It's always one of the first questions. "How much is this going to cost?" It's an important and straightforward question, unfortunately, it is not easy to answer. In part one of this series we began the discussion of the cost of document management software. We need to be specific about the application in order to be specific about the price. In this case, we are looking at a small to medium sized Accounts Payable department, and the specific function of using document management automation to improve the AP workflow.
A midrange price for the basic software in this situation would be in the $2000-$3000 range. This software would allow you to transform all related paper-based documents to an electronic format. It would also provide the ability to import other related documents from different sources across your network.
You may be thinking "I already have the ability to scan documents" - "what good does this document management stuff do me?" That's a topic for another day, for now, let's just assume that if a lot of other companies are doing this - there must be some significant benefit.
There are other potential costs that should be considered as well. Do you have a scanner located in your department that is efficient at handling the necessary scan volume? Depending on the volume of paper and the size and types of documents you'll be scanning, a decent scanner will run anywhere from $1000-$5000.
Another potential cost to consider is professional services. You may want qualified technical support to install and set up your software. It is quite likely that you will also want training on the software. Professional services from a reputable company will run anywhere from $100-$200 per hour. For the sample application we're discussing, you should figure on between three and six hours of support. That would average out to another $600-$800.
One component of the project cost that is often overlooked is ongoing service and support. At a minimum, you are going to want some sort of software assurance program. This will usually provide software updates and "bug fixes." Additionally, you may want to consider an ongoing maintenance contract that provides technical and user support. A typical weight software assurance plan will run between it 15% and 20% of the cost of the software per year.
That's all for now. This in the next part of this series we'll wrap up this example and begin to explore the ROI as well.
I'd welcome your comments or questions. Just pop into the comment section and let me know what you think.
"How much does it cost?” The cost of document management software is one of the first questions most people will want answered when they begin to explore this technology. It's an important question that needs a clear answer. Getting a straight answer about the cost of any product is often difficult when talking to salespeople. I know this can be very frustrating. I'll do my best to help you understand the answer to the question of “how much does it cost?”
Let's explore the issue of document management software cost. Sometimes, it's easy to find out how much something costs. This is usually the case when you know exactly what it is you want. If you want to buy a particular model food processor, it's easy enough to find out the cost by searching online.
Understanding the cost of document management software
The problem with figuring out the cost of document management software is that you must define exactly what that is. It's kind of like asking how much a vehicle costs. You can't find out the price of the vehicle without knowing what the vehicle is.
So it becomes clear that to determine the cost of document management software we must first define what it is we are thinking of buying. To do that, we need to know just what we want that software to do for us. Going back to the vehicle analogy, do you need to haul freight? Do you need to transport lots of people? Do you need to win a race? The answer to these questions will start you on the path to deciding what you want to buy and how much it will cost.
An example of the cost of document management software
In my last post, I explored the benefits of Accounts Payable automation using document management software. We will use that application as the basis for this discussion of the cost of document management software. We will look at a small business that pays about 400 invoices per month and employs two people in the financial department.
Understand that there is a wide range for the cost of document management software. For this example, we will use midrange pricing. The software cost for this example should be somewhere between $2000 and $3000. A typical lease for this amount would cost about $75 per month.
In part two of this series we will dig deeper into the cost of document management software. Check back to learn more, or subscribe on this page to be notified as soon as the next article comes out.
Are there sufficient benefits to justify a small business automating their accounts payable process? As you can imagine, the answer to this question is not simple. Let's look at a few of the factors that come into play
One of the first things that might come to mind is - what exactly do you mean by Accounts Payable automation? For the purposes of this discussion, we're going to look at one of the primary automation components – document management.
Accounts Payable is a paper intensive business process. Depending upon which survey you choose to believe, the estimates for the percentage of invoices in paper format run from 65% to 90%. Regardless of the exact figure, that's a lot of paper.
The foundation of document management is to capture paper based information and turn it into digital files. It would be a rare person in today's business world that doesn't understand at least some of the benefits of digital versus paper based information.
Many document management systems also offer significant benefits in the efficiency of the AP workflow. I'll examine the workflow process in a future post. In the meantime let's focus on the dollars and cents.
Using technology to automate any business process necessarily involves an investment in software, and often hardware. In today's economy, it is imperative that such an investment is justifiable. So how do you go about determining if an investment in Accounts Payable automation makes sense for your company? Obviously, every business is different, but let's examine some industry data on that issue.
AP automation is a hot topic, and there's no shortage of data to draw from. Organizations like the Hackett group and the Aberdeen group are examples of companies that study business process efficiencies and costs. The Hackett group has stated that “organizations can cut the cost of Accounts Payable by up to 90% simply by reducing the use of paper-based processes.”
A 2011 whitepaper by the Aberdeen group examines the best versus the worst performers in accounts payable performance. They gathered data from 130 different companies and found that the cost to process a single invoice for the best in class (top 20%) companies was $3.09. The cost per invoice for the worst performers (bottom 30%) was $38.77.
The data above represents a difference of $35.68 per invoice. For purposes of this discussion, let's assume that only half of that difference was because of automation. That would leave us with a $17.84 per invoice difference. If you process 100 invoices per month that amounts to $1784 savings per month. Your mileage may vary:)
Looking at the example above gives you an idea of the potential improvement in invoice processing costs. To determine the ROI on an investment of Accounts Payable automation, you also need to understand the costs of that automation. Stay tuned, I'll discuss that in my next post.
I look forward to your feedback on this information. Please give me your thoughts in the comments section below. Talk to you soon.