Before you calculate the ROI for your enterprise content management (ECM) business case, you’ll need an accurate projection of costs and benefits. For many people—especially for nontechnical folks—working with numbers can be intimidating. But if you’ve identified and clarified the business need, gathered the right team and tested your assumptions, this part won’t be nearly as hard as you think.

Start by estimating costs and benefits for the option you consider most viable. You only want to estimate ROI for one option, two at the most. Trying to calculate the numbers for every possible option will only drive you crazy.

Before you get started, you can also check out Gartner’s advice for getting more value out of your ECM system.

Costs

You’ll look at two main types of costs: project costs and operating costs.

Project Costs

Project expenditures are pretty straightforward: You consider the type of work to be done on the project and approximately how long it will take, and then put together your estimate. Here’s a handy list of project costs to consider, including salaries, supplies, materials and equipment.

Capital expenditures aren’t as simple. A project cost becomes a capital expenditure when you’ve spent the money to acquire or develop an asset. The financial rules for capital expenditures are complex and often change, so you’ll want to check with your finance department to find out how you must represent them in your analysis.

Operating Costs

Operating costs are how much it will cost to maintain whatever you’re proposing. Operating costs include ongoing expenses like salaries, office space, and maintenance and licensing fees. Some projects will reduce operating costs, so look at expenses you’ll eliminate as well as those you’ll add.

Benefits

Benefits mainly consist of revenues and productivity savings (costs you’ll avoid through greater efficiency).

Commercial organizations generate revenues through sales, while public organizations create revenues from processing more tax receipts, issuing more permits or otherwise operating more efficiently. Work with experts at your organization to estimate revenue. They’ll help you set realistic targets—both how much you can expect and when you can expect it.

Some productivity savings relate to product costs, others to overhead costs. ECM projects generally create overhead productivity savings, which come from cutting current, ongoing expenses that stem from how you run your business. Maybe the system you’re proposing for the accounts payable (A/P) department would enable your company to hire fewer clerks without compromising payment. These savings are usually the same every year.

That said, you might be able to cut other types of operating expenses: Maybe your A/P initiative will eliminate the need for staff overtime or reduce errors in processing. Or perhaps the company will spend less on offsite storage, paper or printing.

Where do I get the numbers?

Obviously, you’re not sitting alone at your desk making up these numbers. You may get them from colleagues, vendors, professional associates or industry standards. However you get them, be sure to track where they came from so you can go back for further information if necessary.

Also remember: you can’t take the numbers you get at face value. Find out what they’re based on and select the value you believe is most realistic. And only use numbers that have buy-in from the departments affected. When the CFO questions your ROI estimate, you want to be able to tell him that his team has endorsed the numbers it relies on. If you can’t back up the numbers when stakeholders scrutinize them, your entire business case loses credibility.

Building a business case for your organization doesn’t have to be complicated. Check out our Document Management Software Justification Toolkit and discover how other organizations like yours have successfully built the business case for document management software!

Justification Toolkit

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