November 14, 2017

ROI of Document Management Solutions

Despite the wealth of advanced technology available, many businesses persist with using the same processes for managing documents that they used in the 80s. Some businesses simply don’t know about the digital document management solutions available and their benefits, while others understand the benefits but aren’t prepared to take on the cost. Understandably, cost is one of the biggest factors weighing into a business’ decision of whether or not to implement new software solutions, but as with any investment, it’s important to look beyond the cost and take into consideration the return on investment (ROI).

So with that in mind, what is the ROI of using a document management solution? The circumstances surrounding every business are different so it will never be exactly the same, but there are some common examples of ways these solutions help businesses save time and money

What is a Document Management Solution?

Document Management Solutions provide a way for you to capture, store and retrieve all of your documents in one central depository – whether they’re coming in via mail, email, Enterprise Resource Planning (ERP) solution, or other sources. With all of your documents in one place users don’t have to search through multiple systems to find the documents they need. Documents can be searched for and retrieved faster from a document managing solution, which results in expedited processes and improved workflow. Additionally, some document management systems also offer an option to automatically send documents directly out of the system, which helps reduce manual processes.

An important note: Integration with your ERP is a key feature to look for in a document management solution so data can flow in and out of both solutions.

Determining the ROI of a Document Management Solution

Example Document Management Solution Quote

The first step in anticipating ROI is to determine what the solution would cost. To give you some context, imagine a business has the following requirements:

• automation of AP Invoice processes and distribution of AR Invoices with Supporting documents
• 3 AP clerks, 3 AR clerks and 30 total approvers
• process 1,500 AP Invoices per month: 70% non-PO & 30% PO based
• process 2,200 AR Invoices per month
• require business forms creation: Expense Report & Check Request
• require Mobile Approval

For this example, they would have likely been quoted $45,382 with Services TBD for a document management solution. Of that total, $37,818 is for Software and $7564 is for Annual Maintenance. The cost for services are being listed as ‘to be determined’ because it varies so much depending on the requirements surrounding each business. In many cases, services are around the same cost as the software, but that is entirely dependent on the situation.

Examples of How Document Management Solutions can Cut Costs

COST OF ACCESSING & SHARING DOCUMENTS

Statistics show that on average it costs $20 to file a document, $120 to retrieve a document and $220 to re-create a document* without a document management solution. Since all of your documents would be stored in one place with a document management solution you can trim down those costs easily with time saved manually filing, searching for, or re-creating documents. Time is money, so reducing the amount of time spent managing documents saves money – it’s that simple.

Time Spent x Number of Employees x Average Hourly Salary = $$

Example:
Please note all examples are theoretical and based on the industry experience of our team and partners.

$36,096 Annual Savings on Accessing & Sharing Documents

Some businesses see these direct savings by decreasing their number of staff, but the majority of businesses opt to redirect the new found time that staff has available to more valuable initiatives, which in turn further boosts the ROI of the document management solution.

COST OF PRINTING & STORING DOCUMENTS

It’s easy to take for granted, but storing paper takes up a great deal of space and many businesses have to use remote storage facilities to keep all of their paper documents. Even if you’re storing all of your paper documents in your office, the filing cabinets can take up valuable space that could be used for employee workspaces, and the paper and filing supplies in itself cost money.

Offsite Storage Fees + Paper Supplies + Printer Maintenance Costs + Filing Supplies + Office Rental Fees/sq. Ft. + Reproducing Documents = $$

Example
Please note all examples are theoretical and based on the industry experience of our team and partners.

Off-site storage monthly fee
$552.50 (or $6,630 annually)

Paper supplies
24 boxes of paper/year x $45.50 x 50% business discount = $546

Printer contract/maintenance
$5,200/year contracts x 20% business discount = $1,040

Square footage x number of filing cabinets
$20/year/sq ft x 7 sq ft cabinet x 10 cabinets = $1,400

Time to reproduce documents each day
2 AP clerks ($18/hour x 30 min/day) x 20 days/month = $360/month or $4,320 annually

$11,690 Annual Savings on Printing & Storage even when including common business discounts

COST OF MANUAL WORKFLOW

Another example for how money could be saved is reducing or even eliminating manual workflow. In the same way that assessing and sharing documents costs your business extra money because of the time employees spend on it, the manual workflow of transferring documents between office locations and to & from storage facilities is also very expensive. Businesses can easily save upwards of an additional $39,000 annually eliminating the direct costs involved with moving paper documents, and the staff time required to manually direct and approve where documents should be going.

Determining if it’s right for you

In this example situation, the business was quoted $45,381.60 with an additional cost for Services that was TBD. With the services roughly estimated as around the same price as the software, which is quite common, the total cost of the document management solution would be approximately $90,000. At first glance this may seem daunting, but with the three cost saving examples illustrated the business would have saved $86,786 annually, meaning that their solution would have essentially paid for itself in one year with a 4.3% ROI.

Document management provides a great deal of convenience with easy access to documents, digital storage, and file sharing, while helping you automate your business processes and bring them into the age of technology. In deciding if it’s the right investment for your business though, you have to consider the ROI of the software and the financial impact it will have. The calculations for anticipating ROI can feel overwhelming with so many details to consider, but that’s where your Solutions Partner can be put to use. Ideally, you should explore your document management solution options with your ERP solutions provider, like The Answer Company (please excuse the plug), because they will be able be able to offer the best insight into integration with your ERP and what solution will offer your business the most benefit.

* Data from PricewaterhouseCoopers