Taming Your Firm's Paper

Although the main attraction is less paper, document management systems do so much more.


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Above all else, Ronald Kranzler wanted consistency throughout Held, Kranzler, McCosker & Pulice. It was something the New York-based firm did not have in its workpapers, which were once set up on a job-to-job basis. "Often this meant, when employees received small jobs, such as a two-day engagement, they didn't have the time to set up detailed binders," says Kranzler, the firm's managing partner. "We'd open a binder and there would be 20 documents with no tabs, sections, or table of contents. There was no organization with small jobs."

The 20-person firm began the process of automating document management four years ago by looking at how it prepared financial documents. "We found our workpapers lacked consistency, and we were amassing a tremendous amount of documents," he says.

Paperless Strategies

Partner Insights

Many firms look to the technology department for developing a paperless strategy. But that's not where the leadership must come from, says Michael Johnson, partner of Pensacola, Fla.-based O'Sullivan Creel.

"Document management cannot be an IT initiative. It's a process improvement and it needs to have support from the top down," says Johnson.

The 165-person firm, which has been using CCH ProSystem Document fx since 2002, appointed a staff team to investigate document systems.

"Once we found the systems we liked, we brought in the IT people to help us make the right decision. And when it came time for the implementation, we had a team that consisted of employees from our tax, audit, and practice divisions that worked on procedures and re-thought the way the firm did things," adds Johnson.

The team approach also worked for the Fort Collins, Colo.-based CPA firm Soukup, Bush & Associates. The firm formed a Paperless Transition Committee to make its CaseWare Working Papers implementation go smoothly.

The committee included one partner, the IT manager, and four associates who represented the various professional services provided by the firm. The committee provided recommendations to the firm, as well as designing and implementing the systems, and also training the remaining firm associates on the paperless system.

But Kranzler says that his firm put document disorder behind it by moving to a paperless environment in which it utilized CaseWare Working Papers and CCH ProSystem Document fx. The firm is pleased with the results.

Moving to automated document management "has provided us with obvious cost savings; flexibility of staffing; the ability to back up all workpapers, tax returns, and permanent files; and savings in space requirements," he says.

In fact, the firm was so successful that it has offered paperless consulting services for about two years. The income from that source was 5 percent of total revenue the first year, and is expected to represent 15 percent of the total this year, with professionals billing $225 an hour.

Services for smaller firms that lack IT departments can involve product selection and implementation. With larger firms, HKMP primarily consults on CaseWare and helps develop in-house templates.

"Three or four years ago, paperless was innovative, but now it's necessary. It's not, 'Should I go paperless?' but 'When?' The longer a firm waits, the further they fall behind," says Kranzler.

That is the message coming through loud and clear among vendors and CPA firms alike. Whether the firm's priority is cost-cutting, client satisfaction, or regulatory compliance, paperless document systems are not so much the way of the future, but more the way of today.

"Paperless is the single biggest issue we see, and we have thousands of firms ranging from large to small enrolled agents using our document management systems," says Mike Sabbatis, vice president of sales for CCH Tax and Accounting.

"The market is maturing. Firms are starting to truly understand what technology can do for them. It changes the way a firm works," agrees Joe Harpaz, president of Immediatech. Immediatech, which markets the Web-based GoFileRoom, has seen the number of customers for the document management system increase by more than 100 percent in the last year, and predicts the number will triple this year.

Keeping It Consistent

A major change for HKMP was how to handle financial statements, utilizing CaseWare's Caseview, a report writer that, when included in an engagement file, allows the firm to create knowledge libraries that house the firm's standardized documents, such as footnotes and opinions.

If a footnote is needed for any financial statement, the accountant can merely go to the library and click on the note that is needed. Caseview automatically inserts the note in the respective client's financial statement, as well as entering the appropriate numbers in the proper place in the footnote.

"With Caseview, once you write and edit the note, it can be used for any client without further editing. Since the numbers are taken from the same database that the financials use, there is much less chance of error. All reports are the same, and I'm able to sleep better knowing somebody didn't do something goofy," says HKMP's Kranzler.

Paperless Doesn't Mean Effortless

A paperless office may be the promised land. Getting there can take a lot of wandering through the desert before arriving, because there are many challenges ahead.

Sole practitioner Robert Liberto is struggling with setting up the system for his Baltimore-based firm, which, besides Liberto, includes two staff professionals and a secretary. He purchased the File Cabinet Solution CS from Creative Solutions to utilize what he called the "less-paper" system. "My two staff members work at home part-time, and the goal is to scan individual tax data so they can prepare the returns from home and not have to lug around a large pile of files," says Liberto.

Liberto used FCS during the 2005 tax season primarily for storing information documents, including W-2s and 1099s. He also stored the 2004 returns in the system.

However, his big issue is converting workpaper files for the firm's compilation and review work to electronic files and determining the best way to set up the review process. To convert files, Liberto has started in a limited way using Excel. "I have looked into a few of the electronic workpaper programs that are on the market, but so far have not found one that seems to fit our needs or that I felt was worth the cost. It seems that using Excel and Word would be a less costly approach and accomplish the same thing," adds Liberto.

He finds it difficult to keep staff from saving multiple copies of the same document in different folders, or in the same folder but with different document names. "File Cabinet does not let you view other documents in the folder while you are saving the current one, so if you have an Excel worksheet that you update or make changes to, if you do not look in that folder first you would not know if it had already been saved, possibly under a different name," says Liberto.

Liberto is considering coming up with a list of standard document names that would be used throughout the firm.

Similarly, the Orem, Utah-based firm of Hawkins, Cloward & Simister found that the biggest challenge lie in getting the staff to think of the electronic file as the actual file. The firm didn't change the way the staff performed their work with the paperless system. Instead, it bought folders with tack-down clips to remind the staff that completed workpapers are to be scanned. All documents must then be be shredded or returned to the client. Nothing is to remain in the folder.

However, that's easier said than done. After partner Eric Nuttall received a call from a client asking about the resolution of an IRS notice, he retrieved the client file in eFilecabinet, only to find no paperwork about the issue. It wasn't until weeks after assuring the client that the issue was resolved that he found the IRS notice in the paper file.

"The manila folder is simply a document management tool. This is why keeping the paper or just dipping into paperless storage won't work. You have to achieve a different thought process in your staff. You cannot get by going part way," adds Nuttall.

Meanwhile, the file cabinet in ProSystem Document fx file now organizes each client by year. "All a partner has to do is put a client's name in and it opens a file with all that client's papers. If a lawyer calls up and has a question about a mutual client, we can pull up the information immediately and send it," says Stephen Barrett, director of information technology.

Implementation took three months and costs were approximately $17,000 for installation and the CCH software, which is priced at $1,750 for the first user and $450 for each additional user. The firm spent another $7,000 for a server. CaseWare cost $4,000 for the software. The firm also purchased laptops and additional monitors in order to implement a dual-monitor system. It bought laptops for about $3,000 each, and six monitors at $400 a piece. It acquired a Ricoh IS400 scanner for $4,000, and purchased multi-function devices from Canon for use as field scanners at $400 each.

Revamping up

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