Average Cost of a Document Management System | HelpSystems

The Truth About Document Management Costs

In a perfect world, going paperless and implementing electronic document management at your company would be a no-brainer.

But it’s not a perfect world.

As a result, many organizations (possibly yours included) wind up believing the following myth:

Document management software is too expensive. It’s not worth the investment.

However, that myth is just that—a myth.

The truth is that managing documents without document management software is too expensive. You’re already spending so much every day just to hang on to your paper documents and filing cabinet systems.

How much exactly could you be saving in document management costs? Find out! Take a look at the five key areas where your current system is costing you—and where you could be finding enough ROI to justify electronic document management.

Ready to calculate your costs? Download the Paperless Document Management ROI Calculator.

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1. Actual Paper Costs

Start with the obvious: paper. There’s paper everywhere and that adds up to a very real cost for your organization. Now, going entirely paperless at your organization might seem impossible (and might, in fact, be impossible). After all, it’s hard to break a habit, and some in your organization might be deep in their paper habits. What is actually possible is significantly reducing paper usage.

Paper documents and storage are often the norm at organizations without electronic document management. Is your organization one of them?

Here’s how to figure out how much your paper documents are costing you:

weekly pages printed x cost per page = weekly savings

weekly savings x 52 = annual savings

Take this example. Let’s say each employee at your organization prints 5 pages each day, and your organization has 200 employees. That’s 1,000 pages every day—5,000 pages every week. Say that each page costs $0.10 to print (accounting for both paper and printing costs).

That turns out to be:

5,000 x $0.10 = $500 weekly savings

$500 x 52 = $26,000 annual savings

That’s a significant savings. Moreover, that’s a significant savings based on a conservative estimate. Studies have shown that the average office worker uses 10,000 sheets of paper each year. That would cost your organization $200,000 each year.

Whether your organization is spending $26,000 or $200,000 each year (or somewhere in between), the ramifications are clear: the paper is taking up too much of your budget. What you save by eliminating (or reducing) the paper can go a long way towards justifying your electronic document management project.

2. Time Spent Filing and Finding Documents

This cost may be less obvious. It’s a soft cost: employee time. Specifically, employee time spent filing and finding documents. It’s less tangible than paper to measure and track, but the costs can often be staggering.

Here’s how to figure out how much time spent filing and finding documents is costing your organization:

number of hours it takes to file/find x employee’s hourly rate = daily savings

daily savings x 22 average monthly workdays = monthly savings

monthly savings x 12 months = yearly savings

Imagine the average employee spends one hour each day filing documents and receives an hourly wage of $25.

That turns out to be:

1 x $25 = $25 daily savings

$25 x 22 = $550 monthly savings

$550 x 12 = $6,600 yearly savings

Double it. Say that same employee also spends one hour each day on finding documents, as well.

1 x $25 = $25 daily savings

$25 x 22 = $550 monthly savings

$550 x 12 = $6,600 yearly savings

That amounts to $13,200 each year spent on simply filing and finding documents. For one employee. If all 200 employees spend the same amount of time, that turns into $2,640,000 each year.

Electronic document management significantly reduces the costs. Filing and finding documents digitally takes minutes, even seconds in some circumstances. As a result, your organization saves significant employee time (and as a result, money)—and those employees can delegate their time to more important tasks. Think of what they can accomplish when not chained to the filing cabinet.

3. Maintaining the Status Quo

Face it. You’ll never have fewer documents than you have today. Documents will only grow as your company grows—and you can’t just get rid of them whenever you feel like it.

Retaining documents is essential for keeping the IRS happy or for proving compliance (HIPAA or SOX, most commonly). Of course, you don’t need to keep them forever, but with paper-based document storage, it can be difficult to realize when it’s safe to clear out the documents.

So, when you have paper-based storage, you are continuously incurring costs to keep and increase it. Notably:

  • Filing cabinet purchases
  • Offsite document storage

Here’s how to find out how much those items are costing you:

Filing cabinet purchases:

units x cost per unit = annual savings

Off-site storage:

annual storage cost = annual savings

Pretend filing cabinets cost $150 each, and your organization needs 3 new ones each year.

