Eight digital keys to tax productivity

The summer extension season provides a unique opportunity for CPAs to look at their tax production processes and proactively evaluate and implement digital solutions that can positively transform their practices. Many firm owners and partners, particularly those that were early adopters of paperless solutions, believe that they have already optimally automated their tax processes and are comfortable with the way they are currently operating. However, with the continuous (and accelerating) evolution of digital tools impacting all firm production, many are missing out on significant digital opportunities. Below are eight keys to unlocking your firm’s digital tax production potential.

Re-evaluate tax application integration: Many firms adopted a “best of breed” approach when it came to selecting digital applications, resulting in the use of stand-alone tools that did not natively integrate with their tax programs and created the adoption of manual “work-arounds.” With the evolution of programming applications, all the major tax vendors have expanded integration capabilities to connect tax applications more effectively with practice and document management, client portals, electronic signatures, and research programs. This summer, firms should proactively think about improved integration within their tax applications, which, in most cases, not only saves production time, but also minimizes errors.

Centralized data ingress: The pandemic pushed clients to deliver documents in whatever format they were most comfortable with, which, in addition to firm portals, included faxes, texts, emails, physical mail and drop-offs. Client documents could be received by any firm member, whom would be tasked with properly archiving them and documenting their receipt, which led to a wide variety of differing processes and file naming conventions. Funneling all source documents to one person or a centralized team of tax-trained administrative personnel promotes standardization and can identify clients that need to be educated on using portal and secure email solutions for digital delivery.

Modern portal promotion: The acceptance of physical source documents costs the firm significantly more in processing than mandating digital ingress. When a client mails or drops off physical documents, the firm is responsible for taking custody, scanning/archiving, and then returning those documents to the client. Using a portal or secure email solution allows those documents to be delivered in a digital format with an audit trail identifying when those documents were received, and specifically which documents were received. Firms should mandate and proactively train all clients to utilize their portal or secure email solution to streamline data ingress.

Additionally, the organizer process utilized by most firms is time-consuming, expensive, and antiquated, particularly as so many clients entirely ignore them. Today’s modern portal features again provide the answer as they offer clients a custom-tailored questionnaire and listing of the documents the firm needs to complete their return. Modern portals have the capability to not only create a customized provided by client (PBC) request listing, but also a dashboard and deadline reminders to keep both the client and the firm informed as to the status of those documents. Virtually every portal solution has integrated similar capabilities which firms should evaluate and implement this summer.

Standard bookmarking and import: One of the notable trends during this busy season was the adoption of scanning tools that not only forced the standard bookmarked 1040 file, but also forced the adoption of optical character recognition (OCR) tools that scanned all recognized source documents and placed the captured information into the appropriate forms. Applications such as CCH ProSystem fx Scan/AutoFlow, Drake Gruntworx Organize/Populate, and SurePrep 1040Scan create digital efficiency reducing front-end preparation time.

Real time collaboration: Sending a return back to a preparer with review notes for correction and then re-reviewing the return significantly cuts the profitability of that return when compared to using real-time or digital processes to complete the return on the first review. Firms should pilot processes to have the reviewer collaborate directly with the preparer in real-time either physically or digitally. Not only will the return be completed faster and at a lower cost, but this “push forward” process provides direct training to the preparer, rather than asking them to interpret reviewer notes. Adoption of video collaboration tools (Zoom and Microsoft Teams) peaked during the COVID crisis and have proven to be effective not only for video meetings but for “live” tax return review and correction of documents shared on screen.

Electronic signature: If your firm is still utilizing “wet ink” signatures to designate the final review of a tax return it is well worth considering a better approach. Onscreen review and digital firm designation alternatives are much more efficient than the manual process of physically printing, signing, and then re-scanning the document for archival. COVID forced Federal/State governments to accept digital signature tools for the past two busy seasons which will be increasingly difficult to reverse as most clients (and firms) have experienced overwhelmingly positive benefits. Firms that have separate processes for dealing with both manual and digital signatures should evaluate how to standardize the use of digital signature tools for all possible documents. Whether it is for an engagement letter, filing a tax return, or authorizing an extension, firms should use a standardized digital signature approach whenever possible.

Archival and delivery: Detail the process to finalize, archive, and deliver a tax return to the client and it quickly becomes obvious where native integration of the tax applications makes a difference. Stand-alone products that require that each digital file be individually named and the specific file location selected are prone to mis-filing or errors as opposed to integrated solutions that automatically publish to the appropriate client file and portal, including emailing the notification to the client.

Invoicing and integrated collection: While many firms have adopted the use of digital invoices and statements, the integration of links that allow for digital payments is gaining traction and should be evaluated this summer, particularly for tools that can integrate payment transactions with the firm’s practice management and/or accounting application to import data rather than having to re-key and reconcile it.

Digital technologies are evolving at an increasingly faster pace including within your firm’s own tax production. Take time to evaluate the latest digital opportunities available and transform your firm towards more effective production processes.