Paper Loan Files: Does Your Bank Know the True Cost?

Alan WooldridgeSure, there’s a tangible cost associated with deploying an electronic loan imaging system.

Software, support, and scanning hardware are just a few of the items you’ll need to budget for.

But, have you ever reviewed the negative impact that paper documents can have on your bank’s bottom line?

In this post, we’ll explore the true cost of maintaining the status quo.

The Tangible Costs of Paper Documents

At first glance, the simple act of printing and routing paper loan files does not seem like a budget buster. Paper, ink, and file folders are increasingly affordable, even for the smallest of financial institutions.

However, if you dig a little deeper, you’ll soon realize that there are many other related costs. For example, consider these questions:

  • If it weren’t for your loan files, would your bank need so many printers?
  • How much do you spend on printer maintenance each year?
  • What percentage of your office is used to house records, which would otherwise be used as revenue-producing workspaces?
  • How much time do your lenders waste by simply waiting for loan files to arrive?
  • What is your annual loan document courier expense?
  • Are you paying too much for postage because of loan files?
  • How many FTEs (full-time employees) are needed just to maintain your current document structure?

In reality, there are countless other costs that directly result from paper documents. It’s therefore no wonder why 69% of community banks have switched to digital loan imaging software. When you factor in the many expenses to support a paper-based system, an electronic solution usually offers a payback period well within twelve months.

Don’t Forget the Intangible Costs, Too

If overcoming printing, storage, and delivery expenses aren’t compelling enough reasons, there are also intangible costs to ponder. Having reviewed the workflows of hundreds of community banks, we routinely hear the following intangibles cited as motivation for “going paperless.”

Risk of information loss – A room full of paper documents is obviously susceptible to fire, flood, tornado, and other natural disasters. A digital archive, on the other hand, can be backed up to multiple redundant servers or drives, thereby reducing risk.

Inefficient manual ticklers – Paper loan files, by their very nature, require a separate exception tracking and reporting system. Despite your staff’s best efforts, manual ticklers are rarely accurate and highly prone to error. An electronic imaging system can be married with an integrated document tracking workflow, which clears exceptions automatically as new documents are received.

Lack of real-time collaboration – When everything is managed in physical loan files, only one person can access information at a time. This leads to long delays in the lending process and bottlenecks in back-office operations. A document management portal can overcome this situation by offering real-time accessibility to your entire repository. Multiple users can simultaneously share access to the same document, rather than waiting for a folder to route through interoffice mail.

Unreliable loan service – For institutions with more than a single branch, paper loan files also create unnecessary friction with customers. Instead of providing the answers your customers seek, a request to pull the file must be submitted to your headquarters. The files are then couriered to the branch, and another follow-up appointment must be set. The customer suffers because of this inefficiency. An electronic imaging system makes everything available within a single web-based portal.

Employee fatigue – Good employees are hard to come by. By forcing them into a paper-centric environment, you increase the likelihood of burnout. You want your team to perform at their top level of output, and they do too. Unfortunately, paper documents create unnecessary administrative steps, which diverts resources from your goal of closing more loans.

Take a Second Look at a Paperless ROI

If your institution has considered a paperless loan operation only to find out it was too expensive, it’s time you took a second look. Gather plenty of resources (here’s a free ROI analysis whitepaper), measure your fully-loaded cost of paper documents, sit through a few software demos, and compare vendor prices.

You might be surprised by the rapid ROI period offered by a paperless loan operation.

Author:

Alan Wooldridge is the President of AccuSystems, LLC, a bank technology and software development firm located in Pueblo, Colorado. To learn more about AccuSystems, visit http://www.accusystem.com.

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