Aug 04 2016

## 5 ways to calculate ROI for your ECM investment

Step 1. Estimate current document handling and storage costs. To find out how much is currently spent on a monthly basis to handle paper documents, list down the following: number of employees who handle paper documents, their average hourly salary, and time spent by each employee retrieving documents, making copies, recreating existing information, and faxing documents each day.

Estimate also the number of paper copies generated each day (pages), cost per copy (paper, toner, ink); amount spent on physical offsite storage per month, hours spent accessing this offsite storage and amount spent on filing supplies; as well as the amount spent on overnight delivery services and postage per month, or the number of faxes sent per day.

This exercise would give you a rough estimate of the labor, copying, storage and distribution cost of a paper-based office. You would be surprised at the staggering cost this exercise on a daily, weekly or monthly basis.

Step 2: Estimate the impact of a document management system on your operations. For each cost item you identified in Step 1, estimate how much of a reduction can be expected as a result of implementing ECM. It would be helpful to forecast a best-case and a worst-case scenario. For example, reducing time spent filing documents by 75 percent could be the best-case scenario, while a 50 reduction may be a worst-case scenario.

Step 3: Multiply the savings (percentages) by your initial cost factors. This provides a best- and worst-case scenario of the monthly savings that your unit will realize as a result of more efficient content management.

Step 4. Estimate the costs associated with ECM. The costs of software, licensing, hardware (and maybe employee training) must be factored in. However, they will vary significantly from department to department or from organization to organization, especially in the area of conversion expenses (i.e. document imaging required to convert paper documents into digital files).

Step 5. Calculate ROI. The return on investment should be the net annualized document handling savings divided by the total ECM costs, as a percentage. Using best- and worst-case scenarios should enable you to arrive at a high and low estimate for the ROI.

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