Document management ROI, worked through with real numbers

A finance director will approve a document management system when the case is specific: these documents, these hours, this cost, paid back by this date. Generic percentages from a vendor will not survive the first question. This guide builds the case from three numbers you can measure in a week, using one company as the worked example.

The formula

A worked example

A 90-person wholesale distributor. The numbers below are illustrative inputs; replace each one with yours. The point is the method.

1. Invoices handled by hand

AP receives 1,200 invoices a month. A clerk opens, keys, files and chases each one, about 6 minutes per invoice when timed over a week. That is 120 hours a month.

With capture software reading the invoices and routing them for approval, a person no longer touches every invoice. They review the share the software is unsure of. If 15% go to review at 3 minutes each, that is 180 invoices and 9 hours a month. Saving: about 111 hours a month, or roughly 1,330 hours a year. The review share is the number to test in a pilot, because it is where the saving lives, and it falls as the software learns from corrections.

2. Time spent looking for documents

Ask five people to note every time they go looking for a document for one week, and how long it takes. Say the AP, customer service and sales operations teams, 14 people in all, each lose 15 minutes a day to it, and a search brings that to 3 minutes. That is 12 minutes times 14 people times 250 working days: 700 hours a year.

3. Paper you pay to keep

Read the offsite storage invoice and count the filing cabinets. Say 160 boxes offsite and four cabinets’ worth of floor space you could use. Put the actual annual storage bill in the model, plus retrieval fees.

Try the invoice processing cost calculator for the AP part; it models the review share the same way.

The costs to count

• Software: licenses or subscription, and annual maintenance. Use the quote for your users and setup.
• Setup: configuration, document types, workflows and migration of existing files.
• Integration: connecting to accounting or HR so data is not keyed twice. Content Central connects to QuickBooks, Sage 50, Sage X3, Workday, Epicor and Dynamics CRM, which keeps this cost down where you use one of those.
• Hardware, for on-premises: a server or virtual machine, SQL Server and backups, plus IT time.
• People: training time, and the dip in speed during the first weeks.
• Scanning the backfile: staff time or a service, if you digitize old boxes.

Payback, not just ROI

In the example, the time-based benefit is about $71,000 a year, or roughly $5,900 a month. If one-time costs come to a figure X and ongoing costs to Y a year, payback in months is X divided by ($5,900 minus Y divided by 12). Put your quote into that one line and the conversation with finance gets short.

1. 01

   Start where the volume is

   In the example, invoices carry two thirds of the benefit. Go live there first, so payback starts early.
2. 02

   Automate the reading, not just the scanning

   Scanning alone saves filing. Capture that reads the document saves the keying, which is the bigger number.
3. 03

   Connect to the system downstream

   Every field keyed twice is a cost the model should remove.
4. 04

   Measure the review share in a pilot

   Run two weeks of real invoices before you commit the business case to a number.

Keeping the case honest

• Hours saved are capacity, not cash, unless they replace overtime, temporary staff or a planned hire. Say which.
• Use your own timings, not industry averages. A week of measurement beats any benchmark.
• Count the first-month slowdown and a contingency for integration.
• Leave out soft benefits such as compliance risk from the ROI number, and list them separately. They are real, but they are what reviewers discount first.

What to track after go-live

For what to look for in the system itself, read how to choose document management software.