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The Benefits of Going Paperless

 

Benefits of a paperless business
 
Paper used to make the world go round, especially the world of business. Due to the transactional nature of the business world, paper was number one for centuries. Contracts, receipts, tax records, employee records, and task specific documents such as correspondence and billing all needed to be physically organized so that they were available when needed. They also needed to be stored for specific time periods that were required either by law or practice. Over time, that added up to an incredible amount of paper weighing down the average business. So let’s look at the benefits of going paperless in your business.

The fixed costs of using paper are massive

Consider that the average office worker goes through 10,000 sheets of copy paper in a year. That’s 10,000 sheets per worker, per year. A small business could easily generate 100,000 sheets of paper in one year. That’s a lot of paper, approximately 200 reams.

Now consider all the collateral equipment, supplies and manpower that all that paper requires. Things like printing, copying, postage, disposal and storage. 200 reams of paper will set you back about $1200 dollars. However, it has been estimated that the collateral costs of transmitting information on paper are about thirty-one times greater than the cost of the paper itself. It is estimated that the average four drawer file cabinet costs $25,000 to fill and $2,000 dollars a year to maintain. The fixed costs of paper are truly enormous and, very often, fly under the radar when it comes to business expenses.

The cost savings of going paperless alone make it worth it

Going one hundred percent paperless is a pipe dream, at least in the near future. There are always going to be certain types of documents that will need to be retained in a physical format. That being said, the vast majority of paper that the average business generates can and should be eliminated, resulting in cost savings that could easily add up to six figures per year or more. The cost savings are perhaps the most attractive benefit to a business that’s considering going paperless, but there’s more. Let’s take a closer look.

When you take the time to consider it, paper takes up a lot of physical space. Picture the average office. How much of that business’ office space is taken up by file cabinets and paper related equipment? The average four drawer file cabinet takes up twenty square feet. (This figure takes into account the physical footprint of the file cabinet, as well as the space in front of the cabinet that must be kept clear in order for the cabinet to be functional.)

The national average cost for office space is about $26.00 per square foot. That means that, on average, each file cabinet is costing a business $520 per year just to sit there. Keep in mind that that is the average cost. In a large metropolitan location the square foot cost for the file cabinet would be well into the four figure range.  Now, that’s just the cost for the physical space that one file cabinet takes up. Every file cabinet takes up more space and increases the cost.

The average business currently devotes over fifteen percent of office space to file cabinets. In addition, on average, every twelve file cabinets require one full time employee dedicated to organizing the contents of those cabinets. Going paperless frees up a large amount of physical space that can be used for other, more profitable uses. It also frees up manpower in a similar fashion. In fact, by going paperless, the average business sees an annual office costs savings of over eight percent.

Increase customer satisfaction by going paperless

What is the most important element in your business? The answer should be clients and customers. Clients and customers are the lifeblood of every business. They generate the sales that all businesses depend upon for survival. Unhappy or dissatisfied customers mean smaller margins and a greater threat of business failure. Conversely, greater customer satisfaction means greater profitability and more powerful growth. Therefore, client happiness is a critical for your business.

Going paperless can help you achieve higher levels of customer satisfaction. How? Because a paperless office is more responsive to customer needs.

Every time a client has to wait, their level of satisfaction decreases. Studies have shown that most customers associate waiting with the inefficiency of a business they are dealing with. Putting a customer on hold while a search is undertaken for a particular file is not going to make that customer look on your business more favorably. Likewise, an employee in a remote location who is unable to deal with a client’s requests because they don’t have access to critical documents is not going to appear either efficient or professional.

When your business is paperless, all documents are available to all employees at all times, whether they are in the office or out of the office. This makes your business more flexible and more responsive to your customer’s needs. This, in turn, increases customer satisfaction which translates directly into more profit and increased growth.

Reduce paper handling costs

Another benefit of going paperless is that it eliminates the hidden costs of paper retrieval. This is a cost that often goes unnoticed by most businesses simply because the use of paper necessitates the archiving and retrieval of documents. Think about it in terms of the average business. Documents are routinely generated within the business itself – things like correspondence, invoices, memos and reports. Additionally, documents that have been generated elsewhere routinely arrive at the business – additional correspondence, bills etc. All of this paper must be archived, stored and be capable of being retrieved when needed. The problem is that a certain percentage of all this paper will inevitably be lost. That loss costs money.

