Implementing tax automation and digital workflow

Editor: Ami Oppe, CPA, CGMA

To implement automation technology into a tax practice, as the old saying goes, “teamwork makes the dream work.” Organizations will not achieve success with just one person championing the new software; team members at all levels of the organization need to buy in to the change. Without a strong and widespread commitment, roadblocks, delays, and dissatisfaction will quickly arise. Change is difficult because it requires people to step outside their comfort zones. However, with commitment from colleagues, positive change is possible.

Research and demo

Planning for change is just as important as making the change. Consulting colleagues at various levels within the organization will help to develop a well-rounded perspective. Presenting a big-picture view helps everyone to understand why his or her task is important and necessary and how it affects other steps in the process. Consider forming a committee to research and try out the various software products available. This helps create buy-in at all levels. Additionally, the committee members can facilitate training, be the go-to people for questions or concerns, and act as a positive force within the firm.

As a first step, the committee should document the current processes and procedures involved in all tax engagements. This will help identify problem areas, any process duplications, and areas where the new software can create efficiencies and improve upon current processes. Along with documenting processes and procedures, indicate the amount of time currently allotted for each task. This will help to show where time savings are possible, especially by applying those efficiencies across all client work.

The next step is to explore software alternatives that could improve the areas identified above. A good rule of thumb is to explore between three and seven options and schedule a demonstration with each software’s company. This will allow for comparing the features and costs among the identified potential alternatives.

During each product demonstration, be sure to keep in mind the firm’s current processes and how the product will change, add to, or decrease them. Since committee members will be championing the new product, it is helpful to have different perspectives on how it will be implemented. For example, an administrative assistant will likely have different questions than a senior manager will, but they are both important to the new process’s success. One important question is obviously the cost of the product. Be sure to understand all of the costs associated with the product, since deep discounts will likely be offered in the first year to win a firm’s business.

Consider this: The next time you are sitting on an airplane, bus, or train, look around — what are people doing? Most likely, a lot of them are using their smartphone or tablet. This is an age of rapid and mobile communications. What if clients could use their commute time to sign your engagement letter or complete their organizer and checklist? Mobile apps are not just for ordering from Starbucks or Chipotle; they can be useful tools for communicating with clients more efficiently.

Documenting processes

When firms consider how to make the leap to using automation technology, it is imperative that they understand all the steps involved with the current process. That can be overwhelming, but breaking it down into separate categories may help. Consider the following categories to help develop a thorough list of the activities that may be improved with an automation process or a new software solution.

Onboarding clients: New clients are great; however, onboarding them can be challenging due to the use of multiple systems, the various people involved, and the many steps in the process.

When documenting the current process, determine how many touches are necessary to complete the onboarding form. Is the document a fillable PDF or a spreadsheet? Does the form have restricted fields that require completion? Does it use drop-down menus for questions with a uniform set of responses to make it easier to enter clients into the customer relationship management (CRM) or billing system?

Perhaps the client usually fills out the onboarding form by hand. This may lead to difficulties interpreting handwriting, transcription errors, lost forms, information residing in multiple places, skipped answers, and more. These difficulties could delay the new client’s setup, which could delay the project’s start.

Accounting programs and databases: Does the following sound familiar? The same client information (name, address, etc.) must be entered into several systems. But what if the systems could “speak” to each other (e.g., when you enter the contact into your time and billing software, it imports automatically into your document management system, tax software, and/or CRM system)? Imagine the time savings and efficiencies gained by having to enter client information only once.

How does the firm keep track of client correspondence and information? Is there one central database with an exhaustive record of all clients? Or does each professional keep track of his or her own individual database via spreadsheets or, even worse, sticky notes? Having a unified system that allows for seamless access to all of this information can save everyone a lot of frustration.

Organizers/checklists and engagement letters: Each year when tax season rolls around, one of the most daunting tasks is distributing the appropriate organizers and engagement letters to each client. This process is a prime target for streamlining. Consider incorporating features such as e-signatures, mobile access, fields prepopulated with clients’ information, and other automated practices. A paperless document management system could become a real timesaver.

Client document submission: During tax preparation, obtaining client documents can create a backlog for practitioners. Available software can retrieve the information needed from certain third parties and upload it to the tax software. This is a timesaver for clients and professionals.

Even for documents that clients must submit directly, there are ways to improve these processes. Consider requesting electronic document submission. This may be especially helpful for clients that already maintain their records electronically.

Preparation of tax returns: Several options are available to streamline tax return preparation. By using a scanner equipped with optical character recognition, preparers can import information into a tax return automatically. Advance planning and training are critical for implementing these automation processes into a firm’s workflow.

Review of tax returns: With the increased use of scanning and the ability to import data directly into the tax return, the review function and process will need to be examined to find efficiencies. Staff may be able to perform the first-level detail review, which should free up supervisors and managers to perform a higher-level review and may provide more time for planning and advisory thinking rather than having to worry so much about the details’ being correct.

Sending returns and electronic authorization forms to clients: Another area that is likely ripe for improvement is providing the copy of the return to clients once it is completed and obtaining their signatures to authorize e-filing. Clients will likely have varying preferences with regard to obtaining a copy of their return, so a firm must consider that as it looks to improve processes.

An electronic delivery system could help make this process more efficient. Allowing individual clients the option to e-sign their e-filing authorization will likely lead to a faster turnaround and less scrambling for authorization forms at the final hour.

If you provide returns electronically on a portal or a mobile app, consider including a link to make tax payments and/or estimated tax payments. This will make clients happy that everything is in one place.

Signing electronic authorization forms: E-signature and tax products offer solutions that allow clients to return the electronic authorization in a secure manner. The IRS requires that if an e-signature is used, clients must complete knowledge-based authentications to validate their identity. Note that e-signatures are not allowed yet for business returns, so different processes or instructions will need to be considered for signing those returns.

The client side of the process: A good practice is to fully train the administrative team on the client side of this process. That way, if a client runs into trouble, team members can easily lend a hand and resolve the client’s issues.

Thought should be given to ways to automate other important client work, such as tax projections or other planned projects. For example, certain clients should be contacted regularly for tax planning. Or the firm could develop valuable online educational resources for clients, such as tutorials or training videos. It is important to have a plan for communication and implementation.

Combining tech tools with essential training

New technology can certainly help with efficiencies and time savings to ease the burden on tax preparers, but it cannot take over for them entirely. While software can virtually eliminate data entry and reduce errors, it is still vital to have a staff of technically trained professionals to review returns and advise clients. Firms that embrace working with new technology will find it easier to deliver “Wow!” service to their clients.

The AICPA Tax Section provides a go-to resource in the Tax Technology Resource Center (available at www.aicpa.org for the information and tools you need to embrace technology trends and the exciting progression of the tax profession.)