Before your company invests in any process, device, or strategy, it’s important that you understand its ROI first.
After all, we all know that these opportunities can often disappoint once they’re actually implemented. Often, it’s a matter of proving the advantages to a skeptical decision-maker within your company.
If you’re considering switching from a traditional paper-based document system to a much more efficient electronic document management system (EDMS), it may seem as though the benefits are obvious.
Nonetheless, for the sake of winning over everyone in your company, it helps to understand every single benefit associated with EDMS and how to calculate the ROI it promises.
ROI (Return on Investment) is a simple enough concept to understand, but it’s extremely important that we establish a shared definition prior to looking at the kind EDMS can provide as there is sometimes confusion about what this term actually means.
Simply put, ROI refers to the financial return you can expect to receive in exchange for your investment. Usually, it’s expressed as a ratio and can be found by dividing the return you’ve earned by the amount of money invested.
Marketing ROI is always a very popular metric. If you spend $100 on ads and you find that those ads bring in $1,000 worth of business, your ROI for those ads would be 10 to 1. For every dollar you spent, you received $10 back.
That doesn’t always tell the full story, though.
Obviously, 10:1 is a great ROI, but what if it takes you 10 years to earn it? A much lesser 2:1 ROI would be better if you could earn it in a single week and then reinvest that money.
This matters when looking at the ROI for EDMS because, as we’re about to cover in detail, some of its most attractive benefits have to do with convenience. While the financial ROI of using an electronic document management system should prove its worth, its ease-of-use has always been a selling point (often, this can be converted into a dollar amount, too).
Before we review how to calculate the ROI of your company’s EDMS, let’s look at the top 13 reasons it’s so high when compared to a traditional, paper-based approach to document management.
The most obvious benefit of turning a paper process into a digital one is that you no longer need to rely on the exorbitant ongoing costs of the former.
If your office is like most, you order paper at least once a month and the vast majority of it is used for reoccurring needs like daily copies of intake forms or printing invoices so they can be filed away.
Inkjet paper is typically sold in packages of 500 sheets. They can cost anywhere between $12 and $17 for just one of these packages, depending on the manufacturer.
For something like a law firm, it can be easy to go through 500 sheets or more a day. Large firms can easily quadruple that number. Other companies may print significantly more – maybe tens of thousands of sheets every single day.
Obviously, it’s difficult to generalize how much your company is spending every year on paper, but if national trends are anything to go by, it’s a lot.
As of 2015, companies still spent $8 billion on paper every single year. This doesn’t even take into consideration the numerous hidden fees that go along with managing it, either.
Therefore, if your business is still relying on paper, there’s a very good chance it’s also wasting a lot of money – money that will be immediately placed back in your budget by switching to an EDMS.
The statistics from the American Records Management Association (ARMA) about lost documents are stunning:
• Approximately 7.4% of staff time is dedicated to searching for lost documents
• After a disaster, 70% of companies are unable to recover lost documents
• Requirements for storing paper documents doubles every three years
Using an EDMS guarantees that your employees are never more than a minute away from the documents they need to access to do their jobs.
At the same time, there is far less risk that they’ll return the document to the wrong folder. If they do, a simple search can be done to find it and put it back where it belongs.
Alternatively, if a physical document isn’t returned to its proper spot in the right filing cabinet, it could be lost forever. Countless hours could be spent trying to find it to no avail.
If your company could benefit from an increase to productivity, it’s hard to think of a better place to start than converting your physical documents into digital versions and eliminating all the extra time – and risks – involved with an outdated, paper-based system.
Your employees’ time is already under attack for several different reasons. Don’t expect that to change anytime soon.
However, one way to at least combat the trend and give your company increased output from your staff would be adding time back into their days.
Where could the time you save from switching to EDMS be better spent for improving your company’s bottom line?
Currently, the average employee only spends 1% of their week going through some kind of training to improve their performance. This, despite the fact that, in 2016, companies spent over $70 billion on initiatives designed to improve learning and development.
That’s one option, but your staff could also just spend this saved time on doing more: more sales calls, more copywriting, more customer retention follow-ups, etc. You have nothing to be gained by wasting your employee’s limited time on an outdated document system that relies on paper.
The name says it all: nonessential tasks have no place in your company. They literally aren’t essential to your organization’s performance.
