Wednesday, December 28, 2011

A step-by-step ROI on my digitizing project

"Quantifying benefits and real cost of a project is a basic step when deciding to invest money in a digitizing project. We show you how to do it step-by-step"



Throughout 3 different post we will be showing, step-by-step by an example how to calculate the Return On Investment of your digitizing project.

To explain the calculations you must be do we will be suggesting some information, although it is for demonstration proposals its try to adjust realistically.


Size of the company: 50 people
Documents handled per day: 100 documents
Number of filing cabinets: 3
Filing cabinets size: Width 41cm, Length 50cm, Height 104cm
Workers needed to manage this number of documents: 2
Workers who need to find documents for doing their daily tasks: 10
(All the workers in the example earn the current Statutory Minimum Wage in Spain of 641,10 euros)

Step 1: Calculating Cost of the Current System
Determine the real cost of maintaining your paper-based documental system, in order to this, take into consideration cost as followings:




COST OF LABOR



MONTHLY BASE SALARY
641,10 €
PRO-RATA 2 ANNUAL BONUS
106,85 €
COMMON CONTINGENCIES BASE (CCB)
747,95 €
SOCIAL SECURITY COST (32% of CCB)
239,34 €
TOTAL MONTHLY COST OF AN EMPLOYEE 
987,29 €
PRICE PER HOUR OF WORK
4,11 €
PRICE PER MINUTE OF WORK
0,07 €



NUMBER OF DAILY MANAGED DOCUMENTS
100
TIEMPO AVERAGE TIME TO MANAGE A DOCUMENT (MINUTES)*        
6




LABOR COST TO MANAGE A DOCUMENT
   0,41 €
DAILY COST TO MANAGE DOCUMENTS
  41,14 €
ANNUAL COST TO MANAGE DOUMENTS (220 Days Worked / Year)
9.050,20 €


*The employee of the example is earning the current Statutory Minimum Wage (SMLV)
*The social security cost in Spain by the current legislation range between 32% and 35%
* According to a study of PriceWaterhouse Coopers (Estimated time for one person filing a document in a well organized documents system )



COST OF STORAGE



SQUARE METERS OCCUPIED FOR A FILING CABINET
0,3075
NUMBER OF FILING CABINETS
3
AVERAGE HIRING PRICE PER SQUARE METER IN AN OFFICE (MONTHLY)*       
29,00 €


MONTHLY COST OF STORAGE
26,75 €
ANNUAL COST OF STORAGE
321,03€

* In the calculation of the square meters needed the space required to open the drawers is taking into account
*  In Madrid in 2010 according to Cushman & Wakefield Property Consultants

COST OF SEARCHING DOCUMENTS



NUMBER OF PEOPLE SEARCHING DOCUMENTS PER DAY
5
NUMBER OF DOCUMENTS IN AVERAGE SEARCHED PER DAY
10
TIME IN FINDING A DOCUMENT (MIN)
6
TOTAL TIME SPENT IN FINDING DOCUMENTS PER DAY (MIN)
300


AVERAGE OF LOST DOCUMENTS PER MONTH
6
TIME IN FINDING A LOS DOCUMENT (MIN)
10
MONTHLY TIME SPENT IN FINDING LOST DOCUMENTS
60




COST PER MINUTE WORKED
0,07 €
DAILY COST TO SEARCH DOUMENTS
21,00 €
ANNUAL COST TO SEARH DOCUMENTS (220 DAYS WORKED PER YEAR)           
4.620,00 €
MONTHLY COST IN FINDING LOST DOCUMENTS
4,20 €
ANNUAL COST IN FINDING LOST DOCUMENTS
924,00 €


TOTAL COST OF SEARCHING DOCUMENTS
5.544,00€


To simplify cost calculations we avoid the cost, in most of cases, of creating again or recovering a lost document (for example, to contact a supplier to know if he can send a copy of an invoice, to write again a lost report, etc). However, it would be interesting to do a more complete approximation about what the lost of documents can cause.

At least including these cost, we can nearly estimate how much it cost to our company continue working with a paper-based documental system.



TOTAL COST OF MAINTAINING THE CURRENT SYSTEM



ANNUAL COST OF MANAGING DOCUMENTS (220 DAYS WORKED PER YEAR)
     9.050,20 €
ANNUAL COST OF STORAGE
        321,03 €
TOTAL COST OF SEARCHING DOCUMENTS 
     5.544,00 €

ANNUAL TOTAL COST OF THE CURRENT PAPER-BASED SYTEM
     14.915,23€


“Managing paper documents in this company has an estimated cost of 14,915.23 euros per year”

As you notice, it's not an insignificant amount that your company has to pay year after year. Don't miss our next post where we'll estimate the benefits of the new system. 


if you want to follow the entire ROI calculation process, just download our white paper.
Discover how to calculate the ROI of a paper document capture process.download it


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