by Christopher Zybert | 4/22/15
In order to fully understand the benefits a paperless solution can provide, you must first understand how your entire organization is currently using paper. Paper-intensive processes are generally addressed in a ‘departmental vacuum’, neglecting to account for the countless other paper processes that are being employed. For example, an Accounts Payable department might begin to scan their invoices for easier management. However, the very same company is most likely still managing their HR documents the old fashioned way.
Only once you have a clear understanding of your current paper burdens, will you be able to determine major cost drivers, process bottlenecks, etc. Gaining insight into all paper related costs will help you build a case for going paperless and demonstrate the return on investment (ROI) you can expect from a digital document solution.
In this section of our Guide to Going Paperless, we will be identifying common paper-intensive processes and help you identify the associated costs.
Identifying Paper Problems
The first, and often most difficult, task when evaluating a scanning solution is identifying all of your paper processes. As we stated before, paperless solutions are often understood in a departmental vacuum – i.e. “How going paperless improves [insert department].”
The reality is that almost every department can benefit from electronically managing its documents. In order to understand how going paperless effects your organization as a whole, we will present several common areas of implementation.
Accounts Payable departments are rife with paper. Even with electronic data transfers and email capabilities, invoicing continues to be a paper intensive process, with up to 80% of invoices entering organizations as paper. According to the Association of Information and Image Management (AIIM), 77% of invoice PDFs are printed, and 31% of faxed invoices are printed and scanned back into a system! It would seem that many companies have moved to electronic friendly solutions. However, if your organization is not prepared to handle them – you will only compound your paper issues.
In addition to the constant inbound stream of invoices, you must also consider old invoices currently occupying valuable storage space. Paper problems are often two-fold – requiring organizations to address an inbound stream of files while tackling a backlog of records. Not only are incoming invoices more costly to process – your old invoices are costing you money in the form of realty.
To make matters even worse, invoices are only one of the scan-worthy documents plaguing Accounts Payable processes.
Other scan-worthy AP documents include:
• Purchase Orders
• Expense Reports
• Packing Slips
Paper invoices have proven to be cumbersome, causing issues that range from lack of process transparency to labor costs associated with data entry and manual adjustments – making Accounts Payable a great fit for an electronic document solution.
From I-9s to benefit documentation, Human Resource managers are responsible for an extraordinarily large amount of very important files. Paper-intensive filing systems impede document confidentiality, hinder compliance efforts, and are generally seen as time consuming and costly practices. With the increasing demand for information security and the unrelenting inbound stream of files, the HR department is an ideal candidate for going paperless.
For manufacturing companies, managing QA documents can be a challenge. One of the largest issues facing QA paper processes is the need to manage supplier data. This includes certificates of origin, certificates of analysis, and a variety of audits that must be produced in a timely manner. Improving QA document management means improved customer service and efficiency while helping to prevent the production of poor quality goods.
Customer Service professionals are tasked with responding to customer issues and inquiries…and they are expected to act quickly. Having instant access to customer data can have profound effects on the efficiency and quality of your customer service. Customer service departments must keep track of a variety of data from internal and external sources, including:
• Purchase orders
• Feature requests
• Product returns
• Literature requests
• Credit applications
• Customer data
Legal documents cover important customer and supplier relations. Effectively managing these documents can make the difference between making profit or experiencing loss. When it comes to automatic renewals, excessive price increases, and ensuring appropriate approvals, electronically managing your documents can prove to be very valuable to your organization. Furthermore, there are a number of security measures that must be met to protect confidentiality – another added benefit to ditching those physical files.
Healthcare is a fantastic candidate for document scanning, as simplified access to data and information security are chief concerns for improving the quality of patient care. Healthcare organizations have more files than your average entity – as they must store and safeguard patient health records. Additionally, hospitals must track and monitor the credentialing of their staff members while keeping HIPAA and other industry regulation in mind. With the need for process visibility, easy access, and enhanced security, the Healthcare industry stands to benefit tremendously from electronically managing their files.
Biotech & Pharmaceutical
Biotechnology and Pharmaceutical industries are highly regulated, and the FDA and HIPAA have provided detailed requirements on how they must manage data. To make matters worse, they are also dealing with manufacturing documentation, engineering drawings, lab notebooks, QA files, and terabytes of data on a daily basis.
By now it should be apparent that paper causes processes to be less efficient and more costly. But just how costly is it? In order to establish a complete understanding of cost, you must first identify cost drivers.
Consider, for example, that the simple act of filing a document can prove to be an expensive process. For every file, imagine that the following costs apply:
• Physical folder and labels = $2
• Setup of folder in labor – 2 minutes at $18/hour = $.60
• Filing/retrieval time in labor – 5 minutes round-trip at $18/hour = $1.50
• Cost of a filing cabinet (Cabinet Cost/10,000 documents x average number of pages per document) - $1,000/10,000 x 25 pages = $2.50
• Cost of filing cabinet space (cost of 10 square feet per year/10,000 documents x average number of pages per document) – If it costs $30/square foot each year: $300/10,000x25 = $.75
Total Cost to File 1 Document= $7.35
While $7 might not seem so bad, the average cost in labor to file just one document is usually closer to $20. Remember, this is just the cost to file 1 document!
Below are some other common cost factors you can evaluate when determining the current costs of your paper driven processes.
Inherent costs include the cost of paper and related materials, including:
• Equipment: Paper means printing. How much are you currently spending on printing equipment (toner, folders, reams of paper, etc.)?
• Filing cabinets: Consider the cost of your actual filing cabinets. Later we will also discuss the cost of filing cabinets as they occupy office space.
• Efficiency: Are your paper processes decreasing your efficiency? Would increasing your productivity improve your bottom line?
• Access/processing/managing: How much time do your employees spend filing, processing, sharing, and managing paper files?
• Misfiled/lost Documents: On average it costs $120-$250 in labor to recreate or find a misfiled document. Between 2%-5% of a company’s files are lost or misfiled on any given day.
• Compliance/Fines: Failure to maintain compliance with industry regulations can be extraordinarily expensive. While electronically managing your documents will not guarantee compliance – it will make staying compliant much easier.
In another study from AIIM, they report that most respondents estimate that the adoption of an electronic filing solution would reduce their need for space dramatically. The average space occupied by document filing is currently 15.3%. If adopted, an electronic filing culture would halve that average to 7.4%. If this drop is reflected in office running costs, it will represent a saving if nearly 8%.
• Onsite Storage: How much space are your files currently occupying?
• Offsite Storage: Are you paying to store your records elsewhere? Do you need to be?
Once you have a clear understanding of your costs, you can begin to calculate your potential return on investment. Be sure to watch for our next installment of the Paperless Transition Guide on WorkflowOTG.com, in which we will discuss all things document security.
Christopher Zybert is the marketing & media coordinator for New England Document Systems, a document scanning, storage, and workflow automation service provider based in Manchester, NH. With a background in social media management, inbound marketing, and search engine optimization, Zybert has married his passion for digital advertising and writing with his newfound knowledge of business process solutions and the document management industry.