That turns out to be:

3 x $150 = $450 annual savings

Now, imagine that you also use an offsite document storage service or an outsourced document scanning service. Your organization, like Jennie-O Turkey Store, might contract outside document scanning services. Jennie-O saved over $140,000 per year by eliminating their outsourced document scanning costs.

Altogether, that’s $140,450 on maintaining your status quo. Is it worth it to you to keep using your old system?

When you choose electronic document management, you can store all of your documents in one central repository. It can be kept on-premises or in the cloud. No need to add filing cabinets ever, and no need to continue using offsite storage or scanning. Plus, you’ll also save real estate when you turn your dedicated filing cabinet real estate over for more useful functions—i.e., employee cubicles.

4. Departmental Costs

Your organization has any number of departments who have to deal with documents. Accounts payable, accounts receivable, and human resources, for instance, depend on documents and are common starting places for an electronic document management initiative. But shipping departments, order entry departments, and others end up involved in the document process as well.

Take a look at accounts payable. AP employees spend time working with invoices—receiving, routing, approving, and paying them, namely. Invoices are at the heart of their work, but time-consuming manual tasks don’t have to be.

Here’s how to calculate the departmental cost for AP employees:

hours spent each day x employee hourly rate = daily savings

daily savings x 22 average monthly workdays = monthly savings

monthly savings x 12 months = yearly savings

An average AP employee might make $25/hour and spend an average of 5 hours each day on:

  • Printing emailed and faxed invoices
  • Making copies of invoices
  • Delivering invoices
  • Processing invoices without POs
  • Searching for corresponding documents
  • Retrieving and researching invoices

That winds up costing your organization:

5 x $25 = $125 daily savings

$125 x 22 = $2,750 weekly savings

$2,750 x 12 = $33,000 yearly savings

And that’s just for one AP employee. Say you have 5 AP employees who dedicate similar amounts of time to AP tasks. Then, your yearly savings is $165,000. That’s a lot of time and money spent on tasks that could take place in far fewer hours.

Automating certain processes and digitizing documents can take care of those inefficiencies—and remove the need for manual tasks. Plus, electronic document management sets departments up for faster and easier processes both now and in the future!

5. Human Error

When you’re organization depends on paper documents, it’s so easy for human error to enter the processes. Someone could easily misfile a document—or set it down somewhere for just a minute, only to completely forget about it and lose the document.

According to the Gartner Group, a misplaced document costs $120 and reproducing a lost document costs $220.

Here’s how to calculate how much misplaced documents is costing you:

number of weekly documents x $120 = weekly savings

weekly savings x 52 = annual savings

And here’s how to calculate how much it costs to reproduce lost documents:

number of weekly documents x $220 = weekly savings

weekly savings x 52 = annual savings

Let’s say an average of 3 documents are misplaced at your organization each week. That turns out to be:

3 x $120 = $360 weekly savings

$360 x 52 = $18,720 annual savings

Add to the fact that you end up reproducing 1 lost document each week. That adds up to:

1 x $220 = $220 weekly savings

$220 x 52 = $11,440 annual savings

Altogether, that’s $30,160 each year just on misplaced and lost documents. That’s an unnecessary expense.

Electronic document management makes it impossible to lose or misplace a document. Documents get indexed, so any relevant search pulls up the corresponding document and documents are securely stored and tracked in one central repository—which make misplacing documents impossible. Electronic document management also prevents documents from being deleted or overridden, so lost documents are a thing of the past—and never need to be reproduced.

Document Management: Worth It? (Yes)

In reality, document management is so worth the investment. Often, your savings in paper- and storage-related costs will pay for your document management software in the first year. You’ll do you more than just break even—you’ll get ahead.

Ready to find out your document management ROI? Use our free ROI calculator to discover your potential savings.