What is the cost of a lost document? There are two components to the cost regardless of the document being either lost or just misplaced.
One component is the potential cost that a decision is made or action taken with incomplete information and there are negative consequences. For instance, if a contract is lost, one party to the agreement could take advantage of the other party. This situation might occur even if a replacement document could be obtained, but maybe not in a timely manner. Therefore, the employee makes a decision based on what they remembered. We call this the “Oh Sh&#” cost because it usually doesn’t get noticed until it is a surprise, and its usually a bad surprise.
Another component is the cost to try to locate the document. Some amount of time is taken by one or more people to locate the document. This could be searching the office or network drives, cloud systems or even calling associates that might have a copy. The time could be minutes or hours. When you multiply the time by the number of people involved and an average labor cost per hour, it adds up. It adds up even faster when it happens every day or every week. We call this the “APB” cost, as in All Points Bulletin where the whole office is involved in locating a missing document.
The cost of an APB is relatively easy to estimate. Here is a reasonable set of assumptions to estimate a cost. A company with 500 employees probably experiences 5 document searches a day that last at least 15 minutes. If the average labor cost of the employees involved in the search is $50 an hour and there are two people looking each time, then the daily cost is $125 (5 docs x .25 hours x 2 people x $50/hr). If you multiply that by 250 business days in a year, it is a large number – $31,250.
It is very difficult to estimate the cost of an Oh Sh&# situation. However, if the same size company experiences one situation a month and the average negative consequence is $5,000, then the total annual cost is $60,000. There was a recent news story about a firm that missed out on $190 million because a document was completed incorrectly. It is probably not too much of a stretch to think that a mere $60,000 lost could be due to a missing or misplaced document.
No paper filing method nor digital document management system is going to solve this problem 100%, but a digital approach with the proper configuration will reduce the chances. A document management system that indexes the text of every document, including PDFs, is going to significantly improve the chances that a lost document will be found. Of course, having a well thought out process and controls for adding documents to your document management system is also going to help.
>Be sure to have required fields or required information for every digital document added. If the document is a vendor contract, make sure the vendor name field is “Required”. If the document is an HR document, make sure the Employee ID is a “Required” field. Better yet, make sure these required fields are approved, complete lists that the use must select from. This will help reduce and possibly eliminate APB’s and Oh Sh&# situations.