Yet, almost every task involved with a paper-based document management system is nonessential and the overhead it creates is anything other than insubstantial.
In total, nonessential tasks require an average of 520 hours a year from American workers. Based on the country’s average hourly salary of $25.39, that means every company is spending $13,202.80 every single year on each of their employees thanks to unproductive tasks. In total, that’s $1.8 trillion across the nation’s entire labor force.
Now, will an EDMS save your company $13,202.80 per employee every year?
No, probably not, but what you can expect is significant savings by getting rid of routine activities that don’t contribute to your company’s profits – things like document requests, document delivery, filing, making copies, and much more.
Aside from the obvious costs involved, these repetitive chores have hidden ones, too. You’re taxing staff with unnecessary work, risking the consequences of errors (e.g. misfiling), and much more.
Speaking of nonessential tasks, consider what it takes at the moment to transfer a document from its current spot in a filing cabinet to the intended party.
At some companies, it may simply involve the person who needs the file leaving their office or cubicle, waking to the filing cabinet, searching out the document they need, and bringing it back to their desk.
Of course, if someone from one office needs a document that’s kept in another, it’s a little more complicated. They need to call or send an email to ask for the required file. Then, the person in charge of these requests has to search the file out, fax it over, and confirm receipt of the document.
This becomes a bit more convoluted when someone from another company – perhaps a client or business partner – is requesting the file.
It also become much more time-consuming on busy days when the people who help with the retrieval process already have other commitments and can’t act quickly enough to keep up with demand.
If the file is necessary to close a client, the sale may be gone for good. In other instances, when time is always a factor (e.g. at a law firm), waiting around like this can be even more costly to the company in terms of deadlines and following certain laws.
As we mentioned earlier, storage needs can easily double every three years. That’s why, depending on how old your company is, some of the burdens related to paper-based document management systems may seem a bit exaggerated.
At the moment, you may only have three or four filing cabinets. They’re sufficient for the total number of files your company has created thus far. As such, this amount seems fairly manageable and switching to an electronic system may appear unnecessary.
Give it time. Soon, you’ll have eight filing cabinets, which may require their own space. At the rate cited above, you’ll have 12 cabinets in just another 18 months and then 16 in another year-and-a-half.
Of course, some of you may already be aware of this problem. You’ve been in business long enough that your office is already awash in paper. Large portions of your office may be dedicated to rows and rows of filing cabinets in order to house them all.
Like so many other companies these days, you may have even gone so far as to invest in offsite storage space. It’s much cheaper than continuously buying more and more office space in order to house your files.
Unfortunately, the obvious problem is that you now have another big obstacle between your employees and the files they need or those they need to send them to. Someone needs to get to the storage facility, go through the filing cabinets, find the right documents, and then either bring them back to the office or fax them to the final party.
Keeping your company “storage locker” in the cloud is much more efficient.
Best of all, you’ll have a lot more extra space in your office. That could be put to all kinds of productive uses or you could simply downsize to a more affordable space for your company’s updated needs.
Compared to the cloud, there is almost nothing secure about keeping your documents in a traditional filing system. This even includes those that may be kept under surveillance in secure areas that grant limited access.
Again, aside from the fact that these sorts of storage areas are still causing your company unnecessary overhead, they really can’t compare to the cloud:
• Better Perimeters and Surveillance: There’s really only so much you can do to improve the security of your paper-based document system. Even with cameras set up and access restricted to those with approval, it would still be easy for someone to walk away with a document they have concealed on their person. With an electronic system, documents are password protected. You can also opt for a tiered-access system so it’s base on seniority and/or need. Either way, no one can log in and access a file without the system immediately documenting this. Credentials can also be stripped from an employee at a moment’s notice.
• Controlled Access: Similarly, keeping your important documents in the cloud is the same as keeping them offsite insofar as third-parties can’t access them simply because they’re on your property. Employees can sometimes leave out sensitive documents on their desks, too. All it takes is someone walking by and noticing the nature of the document to compromise its security. At most companies that use EDMS, employees are required to lock their screens whenever they leave their desks, which keeps this kind of thing from happening.
