Chapter 2: Benefits of an ECM
Perhaps you’re interested in the idea of an ECM system but aren’t sure how to justify it in a down economy.
There are countless benefits to implementing an ECM system, but here are a few major areas where going paper-less will give you more!
- Saving Money
- Saving Space
- Saving Time
- Creating a Meaningful Workflow
- Keeping Your Information Secure
- Bridging the System Gaps
Let’s take some time to explore these benefits in detail and think about what an ECM might mean for your company’s future growth.
When I first started in this line of work, I thought that people would choose ECM because it was efficient and effective. And they did.
But the biggest reason that my customers took the plunge and purchased an ECM was not future benefits, but rather the immediate return on investment (ROI).
Even if you’re not sure whether you’re ready to move toward an ECM, it’s good to get a realistic idea of what your current document storage is really costing you.
To help give you an idea, I’ve completed a sample ROI for a Laserfiche Document Imaging implementation. Though every implementation is different, I hope this will help you to see exactly how moving toward ECM can translate into dollars:
Step 1: Estimate how many pages of paper documents you have
|Standard 4-drawer filing cabinets (12,000 pages each)||Standard||10||120,000|
|Lateral filing cabinets (18,000 pages each)||Lateral||10||180,000|
|Standard banker boxes (2500 pages each)||Boxes||20||50,000|
|Large banker boxes (5000 pages each)||Boxes||0||0|
|Feet of open shelving (1500 pages/feet)||Feet||0||0|
|1” binders (265 pages each)||Binders||0||0|
|2” binders (474 pages each)||Binders||0||0|
|3” binders (660 pages each)||Binders||0||0|
|Old customer files already scanned||Docs||0||0|
|Old customer files total to be scanned||Docs||0||0|
|New customer files per week||Docs||0||0|
|New customer files per month||Docs||40||–|
|Average number of pages in a document||Pages||20||–|
|Pages added to existing customer per month||Pages||5||0|
|Number of years to size system||Years||3||29,760|
|Percentage of documents that are double-sided||%||0%||0|
Step 2: Estimate the labor costs in maintaining those paper documents
Enter the numbers of employees directly involved in filing, retrieving, copying, and maintaining your paper documents
|Type||#||Avg. Annual Salary||% of Time Spent*||Burden Rate**||Annual Cost|
|Total Annual Labor Costs||$85,000|
* Estimate the percentage of time each employee spends on document activities
** Estimate burden rate including FICA, benefits, etc.
Step 3: Calculate your document storage costs
|Standard file cabinet – Approx 6 sq. ft. floor space||$60|
|Lateral file cabinet – 16 sq. ft. floor space||$160|
|Annual cost for storage equipment and supplies
(e.g. file folders)
|Monthly rental cost per sq. ft. for office space||$20|
|Monthly rental cost for off-site document storage||$100|
|Total Storage Costs||$4,500|
Step 4: Calculate the cost of lost and misfiled documents
According to a report from the Gartner Group, companies spend an average of $20 in labor to file a document, $120 in labor to find a misfiled document, and $220 in labor to reproduce a lost document.
Their research also showed that 7.5% of all documents get lost, and 3% of the remaining documents are misfiled. We’ve used those costs and percentages here.
Note: The following calculations use the 379,760 page total from Step 1, each document averaging 20 pages.
|%||Cost Each||Docs||Annual Cost|
|Annual Cost of Missing Docs $38,166|
Step 5: Calculate the cost of copying documents
According to Coopers & Lybrand, the average document gets copied 19 times. Even if we lower that number to 2, the costs add up quickly.
|Estimated cost per page to copy a document||$0.10|
|Estimated number of times the average document is copied.||2.0|
|Annual Copying Costs||$1,920|
Step 6: Determine the size of your ECM
In order to determine what size of document imaging system you need, you have to think about how many pages you have to scan and how quickly you need to be able to scan those pages. You also have to calculate storage to determine how much disk space you’ll need.
|Number of pages to be scanned||379,760|
|Number of scanners||1|
|Speed of scanner (pages per min)||40|
|Total Hours of Scanning||158|
|Percentage of documents that are legal size||0%|
|Calculate 50 KB of storage for each 8.5×11 page||18.99|
|Calculate 75 KB of storage for each legal-size page||0.00|
|Total Disk Space Required||18.99|
Step 7: Determine the cost of your ECM
Based on the cost of the Laserfiche Document Imaging System in early 2012, here is a breakdown of the components of one ECM system.
