Published: October 2014
By Dave Mcclure
There is a growing consensus among accounting firms that they are losing control of tax workflow. In the crush of new responsibilities — from the Patient Protection and Affordable Care Act to efforts to identify and combat identity theft — tax and accounting practices at every level are finding even the most sophisticated workflow tools may not enable professionals to keep pace.
That’s disconcerting for an industry that has prided itself on its business acumen and service to clients, particularly given the emphasis on efficiency and cost effectiveness that has occupied the attention of partners in every size of firm for the past two decades. It is a problem that affects not only public firms, but the tax departments of corporations worldwide.
In a 2012 report on workflow, Deloitte Tax noted that, “Tax leaders often do not have access to a consolidated inventory of the various national and jurisdictional obligations that their company is responsible for. In many cases, they do not know if filings are being completed on a timely basis – or at all. In addition, they may have little insight into the tax processes linked to statutory obligations or internal non-statutory obligations and processes. Without a complete inventory of these obligations, tax executives may not have a clear view of all their department’s obligations or visibility into the processes to meet the obligation deadlines.”
While this assessment may seem bleaker than it need be, it does point to the problems the industry is beginning to encounter that can only worsen if not addressed in the near term:
- Increasing responsibilities in a highly regulated environment. From Sarbanes-Oxley to Circular 230, from the Affordable Care Act to identity theft, and from employment verification to enforcement of financial controls, accountants are being tasked with ever more liability. In fact, this weighs heavily on the minds of professionals in every size of firm. The American Institute of CPAs’ 2013 PCPS Top Issues Diagnostic Report shows that firms of virtually every size list the increasing complexity of laws and regulations as factors for management consideration.
- Transition to the cloud. As difficult as it may to believe, nearly half of all accounting firms have made the transition to the cloud, according to a late 2013 survey conducted by CPA.com, the technology arm of the AICPA. But they expressed concern over cloud vendors’ ability to manage data breaches and maintain effective internal controls, with the percentage of those identifying themselves as “somewhat confident” or “not confident at all” — the two lowest categories — rising from 15 percent a year ago to almost 43 percent now.
- Workflow is not optimized. A workflow system is not simply a means to assign responsibilities and track the progress of tax returns through completion and review. To be successful, a system must reduce inefficiencies and be optimized to drive higher levels of productivity. Tax workflow systems that cannot do this simply waste resources — the firm would be better off starting over, or reverting to paper cover sheets. One of the new fronts in the battle for productivity is the use of electronic signature pads. Vendors of tax workflow systems are promoting the use of these small scanning devices to fill in signatures on forms. While the time saved on any single tax form is small, the cumulative gains in time for total return preparation can be impressive.
- Workflow systems are isolated. All too often, it is easy to view the workflow system as existing in isolation — somehow disconnected from other operations of the firm. But if it is to be optimized for peak performance, it is necessary to integrate the workflow procedures into all of the other systems of the firm, from billing to client communications and client services.
- Differentiating types of workflows within the firm. Almost from the outset of workflow management some 25 years ago, the struggle to build, optimize, operate and benefit from tax workflow systems has been one of differentiation: differentiation of manual versus electronic systems; of accounting workflows from tax workflows; and of professional versus staff responsibilities. That is unlikely to change in the near term, though efforts continue at more firms.
In recent months, a new form of differentiation has been considered for tax workflow, built around the number of professionals and the resources required to complete simple versus complex returns.
Under this differentiation schema, tax returns are prepared either through a “traditional” workflow or an “advanced” workflow:
“Traditional” tax workflow engagements are managed by a single professional preparer with the support of an administrative person to handle data compilation, scanning, data entry and organization. It requires only a single interview with the client, and is the most common workflow model for high-volume individual tax return practices.
By contrast, an “advanced” tax engagement requires a more robust response, often involving several staff in the preparation of multinational, federal, state and local tax returns. Administrative chores are handled by more experienced para-professionals, with professional staff held in reserve for tax issues, exceptions, planning and reviews. While a simple 1040 return for select clients may fall in this category, it is also used for preparation of tax returns for business entities with complex ownership structures, multi-state apportionment of income, oil and gas partnerships, cross-border or expatriate returns, or elections for special treatment of transactions.
The marketplace for tax workflow solutions is changing in a tangle of new regulations, new responsibilities and new demands for performance. While the industry is struggling to keep pace, the best of the systems identified for 2014 have established a strong start toward resolving these issues.
Practice Management Workspace (Office Tools Professional)
Practice Management Workspace from Office Tools Professional combines dashboards and data entry into a single workflow screen that combines contact management, calendaring, collaboration and task delegation, expense and billing, and tickle-file management in a desktop-based solution.
From phone calls and e-mails to documents flowing in and out, everything is tracked, accessed and measured. Workspace tracks how much time was spent and how much was billed for optimal firm productivity.
Practice Management integrates with the Microsoft Office programs Word, Excel and Outlook, in addition to popular mapping programs. Reports can be exported directly to Word, Excel and all common formats. Firms can create timecards for payroll or billing inside of Microsoft Office, and an Adobe add-in enables printing or saving of any file in PDF format.