• Unlimited Opportunities to Outsource Security: Every year, there are more and more options for improving your company’s cyber security. There are entire companies dedicated solely to finding new and improved ways to protect businesses like yours. By switching to an electronic system, you can easily outsource your security needs to one of these companies. You’ll enjoy the benefits of improved security and less overhead.
• Potential for Frequent Audits: Auditing a paper-based system is nearly impossible. You really don’t know if it’s been successful or not until it hasn’t. That shouldn’t inspire a lot of confidence. On the other hand, if you outsource your security needs to a third-party, you can rest assured that they are constantly auditing their system to look for possible vulnerabilities. If there’s a way to break through their protection, these companies are far more likely to find out about it before someone who wants access to your files. Then it’s just a matter of downloading their update.
Keep in mind, too, that this fact is spreading throughout every industry. More and more, people are waking up to the fact that the cloud is a much more secure environment for sensitive information. The longer you hold off on making the switch, the more you risk losing potential clients and business partners who won’t feel comfortable working with a company with such obvious vulnerabilities.
No more constant trips to the copier.
Do you have a new client you need to onboard? Just drag-and-drop the files required from your cloud storage and email them over.
Have a client who wants to look at their payment history? Looking to land a new one by showing them examples of past work you did for a similar client?
Whatever the case, it couldn’t be easier to copy and share documents with an EDMS. This isn’t just convenient. For modern companies, it’s become an essential part of doing business.
At the same time, this is also a vital option for any company interested in hiring remote employees or working with freelancers. You can allow access to the documents they need from anywhere in the world.
If you have employees who regularly hit the road to meet with clients, it’s an absolutely massive risk to let them travel with copies of sensitive documents. Even letting them scan these documents and keep them on their laptop is a big, unnecessary risk.
Instead, let these employees travel stress-free, knowing that, wherever their final destination is, they will be just a few clicks away from accessing the information they need for a successful meeting.
The last thing your sales process needs is another step. You want to keep it as efficient as possible to bring on new customers.
With a paper-based system, you may need to fax forms to get filled out and then have the customer fax them back before you file them away. Of course, if they ever want to look at those forms again (say, they lost their copy), you’ll have to go rummaging through your filing cabinet to track it down.
Make it simple for people and companies to become clients. Send forms electronically and – whether they e-sign or provide a signature before scanning and uploading the document – immediately place them in your cloud storage for safekeeping.
Usually, datasets for auditing your electronic documents ensure that you know the following about people accessing them:
• Who did it
• What they accessed
• Where they access it from
• When they accessed it
These are important, but if you outsource your security to a company that specializes in it, you can rest assured they’ll keep track of this for you.
Instead, consider creating an auditing system that ensures the right files are always kept in the right folders. You can easily create company requirements for how to name these files based on the information they cover and which folders and subfolders they must be kept in.
After that, it will be remarkably simple to constantly check to make sure every file is where it needs to be.
There are already plenty of rules about storing customer information. Certain industries have unique rules, as well. For example, if you work in healthcare, HIPAA has guidelines for PHI (Protected Health Information).
These requirements aren’t going to go away. It’s actually the exact opposite that will happen. You can expect more and more regulations designed to keep customers safe and the only way to do that will be with an EDMS.
Finally, it should be abundantly clear that an EDMS offers the kind of flexibility required to scale up.
If you want to expand from one office to two, you’ll need to make a lot of copies, a process that will most likely be riddled with risks for human error.
Even if you keep the same office but decide to add to your workforce, that will be more people printing, copying, and requiring access to your files every single day.
It’s much easier and more cost-effective to just use an EDMS that will support any amount of scaling you wish to do.
That might seem like a bold claim, but an EDMS really does have the potential to completely transform how your company operates.
Think about the various tasks within your current workflow that require an actual staff member. Aside from the fact that, as we just touched on, this requirement opens up the task to human error, it also necessarily suffers because it demands the attention of a paid employee.
Automating parts of your workflow with an EDMS won’t just reduce risks, it will also reduce timelines and overhead.
The most common examples of EDMS automation include:
• Desktop document retrieval
• Indexing throughout the document scanning process
• Storing digital copies in secure cloud locations
Though it can be tough to estimate the savings automation provides, it’s obvious that this feature of an EDMS would save most companies a fortune. The more steps you can automate in your process, the greater those savings will be.