Obviously, prices are subject to change and are not representative of all ECM systems. However, I hope this will give you a ballpark idea of how much you can expect to pay in relationship to the estimated document storage costs outlined above.
|Installation and training||$2,000|
|Number of users accessing the system (not concurrently)||12|
|Annual Laserfiche support (LSAP)||$1,200|
|Total System Cost||$24,200|
Step 8: Determine the cost to scan documents
The table below shows the cost of scanning when you multiply the hourly cost of a scan operator by the total hours of scanning we estimated in Step 6. This calculation does not include prep time.
|Costs Associated with Scanning||Amount|
|Hourly cost of scan operator||$20|
|Total System Cost||$3,160|
Step 9: Estimate labor to maintain your documents in the ECM
We estimate that with Laserfiche, electronic documents can be retrieved in about 1/5 the time as paper documents, especially since there is no longer a need to re-file. This calculation utilizes the labor estimate that we came up with for copying documents in Step 2.
|Costs of Labor||%|
|Estimated percentage of labor||20%|
|Labor Cost to Maintain Docs in Laserfiche||$17,000|
Step 10: Calculate the cost of lost and misfiled documents when using the ECM
Lost or misfiled documents are no longer a problem in Laserfiche. If a document is filed in the wrong folder, it can still be found using the values in the template fields. Even if these values were entered incorrectly, the full-text search can be used to find the document.
We’ve estimated 1% labor associated with finding lost and misfiled documents, but the number should be virtually zero.
|Costs Associated with Lost Documents||Amount|
|Estimated percentage of labor||1%|
|Total System Cost||$382|
Step 11: Determine strategic and miscellaneous savings/benefits
It is important to note that this number is not totally representative since you can’t quantify better security, instant information, better customer service, and the protection of information if a disgruntled employee leaves the company.
Those things are, of course, priceless.
However, even without the additional benefits quantified, you can see that the initial ROI associated with implementing an ECM is astounding:
|Annual cost of paper documents
|Annual cost of Laserfiche Imaging System
(Hardware and software over 3 years)
|Total Annual Savings||$100,973.00|
The numbers speak for themselves. In this scenario, the organization that implemented the Laserfiche Imaging System saved over triple the amount that they spent. No wonder ROI was the deciding factor for so many of my customers!
Reducing Clutter and Saving Space
For many growing companies, space is at a premium. There’s never enough of it, and the bigger you get, the more you need. At the time of this writing, real estate costs range from $15 to $40 per square foot in many major cities.
But our need to retain important information requires things like storage rooms and big, four- and five-drawer filing cabinets, taking up space that could be used for other things.
Imagine if you could convert your records’ rooms into usable office space or eliminate warehouse costs for your old records!
A good ECM system allows you to do that. It reduces clutter in the office and on peoples’ desks (which, in turn, reduces stress). It also renders filing cabinets totally obsolete. Space and organizational complications no longer have to be a barrier, preventing you from taking on new clients or growing as a company.
A great example of the value of saved space is the story of Lakes and Pines Community Action Council. Lakes and Pines is a non-profit corporation that offers programs to assist low-income families and individuals north of the Twin Cities.
But when their funders informed them that they needed to increase document retention from three years to six, they realized they would have to double their storage space.
Lakes and Pines considered their options. They could add an additional 40’ x 40’ of storage space to their current office, lease storage space in a warehouse, or purchase $50,000 of sliding file equipment. As they considered their options, they began to realize that these solutions were not only expensive, but also inefficient.
The organization began looking into ECM and eventually chose Laserfiche. They appreciated its modular licensing, which let Lakes & Pines purchase only what they needed, with the option to add additional modules later.
They found the program simple to use and were surprised to learn how little it cost. “We not only solved our space issues for a fraction of the cost of other alternatives,” recalled Steve Long, Director of Data Processing for Lakes and Pines. “But we also gained staff efficiencies.”
A similar story unfolded for another Laserfiche customer, a First National Bank. When they implemented an ECM, they were able to scan and then eliminate over ten years’ worth of commercial and personal loans. Then, they turned their storage area into a new conference room.
For these two organizations, and many others, saving space has translated to increased productivity.
Did you know that one of the biggest hidden costs for businesses is the time it takes to handle paper files? Industry studies have shown that the typical worker spends over 20% of their day searching for documents.
It’s not so hard to believe if you think about it. Let’s say an office worker has to find 10 documents throughout the day. She gets the request, leaves her office, walks to a records room, and finds the right filing cabinet. Then, she has to flip through folders to find the necessary file, copy the paper, and re-file the folder. And, of course, walk back to her desk.
How long do you think this whole process might take? 5 minutes? 10? 20? If we estimate it takes 10 minutes for each file, 10 files a day quickly adds up to 100 minutes – 30% of her work week!
The beauty of ECM is that it cuts out all the legwork. Instead of spending time searching through file cabinets, you can retrieve the right one in seconds. All that time that she previously spent making the trek to the storage room can be used in more productive and lucrative ways.
