On my first trip to India over six years ago, I witnessed innovative tax return processing strategies. These involve concepts foreign to many tax partners and staff involved in the preparation of individual and business tax returns.
Two of the most revolutionary strategies I saw were Six Sigma and one-way workflow.
Upon returning home, several industry leaders and members of the press asked about the most significant thing I learned while in India. My immediate response was, "It's not about cheap labor, but rather workflow."
I even went so far as to tell Dave Wyle of SurePrep and Mark Albrecht of Xpitax that they were really in the software business and not tax return preparation. Both have commented about the accuracy of my statement many times since.
The big question is, what is unique about processing and workflow in India?
Let's start with the Six Sigma strategy.
Most processing centers in India at that time were set up to do banking and credit-card processing during the night (our business hours in the U.S.). Many leaders and managers had previously been trained in Six Sigma, in which a primary goal is to drive out errors at the lowest possible level. This is the opposite of what I saw happening (and still see happening) in many firms, where errors are discovered during high-level reviews, rather than in systems and at lower levels.
In the past few months, I have asked numerous firms to diagram their workflows for business and individual tax returns using a program like Microsoft Visio. Interestingly, most of these diagrams are presented in Excel - the tool of choice of too many CPAs. It reminds me of the carpenter with a hammer, to whom everything looks like a nail. Obvious results from these diagrams are the number of touches and loops in the process.
In India, sourcing firms quickly developed software to support the one-way workflow strategy. A point list is immediately provided to the preparer; however, the reviewers make necessary corrections and move the return forward. Another difference is that returns do not sit around waiting for review by a partner or manager. Each return is categorized by difficulty, and the preparers are graded. Preparers learn from the immediate feedback of the point sheet or just-in-time training.
When most firms hear this statement, they respond, "We can't do that, because we don't have that many people in a production facility. It would be impossible to pull people out of production for training."
Not so fast. It is possible with tools such as Camtasia from TechSmith or Adobe Capture. Someone can record the proper method of processing and entering data on any schedule or area of the tax return. This can be played on demand. The training is generally short and available online. In India they pull people out of production if they make persistent errors or need additional training. They also provide in excess of 100 hours of training before putting people into production. Does your firm provide that type of training to entry-level staff and interns?
In most firms, few, if any, people discern all of the steps in the preparation process. Partners generally mention five:
1. Obtain client information.
2. Assign the return.
3. Prepare the return.
4. Review the return.
5. Deliver the return.
There are always front- and back-stage steps to any process. Thus, there are probably at least 50 steps in most firms' preparation processes, rather than just five.
While we can't list all areas for improvement, the following are high-priority ones that can benefit your firm:
1. Spend time communicating with clients to improve the early receipt of taxpayer information.
2. Utilize tools that automate and standardize file structure and categories.
3. Evaluate new OCR tools that automatically enter data into the tax return software.
4. Determine firm standards for document storage. Confusion persists over whether to store tax documents in a workpaper container (such as ProSystem fx Engagement, Engagement CS or CaseWare) versus a full-featured document management application.
5. Review on screen, rather than printing and reviewing (a green initiative).
6. Manage documents digitally. Do not print and then scan documents.
7. Avoid the use of e-mail and attachments. (This violates laws in several states.)
8. Bill and collect with the delivery of the return. (You cannot check out of a hotel without paying. What would the collection rate be if hotels sent bills when they felt like it?)
9. Use portals for the delivery and storage of important tax documents, rather than paper. Portals with aggregation capabilities will become important in the future.
10. Train and manage your staff.
My conclusion is that significant room for improvement still exists in most firms' processes. However, many firms simply fail to document or innovate to leverage available technology. Also, it is difficult to review and change a process if you are part of the process. Often it requires an outsider who is capable and willing to ask the tough questions, like, "Why do you do that?"
The action plan below will assist your firm in improving its processes and profitability:
1. Designate a process improvement team with an outside facilitator.
2. Document the firm's current processes using a workflow diagram.
3. Compare and review those processes with peers.
4. Evaluate methods of implementing technology to reduce time.
5. Evaluate the firm's current business model.
6. Develop a one-page improvement plan.
7. Execute the plan.
8. Train to the plan.
9. Hold people accountable.
Change management requires both management skills and support from firm leaders. It is not unusual for partners to be obstacles and resist when proper training and a commitment to firm standards, policies and procedures do not exist. Accountability starts at the top, and the managing partner is ultimately responsible for success in this area.
All progress starts with the truth.
Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.
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