In pursuit of the paperless office.

Those in the real estate industry, either owners, developers, syndicators or brokers, tend to accumulate significant amounts of paper in their business. There never seems to be enough space in the file cabinets to store prior year partnership tax returns, paid invoices, legal and mortgage documents, fixed asset records, or tenant files.

After several years of accumulating documents, many files are boxed and shipped to inconvenient storage space. Typically, retrieving a file from dead storage, (whether to obtain a prior year Schedule K-1 for a limited partner or to document a gains tax filing with invoices) can be agonizing experience. Who to send to the storage space, the availability of this person and the likelihood of finding the document are concerns that are faced regularly. Often, it takes hours, if not days, to track down some documents.

For most real estate offices, the problem is getting worse, with average paper volume growing 25 percent annually. The cost can be staggering - and it's not just the cost of storage. For example, filing or retrieving a single document can cost as much as $20 in labor. Finding a misfiled document costs an average of $125 in labor. Recreating a lost document (it's estimated that 7.5 percent of all paper documents get lost) costs an average of $350 in labor.

Document management systems may be the answer. Although a considerable investment in computer technology initially is required, a document management system will reduce these costs in the long term and make operations more efficient and effective.

In addition to eliminating filing cabinets of documents and off premises storage, document management systems have these benefits:

* Once an image is stored in such a system, many people can access it immediately and simultaneously, even from remote locations. For example, an investor's Schedule K-1 can be retrieved in minutes, rather than hours or days (as would be if it was stored off-site).

* If a document is converted by optical character recognition (OCR) software, it's possible to locate even misfiled material simply by conducting a computer search for key words in the document.

* By adding a password to files, users can keep certain information confidential.

* Data stored on optical disks can play a major role in disaster recovery.

The technology used to address the problem is document imaging using optical storage. While there are several imaging software packages, no one package is flexible enough to meet most users' needs. As a result, systems must be customized for the user's unique operation.

The technology involves the use of a scanner, which electronically converts an image on a page into tiny bits of binary information. The original can be a handwritten or typed document, a photograph, a computer printout of a rent roll, a lease or a tax return. The converted image then is stored on optical disks.

A typical document imaging system comprises three hardware components: for input, for storage and for retrieval. In addition, software is needed to manage the scanning, indexing and retrieval of the stored documents. Let's examine each of the three hardware components.

Input: A scanner is required to capture images electronically. Scanner speeds range from 4 to 100 pages per minute. An automatic document feeder and an imaging accelerator board also enhances speed.

Storage: A single scanned page can require between 20 and 100 kilobytes (Kb) of space, depending on the resolution and image compression. A 5.25-inch optical disk can hold the equivalent of approximately 30,000 pages. A multi-function disk drive costing about $3,000 is needed to write to an optical disk. With a re-writable optical disk, data can be recorded on the disk, erased and then replaced with new data. Another type, called a WORM (Write-Once-Read-Many) disk, may be more appropriate because the data on such disks can't be changed.

Retrieval: The final component is the one that gives most users the biggest problem. To retrieve a document, the user has to know where to look. That's where indexing becomes important. Documents are retrieved according to the way they were filed (indexed) during the conversion process. The document imaging industry uses a standard for indexing, similar to most office filing systems: Documents are stored in "file cabinets," which are made up of "file drawers," which in turn consist of "file sections" broken down into "file folders" with file names, numbers or both. If a document is converted using OCR software, any OCR readable data in it can be used as the basis for the index - for example, partner number, tenant name or any unique word.

Real estate offices, faced with the problems of file storage and retrieval should consider the benefits of installing and converting to a document management system. As with any emerging technology, those who quickly become experienced in imaging applications stand to benefit the most.