I recently met with a prospective customer to talk about Laserfiche Document Management technology. I told Dick that ECM could save him and his staff hours each week. I also shared the sobering statistics that I’ve found from reliable sources.
Garter Research has found, for example, that on average, “professionals spend 50% of their time searching for information and take 18 minutes to locate each document.” And the Delphi Group notes that “companies on average spend $25,000 to fill a typical four-drawer filing cabinet and $2000 to maintain it each year.” This means that “over its life-span, a single sheet of paper ends up costing an average of $30.”
He listened to the statistics and then said something that has haunted me ever since: “Who gets fired?” Dick asked. “Because if no one gets fired, we don’t save anything.”
I’ve thought a lot about this question over the years, and I keep coming to the same conclusion. “Nobody!”
A recent study examining work habits compared the amount of work that people were being asked to do today to that of ten years ago. 35% of those questioned said that they’re doing the work of two people, and 33% are doing the work of three people.
The study also found that that work is much more complex: 40% of people have between 2 and 5 windows open on their computer at any given time, and 25% have between 6 and 10!
Our American more-is-more business ethic may seem best, but in the end, it only serves to push employees past their limits and create high levels of burnout.
When you implement a good ECM system, you’ll find that you have much more time to work with. The secret is in how you choose to use that time.
Over the years, I’ve seen companies take three different approaches with this influx of time:
- They do nothing and let their employees find ways to fill the time. If their employees are self-motivated and resourceful, they may choose to use that time wisely and do something that increases productivity or quality. But this can also backfire if the time saved is wasted on other unimportant things.
- They work with their employees to find other areas in the office where they could become more efficient and thus, more profitable.
- They change how tasks are delegated, making sure things are better dispersed and everyone has a greater margin. When things are appropriately delegated, everyone is able to achieve that elusive work-life balance. Additionally, time is freed up for new ideas to grow. Creativity requires space, and those companies that want to be on the cutting-edge of their industries are making time to develop the ideas that will eventually make them more profitable.
In a way, my customer was right: simply purchasing an ECM definitely saves time, but it’s up to you to translate that time into money. Like all other resources, you have to use time wisely to improve other processes within your organization.
Just think of the long-term effect it could have on your organization if an ECM saved each employee one hour a week, and each employee used that time to find ways to save another hour each week. If this refinement process continued, it could transform your organization!
So, Dick, if you’re out there and this makes sense to you, give me a call. I’d love to talk to you again!
Creating Meaningful Workflows
With so many paper files coming and going, it’s no wonder things get lost in the shuffle. It’s a major problem; in fact, some industry experts estimate the cost of recreating and replacing a lost document to be around $250!
Using the workflow feature of an ECM reduces information loss by simplifying and streamlining processes. It becomes simple for multiple people to view and update files simultaneously. For example, in a process such as hiring a new employee, the file is routed automatically to each person in the process, making it simple for each person to do their part. Simplifying these processes not only expedites action, it also improves consistency, because the workflow does the naming and filing automatically. Simple improvements in daily tasks like these are what give your company an edge over the competition.
Michael E. Gerber, author of The E-Myth, has outlined some basic principles in his work that apply to all organizations. His principles have impacted my own business practices, as they focus on using a well-run, repeatable system.
In the introduction to his book E-Myth Revisited, Gerber writes, “The problem is not that businesses in this country don’t work; the problem is that they’re working on the wrong work.”
If you take a hard look at the paperwork in your business, you’ll see that there’s a system to it. Some companies have a well-defined business process that can be automated by the workflow in an ECM system. Other companies don’t.
Think about it for a moment: how much work is being spent on your paper systems? Are your employees spending an inordinate amount of time trying to fix or manage inadequate workflows or processes? Is this the “right” work for your creative, capable staff to be doing, or is it, as Gerber states, “the wrong work”?
Recently, I met with a business manager who told me proudly how efficient his employees were. He was right. They had an immaculate paper system, and his employees spent a lot of time making sure their paperwork was neatly filed and organized. Everything had its place, and everything was in its place.
But one thing that occurred to me was that in the process of being efficient, they lost the reason for the paperwork in the first place. The paper had become more important than what it represented: customers and their needs.
How much better off would the company be if they used technology to minimize the time needed to handle the paperwork and spent that time contacting and serving their clients? There is a difference between efficient and effective: efficiency is doing things well; effectiveness is doing the right things. The magic happens when the two concepts merge into one.
With a good ECM like Laserfiche, this is what happens. The workflow is automated and intuitive. It takes care of the menial processes so that you can focus on those things that are most important.
