[IMGCAP(1)]As a tax preparation business owner for more than 30 years, Chuck McCabe considers his success due in part to being proactive in structuring his business policies and procedures. 

“Unexpected problems and expenses will always arise but will be much easier to deal with if you have procedures in place,” he said. “A thorough policies and procedures manual will have written procedures for prevention and problem resolution.”

Based on his experience during past filing seasons, McCabe, founder and chief executive of Peoples Income Tax Inc. and The Income Tax School, has come up with some issues he urges tax business owners to consider.

“As an owner or even a manager, it is important to always know what’s going on and be aware of the day-to-day. It’s also important to know that you cannot possibly take on every problem that occurs in the office. You’ve got to learn to empower your people, and this starts with training,” he said.

“We train our employees in tax preparation, policies and procedures and customer service to prevent operational and customer service problems,” he noted. “Having a written policies and procedures manual enables us to provide consistent quality service and efficiency, even in branch offices.”

McCabe advises training employees to own the problem. “This means that if they answer the phone or a client walks in with a problem, it’s now that employee’s problem and they are responsible for seeing it through. This prevents problems from falling through the cracks. There’s also a paper trail—a problem resolution form has to be filled out for every issue that arises.”

McCabe has systems in place to help prevent client problems. “First and foremost we have a strict policy requiring every tax return we prepare to be checked by another preparer to minimize errors that could result in damages and the loss of clients,” he said. “On occasion, we hire secret shoppers to have their returns prepared in our offices and complete a form to report the office procedures that are or are not being followed and the quality of the experience.”

Aside from client problems, there also needs to be some consideration and planning for other problems that may occur, he suggested. “To prevent employee theft we have checks and balances for our accounting, and limiting signature authority to the owners. Our tax preparers are also required to deposit receipts in the bank daily without fail. This prevents embezzlement and situations where the client does not have the money in their account to cover a check deposited late.”

E&O professional liability insurance serves to prevent a large claim from a client due to errors and omissions from becoming a financial burden, McCabe observed. He also has “key man” insurance in place to enable the company to have adequate funds to replace him and offset any short-term problems in case of his demise.

“To address break-ins or fire, we have a security and fire alarm system with eight cameras, plus monitoring that will dispatch the police or fire dept. Our P&C [property and casualty] insurance policy has a business interruption rider.”

McCabe suggests that when feasible, leases should include a provision prohibiting the landlord from leasing to a competing tax service in the same center.

Lastly, McCabe has tax preparer employment agreements with enforceable non-compete, confidentiality and non-solicitation provisions to prevent preparers who leave from taking away clients, plus agreements to contract assignments in the event People Income Tax sells its business.

“All of these items are things that you should not only plan for, but also write down in a policies and procedures manual,” McCabe suggested.