In many ways, understanding the return on investment you’ll get from an electronic document management system is fairly straightforward.
Nonetheless, for companies that have relied on paper for years – maybe even decades – it can look like an intimidating prospect to make the switch. That’s why we are going to break down the seven factors involved in calculating the potential ROI for your EDMS and then provide you with an example, including the template you can use for applying this equation to your own business.
In a moment, we’re going to show you exactly how you can calculate the ROI your company will receive by switching from a traditional, paper-based system to an EDMS.
Before we do, though, it’s important that you understand the seven factors that must be considered in order to get this number.
Depending on how often you document your current document management system, you may have some work to do before you are able to go through the process below. There’s no other way to accurately calculate your expected ROI, though.
• How many filing cabinets does your company currently use? A standard four-drawer cabinet takes up at least 12 square feet of space in an office. There’s an opportunity cost to using this space for physical storage, so it’s important to calculate how much it’s “costing” you in this regard.
• Does your company rent a storage facility offsite? Many companies eventually get to the point where they simply don’t have the room on their own premises for their document management needs. You can only fit so many filing cabinets in an office until it becomes necessary to rent an offsite storage unit or even space in a warehouse.
• How many copies are required of incoming documents? For example, at many law firms, it’s standard practice that copies are made of any relevant documents for each attorney handling the case and their paralegals. At other companies, a number of copies must be made of any incoming order. They’re sent to the warehouse, sales, accounting, and another is kept in the company’s records. You need to know what the requirement is by document and how often you receive each type of document.
• How much does your company spend every month on filing supplies? The price of filing supplies can really add up over time. Look back over the entire year to find the average amount you spend, as some months are probably significantly more than others.
• How long does it take for your employee to retrieve a document? Although this might seem like unnecessary minutia, this is another “cost” that can really add up. If you’re paying these employees an hourly salary, you should care how much time they’re spending retrieving documents, especially because this overhead will be completely nonexistent if you switch to EDMS.
• How many employees handle each document? Similarly, you want to know how many employees are required, on average, to assist with each document.
• How much time is required to file a document? Again, it matters how your employees spend their time, so track it closely by figuring out how many minutes someone takes to file a document away. This is another example of overhead that won’t exist if you adopt an electronic document management system.
Once more, we want to encourage you to take the time required to get concrete numbers for each of these. When you see how much money an EDMS can immediately begin saving your money – much less when you actually begin saving it – this extra work will be completely worth it.
To understand how you can measure the ROI of your EDMS, let’s look at an example. We’ll consider the ROI for a small business with a fairly conservative new document count. Yours will most likely be much greater, but this smaller number will serve to better prove how helpful this solution can be.
The document management team for this staff consists of two supervisors and six support members, so eight people in total. This business only generates 100 new documents every week. It has been in business for 20 years and requires 10 filing cabinets to maintain all their documents. Though the growth of these documents will probably compound, we’ll assume it increases by the same amount every year. Therefore, every two years they’re in business, this company needs to purchase another filing cabinet to keep up with their documentations needs.
As we covered earlier, keep in mind that many of the advantages of EDMS include benefits with difficult ROIs to track. There are the savings of time and the benefits of convenience.
There is also the fact that you can basically never lose a document by using an electronic system. If you have to spend money on replacing such documents or have ever lost money over one, your ROI for using EDMS would be higher than the above calculation showed.
Likewise, misfiling documents is virtually impossible. While someone could put a file in the wrong folder, you can easily use the search function to track it down in seconds.
Finally, the above template doesn’t take into consideration the massive amount you’ll be saving on office supplies like paper and ink. That’s not to say you’ll never need either again, but you should expect to reduce your spending significantly.
The same can be said for your printer and copier maintenance costs. As these machines age, you may not need to spend money on replacing all of them, either, as your printing and copying needs drop after introducing an EDMS.
Even though you now better understand all of the benefits to be gained by switching to an EDMS and how to pinpoint the ROI you can expect from one, don’t begin the transition quite yet.
At QBSI, we can provide a free assessment of your current document management approach, which will show you everything you need to know about your technology, workflows, usage patterns, and their costs.
Our five-step QBSI360 process is simple, quick, and informative. Upon completion, you’ll be ready to save money and improve efficiency with an EDMS. Start your QBSI360 assessment today.