The benefits of an automatic workflow like Laserfiche are innumerable. Here are a few:
- Management knows exactly what the workflow is and can be confident that the correct business process was followed each and every time.
- Training of new employees is easier because they don’t have to learn business process rules; instead, they can focus on their part of the process. The Laserfiche workflow takes care of the rest.
- Management is alerted when certain processes are not completed in a timely manner.
- It’s easy to see where a file is in the workflow: no more searching the office to figure out who has it!
- Your organization is less dependent on key employees who know the business processes.
- The workflow does not stop if an employee is on vacation or leaves the organization.
Processes and workflows are essential for every business, but often the process becomes cumbersome and ends up taking up more time and energy than it saves.
Regardless of whether or not you invest in ECM, put your paper workflow under a microscope. Make sure that you’re doing all you can to have your documents flow as efficiently as possible.
Keeping Your Information Secure
One of the biggest liabilities with paper documents is how difficult they are to keep secure. There’s no way to know who has accessed a paper document, and it’s almost impossible to make sure only authorized staff have access. The security of documents can easily be violated by disgruntled employees or by sheer carelessness.
An ECM simplifies and tightens security by adding layers to it. Most systems include multiple levels of password-protected access for groups and individuals, encryption for document contents, and audit trails, showing who has accessed or updated documents.
For example, if an employee using an ECM system is not authorized to see Human Resource documents, they will not even see that the Human Resource folder exists – security is that granular. Administrators can define user privileges in a way that makes sense with the company workflow and ensures total security.
As offices become more virtual, and employees begin to work more and more remotely, ECM gives employees the freedom to access vital records while simultaneously ensuring that security is maintained.
Another aspect of keeping your information safe is making sure that it’s backed up in case of a disaster. Have you considered what would happen if you had a fire, flood, tornado or break-in that seriously damaged your office?
The U.S. Department of Labor estimates that over 40% of businesses never reopen following a disaster. Of the remaining companies, at least 25% will close within two years. It’s not the damage to facilities that makes recovery so difficult. It’s the loss of crucial data.
A good ECM protects your paper records by creating electronic copies that can be backed up in multiple ways. It can also include off-site data backups, as well as additional steps that ensure that a fire, flood, tornado or break-in won’t cripple your business.
Bridging the System Gaps
Businesses today use a variety of systems, from CRM to accounting, to email and fax. Each of these systems has some information that overlaps. For example, each one might have important contact information for customers, such as phone numbers, fax numbers and email addresses.
The problem is that these systems cannot communicate with each other, so they become, essentially, silos of information.
While this is not inherently bad, it can be a big problem if your customer changes her fax number. Instead of making the change once, you have to go into multiple systems and update the information.
This is where ECM comes in. A good ECM has the capability to become the bridge between these silos of information.
If an ECM is designed correctly and has agile functionality, it can be used as the middle man (middle-ware) to pass data from one system to another, making the two systems function as one.
For example, I recently worked with a finance company that had two systems: one that dealt with loan applications and the other that handled loan payments. Since the two systems could not communicate with each other, much of the application process was handled by passing documents from person-to-person and office-to-office. You can imagine the capacity for error here and the amount of documents that were somehow misplaced.
When we implemented the Laserfiche ECM, however, it automated the process. Suddenly, drivers’ licenses and signatures could be captured in the field using an iPad and fillable PDFs to begin the application process. The Laserfiche workflow updated the loan application program directly by database connection and monitored the progress of the approval process.
When one application began taking too long, a manager was notified immediately so that the problem could be addressed. When the application was complete, Laserfiche automatically connected to the finance application and updated the database with the applicable information.
Laserfiche is constantly working in the background to keep the two systems in sync, eliminating the need to pass all that paper around!
If you’ve ever dealt with that end-of-the-month scramble to fill out expense reports, secure approval, and get them to accounting in time to get paid, this next example will make sense for you.
At my company, the end of the month is always a high-pressure time anyway, and the expense reports just made things worse. But once we integrated Laserfiche, we were able to automate the process.
Now, as soon as an employee has an expense item, they can take a picture of the receipt with their cell phone or tablet. They can then email that picture to a special email address at our company. We created a program that takes those emails and sends them to Laserfiche, which then checks that a receipt was included, assures that it has been designated to one of the allowed expense categories, and updates the expense report for that employee.
At the end of the month, each expense report is sent to the employee’s manager for approval, and once approved, it is automatically forwarded to accounting for payment.
This workflow not only saves time, but it also eliminates a task that no one liked doing and eases the stress for everyone at a busy time of the month!
There’s no reason that our various business systems should remain silos of information. Technology should improve business processes, rather than complicate them! Think about the ways your bottom-line would improve if your systems worked together in an effective, streamlined manner!