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The Cost of Managing Paper: A Great Incentive to Go Paperless!

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Efficiency expert K.J. McCorry, author of Organize Your Work Day In No Time, revives our interest in the long-promised paperless office by talking about how much all that "cheap paper" really costs.
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Do you know how much your company spends per year to manage paper? Across the Fortune 1000, office document expenditures exceeded a staggering $217 billion in 2002—more than $7,500 per employee, according to a 2003 ALL Associates white paper. Resource Information Systems Inc. (RISI) estimates that U.S. companies will spend about $8 billion per year on managing paper. A 2005 study by the Minnesota Office of Environmental Assistance estimated that associated costs could be as much as 31 times the purchasing cost of paper, which includes not only actual price, but storage, copying, printing, postage, disposal, and recycling.

What really goes into estimating the costs of managing paper? These estimates and figures include a host of items that relate to paper management—the cost of purchasing paper, printing costs, fax/copier equipment and supplies, distribution, mailing costs, courier services, filing supplies and cabinets, storage space, as well as staff time spent in handling, managing, and filing paper.

Paper management costs vary from one company to another, depending on how each company is configured and which costs that particular company associates with paper. Companies that are considering paperless systems need to know not only the costs associated with implementation of such systems, but also the current costs of managing data in paper format.

Implementing paper-reduction measures could save your company more money than you might think. Even in this electronic age, much of corporate memory still exists on paper. Through simple paper-reduction methods, an office could reduce paper costs by 20–25%. For example, by implementing paperless investment statements, Citigroup saved millions on paper costs over the course of a few years. American Century estimated that paper costs associated with its customers were cut approximately 90% when the company converted to online statements. As each of these companies learned, more than just the paper itself contributed to the cost of document management.

The True Costs of Paper

The typical U.S. office worker uses more than 10,000 sheets of paper per year, which is about 2 cases of paper per employee. With an average price of $40 for a case of standard copy paper, this is an $80 annual cost per employee. The cost of the paper is only about 10–11% of the lifecycle cost of that paper, according to a government study conducted by California's Alameda County. The main costs of paper documentation fall into copying, delivery, handling, storage, and retrieval of that paper, with copying costs at 33% and distribution costs at 56%, according to the Alameda study. Other studies show that for every dollar spent on printing documents, companies incur another $6 in handling and distribution of the paper.

According to PricewaterhouseCoopers, the average organization spends about $20 in labor to file each paper document, approximately $120 in labor searching for each misfiled document, and $220 in re-creation of a document. A study conducted by Deloitte & Touche in the early 1990s found that U.S. managers spent an average of three hours a week looking for paper that had been misfiled, mislabeled, or lost. IDC Research estimated that the typical enterprise with 1,000 knowledge workers wasted $2.5 to $3.5 million per year searching for information and re-creating lost documents. Considerable time is still wasted and used inefficiently in managing paper documentation, especially when a high percentage of the data is created and generated electronically.

Storage of documents is another high cost associated with paper. In my own research I've found that, depending on quality and brand, filing cabinets can be expensive, running as high as $1,000 for a sturdy standard five-drawer lateral filing cabinet. Then you must account for the cost per square footage of office space consumed by these storage units; the average filing cabinet uses 15.7 square feet, and the current U.S. average cost of office space is $15–$20 per square foot, so you're paying roughly $236–$314 per filing cabinet solely for the real estate it consumes.

Current estimates show that 50–70% of space in an office is still dedicated to filing and storage of documentation. The real clincher is studies showing that over 45% of the files in those cabinets are duplicated information, and 80% is never accessed again. Because of U.S. regulations and our litigious culture, most of the paper stored is saved in case of legal liability, compliance, and/or audits. Once filed away, most of this documentation is never accessed or needed again. A further waste consists of papers printed and stored that really are never needed at all. A recent Xerox study found that more than 45% of office papers could be discarded on the day they were printed.

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