As an example, let’s consider a business that generates and receives approximately 100,000 documents a year. (By the way, for the average business, this is a relatively low number. Most businesses generate and receive many more documents than this.) Studies have shown that approximately 7.5 percent of a company’s documents will be lost in any given year. This means that our example business will lose about 750 documents per year. Even for a micro-business that generates 10,000 documents a year, the number of lost documents would be around 75.

Now, you may be thinking “What’s the problem? That’s a fairly acceptable figure given the amount of documents that the business generates and receives.”

This amount of lost documents is a problem for two reasons. First, it has been shown that, on average, each lost document costs a business $122. This expense is comprised of employee time spent looking for the lost document and in reproducing or replicating the document. So, in a given year, the 750 documents that our example business can expect to lose will cost the business $91,500. That is a significant amount of money and the majority of business owners are unaware that this expense exists. (In the case of the micro-business losing 75 documents, the cost would $9,150)

There is a second problem with lost or misplaced documents – they directly impact on customer or client satisfaction and how they perceive your company.

Imagine a situation where a client is on the phone with a question. In order to answer this question, the client’s file must be retrieved. The client is placed on hold while the file in question is obtained. However, once back on the phone, the document that will help answer the client’s question is not in the file. Once again, the client is placed on hold while a search for the document is made. After several minutes, the client is told that he or she will be contacted when the document in question is found.

The average search for a misplaced document takes twenty minutes. So, at best, it will take up to an hour for the client to be contacted with an answer to their question. At worst, the document will need to be replicated or reproduced, and the client will have to wait days for an answer. Either way, the client will be inconvenienced.

Remember that most people equate delay with incompetence. Because paper documents will get lost and misplaced the opinion about your business in the eyes of the people who matter most, your customers, will inevitably suffer.

Going paperless eliminates this problem. There are no physical documents to archive, store and retrieve. Therefore, there are no documents to lose or misplace. Everything is electronically available and securely backed up on a regular basis. As a result, you save money and your clients remain happy and satisfied.

Going paperless reduces risk to your business

Another problem with paper is its relative fragility. Paper burns. It is very susceptible to water damage. Even the air, over time, will degrade paper, eventually making it brittle and useless. A business that hasn’t gone paperless is vulnerable precisely because of the fragile nature of paper.

Imagine a situation where a disaster destroyed all of that business’ paper documents. It would be the equivalent of a death sentence. Over 70% of businesses who suffer a catastrophic loss of documents go out of business within three weeks.

When you go paperless, your business is protected from this kind of disaster. Your documents are safe, backed up into the cloud, secure from physical harm.

Paperless systems increase productivity and ROI

Let’s consider the logistics of paper for a moment. Paper needs to be managed. Someone has to do that managing. Studies have shown that searching and retrieving physical documents takes up 20% of an employee’s time. Let’s say you have a business with 10 employees, each of whom has full access to a physical document storage and retrieval system. The accumulated time each of these employees spend looking for and retrieving documents equals 2 additional employees. If the average salary for these employees is $30,000 per year, then the business in question is paying $60,000 per year simply to have files found and brought to another location. That’s a lot of money for a behavior that is not very productive. Again, a paperless system both recoups this cost and allows the workforce to concentrate on more productive tasks.

Speaking of recouping costs, many businesses shy away from going paperless because of misplaced concerns regarding cost. In reality, the upfront costs of switching to a paperless system are relatively low. There’s not a lot of equipment needed to go paperless. Because of this the average business recoups that initial investment in a matter of weeks to a matter of months. After that, the savings that are realized by eliminating much of the hidden costs of paper that we have been discussing start to become significant.

In the end, a paperless system is more efficient and more cost effective. There is less hassle and expense involved in putting the right information in the hands of the right person when they need it most.

We are habituated to paper only because all of us were raised in an environment where paper was ubiquitous. It was the primary medium for transmitting business information. This is no longer the case. Electronic data management and storage has replaced the primacy of paper. The time has come to break from what is simply a tradition and reap the many benefits of a paperless environment.

Next week we will look at tools to help you with a paperless office.

If you wish to review last week’s post on the reasons to consider going paperless, click here.

"THE ACADEMY GETS IT!"

“I started my own business in 1995. The Self Employed Business Academy gets it. Clear, concise, and actionable information. You may be in business for yourself, but with the self Employed Business Academy at your fingertips, you won't be by yourself"

Ed Carey

Ed Carey, AMG, LLC

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