10 ways to grade your tax season

Published
  • April 28 2017, 5:50pm EDT
With April 18 in the past, tax practices should start assessing their performance.

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Once the post-season parties are finished, once everyone’s back from vacation, and once everyone’s caught up on their sleep, it’s time for tax practices to turn a critical eye to their own internal workings in order to make things better for next tax season.

With that in mind, here are 10 areas on which to grade a tax practice (and its staff, tax software providers and clients).

1. Overall profitability

To judge a practice’s overall profitability, it helps to have data on its billings and realization from the previous year – but also what was projected for this year, in order to compare the real results against those projections.

Besides projected-versus-actual billing, it’s also worth looking at expected-versus-actual hours and other staffing metrics. If it’s possible, firms may also want to drill down on individual accounts or types of accounts to see how profitable they actually are.

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2. The practice’s tax software

Apart from the coffee maker, there is no tool more important to tax season that whatever tax prep software the firm uses. To that end, they’ll want to judge whether it offered the forms they needed, how hard their staff found it to use, how well it worked with the firm’s other software and systems, how any upgrades performed, and so on.

Many tax software providers start offering tests and demos of new packages and features during the summer, and it’s helpful to have a good idea of what worked and what didn’t before kicking tires on new packages.

3. The tax software provider

Some technology companies build great software but fail to support it properly, so it’s worth considering how the software vendor performed separately from how the software itself performed.

How responsive was the vendor to technical issues and questions? How reliable were their support teams? Did they have any unexpected service outages? How good were they at communicating about outages or other disruptions, and how quickly did they resolve them?

4. The practice’s workflow

This is an area where it pays to bring in people from all levels of the tax practice, to get a wide range of perspectives on how work is routed through the office. What held returns up the most – was it dilatory clients? poor scheduling? software or hardware issues? unnecessary steps in the process?

If the biggest roadblocks don’t spring from the firm’s processes or technology, they may come down to individual performance, which is the next area to examine.

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5. Staff performance (and partners, too)

Consulting with individual managers and reviewing individual returns will help figure out which staffers needed more training, better management, a stronger grasp of the firm’s processes – or a new career.

However, it’s important to make sure that everyone gets assessed, as partners and managers can cause just as much trouble during tax season as anyone else.

6. Staffing levels

This can be part of the overall assessment of the firm’s profitability, but it’s a complex enough area to reward diving into on its own.

Some questions to consider: Was staffing demand consistent throughout the season, or did it vary? Is the firm’s ratio of temporary to permanent tax help appropriate? What does the growing use of extensions mean for post-season staffing?

7. Client profitability

Legacy clients with low fees may be dragging down a firm’s overall profitability, as can partners who are afraid to bill for all they’re worth. Firms may want to set a fee level and examine any client who falls below that, allowing exceptions only with very good reason.

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8. Client personality

Some clients may not be worth working with, no matter how much they pay. Some don’t pay much; some have returns that are either too easy (uninteresting and unchallenging) or too hard (not worth the fees); some have unrealistic or insane ideas about turnaround times and service levels; some fight over fees; and worst of all, some abuse staff.

Identifying and getting rid of them will make next tax season much better for all concerned.

9. Client satisfaction

One easy way to judge client satisfaction is to note how many of them return each year. That’s a great start – but it’s also worth tracking how many of them refer other potential clients to the firm.

That’s purely passive, though: The best way to find out what you’re doing right and wrong with clients is to ask them, preferably with a formal survey, either by e-mail or by phone.

10. Security

This can be hard to judge, but it’s worth trying to find out how closely staff followed the firm’s security policies. Did clients and staff actually use the firm’s portal or encrypted e-mail systems for exchanging information, as opposed to just e-mailing it in the clear? And did the firm track how many clients’ identities had been stolen this year? Does it have a service in place to help those clients?