The Pressure to go Paperless

Source: Journal of Accountancy

Sarbanes-Oxley and the Health Insurance Portability and Accountability Act are among the many reasons to convert to a paperless (content management) system.

Firms may be a long way from a truly paperless environment, but there are transitional processes. Paperless tax preparation is one.

Your transition team must understand the business processes of the firm. Technological knowledge is not enough. You may want to use an outside consultant to help in the conversion, but be sure he/she is independent. Talk to the consultant’s clients and make sure they are not all using the same basic hardware and software.

During the analytical phase of the transition, you may discover weaknesses in your existing paper flow system, which of course should be corrected. 

Optical character recognition (OCR) is superior to image-only storage: All the information (words and numbers) in the entire document can be made part of the document’s identifying index. As a result, any word or number on the image can be searched and any part of the document can be retrieved. Another option lets the user select which process to use—image-only, OCR, or both, depending on the type of documents that are scanned and how detailed the indexing. For example, some documents, such as tax returns, can be filed and easily retrieved as image-only because the name and year are usually sufficient for retrieval. But a report with voluminous text and numbers might require OCR.

Most stored data will be filed in a typical tree format, with a branch for each principal category and sub-branches for individual work areas. The software can take that process to a more sophisticated level by using key information for indexing, which facilitates retrieval.

The scanner must handle volumes of documents so it should be heavy-duty with a maximum expected normal volume of at least 10,000 pages per month. If the scanner exceeds the recommended amount, it may not qualify for warranty repair. Budget about 10 percent a year of its original cost for maintenance. Typically scanners for organizations up to 100 employees cost about $2,500 each; for businesses up to 1,000 employees, $4,000; and for larger organizations about $15,000.

While it’s nice to have the fastest scanner available, it may be more practical and economical to have several slower units in different places—the slower rate being a trade-off for better locations. It should scan both sides of a document in one pass.

Cost of the system software will depend on the number of users:

             1 user                                                   $ 1,700 to $ 2,000

             2 to 10                                                    8,600 to  14,000

            11 to 50                                                  22,000 to  44,000

            50 or more                                               77,000 plus

The greatest savings will be from speeding up file retrieval and reducing clutter. It will be faster to open and review files when clients call with questions. The cost savings from decreased paper expense, copying charges, staff time, postage, and overnight charges also can be significant. Less file storage space will be required. Audit work papers will be Web-based, eliminating the need to carry heavy briefcases and secure files overnight.

From Journal of Accountancy, June 2005. Click on the following link for the complete article:
http://www.aicpa.org/pubs/jofa/jun2005/johnston.htm.