By Roman Kepczyk, CPA.CITP, CGMA, PAFM on August 29, 2017 minute read

“LEAN” Tax Production Opportunities


Your firm went paperless for tax processing a long time ago, but are you really taking advantage of the digital tools and production processes that have evolved since then? Many CPA firms created digital versions of processes that simply emulated their manual processes. For example, moving physical check-in lists to spreadsheets, scanning a client’s tax return at the back-end for archival, converting tax routing sheets to PDFs or practice management projects digitized each of those processes, but they did not significantly improve production efficiency as processes often remained compartmentalized with personnel doing their work in the same fashion as it always had been done before. If you were starting a firm from scratch today, you would look to implement the latest stable and proven integrated technologies that allow for mobile access and collaboration by design. Through Lean Tax Optimization (LTO) consulting with firms, we have identified specific applications and process changes where firms make the most consistent improvements in tax productivity, which we suggest firms evaluate and pilot during the summer season.


The greatest single improvement that firms can make in tax production is to implement a digital workflow tool that tracks every step of the tax life cycle and provides onscreen access to all users in the firm. The 2017 CPAFMA Paperless Benchmark Survey found that 62% of medium to large firm respondents had implemented applications such as XCM, Thomson Reuters FirmFlow, CCH Workstream or utilized projects within their practice management application. Digital workflow tools have the ability to capture all the information from tax routing sheets, due date lists, staff assignments, links to source documents and returns, as well as to integrate with document management and portal. Workflow tools allow the firm to stratify the types of returns with customized workflow steps appropriate to each level of tax return that also helps firms assign each return to the appropriate level of preparer and reviewer. It provides a single location for all authorized firm members to see the status of all returns and to easily move projects forward or reassign them if necessary with minimal duplication of effort.

Centralized Contact Management

When tax personnel is asked where they go to lookup client contact information, they often have a variety of responses including within the tax program, their personal Outlook, practice management and sometimes even in the client’s network files or engagement binder. Often, different personnel maintains email and physical addresses in each of these applications and the information are routed to them via different methods. This routing often results in the data being out of sync between the various databases which causes staff to no longer rely on locations that have failed them in the past. Tenants of Lean Six Sigma strive to capture data at its root source when the information is created and build quality control into the process to verify it was done properly and can be relied upon. LEANing this process entails having all contact updates being sent to a centralized administrative resource whom would be trained to update the contact database in every impacted application and that firm personnel would also know to go to one primary resource (usually practice management) to look up information. This then allows databases such as practice management, tax, and in some cases workflow, to be integrated so that fewer updates are required.

Digital Delivery

It is anticipated that firms will continue to have clients that only want paper correspondence for the foreseeable future, but the size of this group is expected to decline steadily and should not set the standard for delivery of the firm’s engagement letters, organizers, tax returns, and invoices. When partners walk through the actual process of getting a physical document printed, reviewed, stuffed, stamped and sent, including the staff time and materials involved as well as their own time, and then compare that to delivery cost in a digital format, it is amazing they don’t mandate digital delivery as one of their top priorities. Estimates of the differential cost savings between physical and digital delivery are $10 to $20 per interaction. From a “Lean” perspective the hardcopy version adds very little value to the process since more and more clients want the file digitally stored and end up doing the scanning on their end, so why not just give it to them as a digital file? Providing documents to clients digitally and securely allow the majority of them to access, forward, and respond more timely and at their convenience.

Standard Data Ingress

While clients traditionally mailed in or dropped off their documents in the office, an increasing number are sending them in digitally through portals and firm email solutions so it is imperative that internal procedures are upgraded to capture all ingress. This should include training personnel on how to process files that are sent in an email (and even text) attachments and determining if they should be the one to put the document in the client binder or if it should be an administrative task. Centralizing the vast majority of the received documents within the administration is the most effective method if the administrative team is trained on the tax file and binder tools and has the capacity to do quality control when capturing this data. Firms might consider having one administrative person scanning/importing the documents and another reviewing them for quality control. If firm personnel trust that this process is working effectively, there is no need to route any physical documents or lead sheets through the office, which adds time to preparation and review without adding any value (as personnel at higher rates are doing and re-doing quality control when reviewing the physical documents).

Collaborative Review and Push Forward Processing

The review process is one of the largest bottlenecks in the practice when preparers are not adequately trained to do quality control on their work before sending it for review. This is evidenced in firms where the majority of returns are sent back to the preparer with a point sheet, which the reviewer must spend the time to create and the preparer interpreting because this is viewed as needed “training.” The reality is that a significant portion of the margin on each return is lost because of this back and forth when in many cases the return can be completed if the preparer and reviewer would collaborate on getting it out using lean principals. This starts with better preparer training before tax season and requiring preparers to do an “express” review prior to release. This not only forces preparers to check their work for the most common reasons they are sent back, but it also trains them to be reviewers. Reviewers should make an effort to do all they can to complete the return in one pass, which means bringing the preparer in to verify corrections (or do so virtually with Skype) and only send back returns that cannot be completed. Yes, some returns will need to be sent back for absolute errors that the preparer will have to create schedules for, but the majority can be pushed forward while at the same time providing live training, which is the reality of the last few weeks of busy season anyway. The added bonus to this process is that more returns are completed timely which increases the margin on the return while reducing the overall hours it took to create the return.

Integrated Secure Email/Signature Tool

While it’s recommended that firms use portals for ongoing business clients with multiple interactions throughout the year, portals can be difficult for once-per-year tax clients to utilize. Almost half of the respondents to the 2017 CPAFMA survey utilized a digital signature tool this past busy season. In addition to 12% utilizing CCH’s eSignature application, the 2017 CPAFMA survey found that a significant amount of firms were also using a combined secure email and digital signature tool with the two most popular being Citrix ShareFile with RightSignature (18%) and cPaperless Safe Send/Sign tools (7%). Lean Six Sigma focuses on adding value from the client perspective, which means including proactive education for your client on using your portal, email solution and interacting with your personnel.

Summertime provides a unique opportunity for CPA firms to look inward at their own production processes, evaluate new applications, and pilot changes that will make their firms more effective in the long run. Taking a “Lean” look provides a fresh perspective and implementing solutions proven effective by your peers makes for more productive tax processes in the future.

This article was originally published for the American Institute of Certified Public Accountants (AICPA). Copying or distribution without the publisher’s permission is prohibited.


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