The concept seems tempting and money-saving: Sending documents to clients electronically versus snail mail and paper, or meeting with clients over Skype or some other remote-conferencing service.

No travel, no postage, no toner cartridges to replace -- the savings seem endless. 

But so are the pitfalls, if security fails when transmitting a client’s sensitive financial documents, or if clients don’t take to the idea or aren’t approached about the advantages of a virtual practice in the right way.

Getting started

Building a virtual practice can involve many kinds of preparation. “When I began to build my practice, I built relationships with clients so that when many of them moved away, they asked if they could continue to use my services,” said Enrolled Agent Mele Perrego in Clayton, N.C., vice president of the North Carolina Society of Enrolled Agents. “When my husband and I moved New York seven years ago, two thirds of my clients chose to stay with me via mail, e-mail and fax.” She has since replaced these transmission methods with portals.

EA Lynn Schmidt of Lynco Financial & Tax Services Inc. in Winter Haven, Fla., said it took her about a year of learning and planning via printed material, seminars, webinars and asking a lot of questions before she launched her virtual practice. She has for two years been using a portal to store and share client returns and supporting documents.

“Clients who use it like it,” she said. “I have one or two who are resistant and I’m not sure why except it’s change.”

“I’ve found the younger taxpayers to be especially open to this approach, as they tend to be most comfortable in the virtual world,” said Donna Crowley of Port Orange, Fla.-based Actual Numbers Tax & Accounting, a member of the National Association of Tax Professionals, who has launched a tax prep and accounting business “with the intention of being paperless from the start.”

“I think older clients will be more intimidated by it,” said CPA Steve Trojan of Crystal Lake, Ill.-based SMT & Associates. “The younger the client, the more they have grown up with this technology so it is more natural. The older the client, the more they want paper and are more leery they are of Internet-based solutions.”

“People get afraid of the word ‘portal,’ but if I say, ‘Do you do online banking?’ and they say yes then I say this is the same thing,” said Schmidt. She added that clients can also be made to see that portal communication and electronic filing sharing can be especially effective when clients are geographically separated or in the wake of a natural disaster when paper documentation would’ve been destroyed. 

Paper chase

For many practices looking to go virtual, the first step is replacing paper with electronic files and figuring out the best way to electronically transfer sensitive files. Crowley, for example, uses document manager software that integrates with document transfer software (SecureFilePro through Drake Software), “and the integration is very smooth for both the client and me.” She even scans in her handwritten engagement notes.

EA Michael Harvey Baum of Baum Accounting, Tax & Computer Help, in Naples, Fla., a member of the National Association of Tax Professionals, said he has operated a completely paperless office for several years. Baum transmits client returns using Adobe Send/Now, which he finds secure. “The client then receives a separate e-mail from Adobe with a link to their portfolio to be downloaded. The link expires in seven days, so they have plenty of opportunity to retrieve their information without it staying on the cloud permanently,” he said.

He also recommends that preparers obtain the full version of Adobe Acrobat. “Most probably have a standard edition and Adobe offers a low-cost upgrade,” he said. The full version, he stressed, allows him to create client portfolios that have each of the individual files and include invoices, the engagement letter, the return, work papers, and other documents.

“The full version allows me to create my own stamps from any compatible file,” Baum said. “I have a complete series of tick marks and circled numbers that I can place directly on the work paper which is opened on a second monitor. I’ve also created stamps that have my letterhead and the client folder label, which eliminates the need for expensive stationery.”

“The full version also allows me to combine the individual files into one binder that can be renamed,” he continued. “This reduces the file clutter and also automatically creates a bookmark with the file name in the combined file. I find this is very helpful when I need to go back and check the file from a previous year. The bookmarks will show each major grouping within the file.” 

All documents are scanned to PDF and placed in the client’s annual folder, and “another great function is the ability to redact Social Security number and other sensitive information in any PDF document,” Baum said.

(Part 2 will examine preparers’ and clients’ concerns with security of information transmitted and stored in a virtual practice.)