everything is stored and accessed digitally.

Per month, these salary-related expenses come out to about $16.60 each day. Over the course of a month, that’s $332, for a total of $3,984 per year—a huge improvement over the $200,000+ with paper filing.

Naturally, there are the other expenses listed above. To maintain security, servers, and networks, for example, it might cost you an extra $1,500 each year, giving us a total of just under $5,500 annually when you switch to paperless filing.

Depending on the conversion costs and the resources it takes to acquire and install the hardware and software you need to support paperless filing, this difference in costs means the process of going paperless could pay for itself in less than a year.

Making the Case for Paperless Filing

You can draw on these examples to start figuring out what information you need. The process will go something like this:

  • Gather information on salaries, filing/searching time, costs of off-site storage, etc.

  • Get a quote from a reliable data capture service on the total cost of conversion.

  • Assess storage needs (i.e. software, hardware, physical space for disks and servers, etc.)

  • Determine costs of digital security and maintenance measures.

  • Present the information to compare the high costs of paper filing, the upfront costs of document conversion, and the savings of using a paperless filing system.

Document management ROI represents an incredible opportunity for companies to optimize their use of revenue and maximize the security of their information. For assistance calculating the potential ROI of document conversion, try using the document conversion ROI calculator here or contact ILM for more information.

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