Transforming Client Accounting Blog

New Reporting Options Respond to Growth in Cloud Computing 

How is your practice planning to comply with the IRS mandate that will require all professional tax preparers to file electronically?

While the IRS recently announced that the requirement for all tax-preparers to e-file would be phased in over two years—requiring all preparers who anticipate filing over 100 returns over the year to make the transition by January 1, 2011, and for all providers who anticipate filing 11 or more returns to comply by January 1, 2012—it is clear that the IRS is following its Congressional mandate to make the process of tax filing primarily electronic.

For many tax preparers who have already adopted e-filing, this deadline will pass unnoticed, and may even provide a competitive advantage. For other preparers who have put off adopting, or simply have not seen the need for a digital workflow, this is a crucial time to make long-term strategic decisions about technological adoption and cost management.

If your firm is faced with a need to upgrade its workflow in order to maintain current levels of efficiency while complying with the IRS e-filing regulation, the preferable strategy might be to spend as little as possible until the technology begins to truly benefit the practice.

Increasingly, firms and preparers are meeting this challenge by adopting cloud financial solutions.

One of the best reasons to start doing business in the cloud now is that cloud-based solutions can accommodate a paperless workflow. In this scenario, administrative support staff may scan incoming documents, which are then identified, labeled, and bookmarked by an automated, cloud-based software platform, where the tax preparer can quickly access the information to save valuable time.

“Smart Scanning” has been around for a while. In a recent study, 70 percent of firms reported that they were scanning tax documents. However, while scanning is the first step to a paperless workflow, cloud-based financial solutions, such as Copanion GruntWorx for tax document automation, and XCM for firm-wide tax workflow, help tax-preparers to leverage this practice, making them more efficient during the busy tax season.

Mandatory e-filing means that all tax preparer workflows will end in the digital space, so consider the ROI implications of using cloud financials to implement a streamlined, paperless process for your entire firm. Some of the questions firms should ask are:

• Will adopting a cloud-based workflow solution pay off by increasing productivity; and
• Will choosing more user-friendly solutions mitigate training costs?

As James Bourke, CPA.CITP, of WithumSmith+Brown, puts it, “Before deploying new technologies or replacing existing ones you need to ask yourself, ‘How will this deployment make us a better, more profitable firm, and is this technology aligned with our strategic plan?’”

With conventional, non-cloud-based software solutions, firms must consider not only the cost of the licenses, but also increased IT costs and the “planned obsolescence” model of traditional software, requiring additional large expenditures to upgrade.

Cloud financials, by contrast, are priced on a rolling per-user, per-month basis, with ongoing support, training, and upgrades to the platform included in the Service Level Agreement (SLA).

Some of the benefits of this model are:

• Ease of fitting cloud financials into a tight budget;
• Having new users trained as needed ; and
• Limiting IT expenditures

How is your firm preparing to meet the e-Filing requirement? Is your firm moving to a paperless tax workflow? Let us know by leaving a comment.

Here we are again. It’s November, and you are coming to the realization that another tax season is just around the corner. Doesn’t it feel like the 2009 tax season just ended?

Do you remember thinking in the spring that, “Next tax season, my firm isn’t going to …” or “Before next tax season, we better …” Many of those ideas often revolved around investments, such as technology, that would help you, your staff, and your firm to be more efficient, effective, and forward thinking during the 2010 tax season. Anything! As long as it would make the tax season, well…less taxing.

With less than three months until the full-blown tax season gets underway, what can you do at your firm to increase efficiency while continuing to offer the exceptional service your clients have come to expect? Below are some best practices, as well as reference links to tools and resources you still have time to invest in.

Best Practices

• Process Review and Improvement: Streamlining workflow is an ever-neglected to-do item for many CPA firms, especially as client demands and regulations increase. It may prove valuable to have someone internally or externally document your existing business process and identify tasks that can be eliminated or done more effectively. Preparing a graphical workflow of the steps your team takes to complete the process may enlighten you.
  
  Edward V. Jennings, CEO of Copanion, Inc., a tax document automation software company in Andover, Mass. and an AICPA Trusted Business Advisor partner, commented that firms that have moved to a paperless tax workflow, the efficiency gains have been phenomenal—some report time savings of up to 45 minutes per return. With the time saved, tax professionals are focusing on higher value activities and delivering better customer service to differentiate and grow their practices. Achieving results such as these is possible, and it's easier than many think.
  
  

• Create a Single Location for Digital File Storage:  Whether you are using a Windows® file folder structure, or a more sophisticated professional document management system, the goal is to keep digital files organized and easy to find for all your staff. Not only does it save time, it increases efficiency among staff members who need to search for client content throughout the tax season and workflow process. It also reduces the loss of a potential “roving” paper file.
  
  

• Invest in Technology/Hardware: Investing in a high-speed scanner and dual monitors may seem trivial, but think about how often you wished you had electronic files to work from versus paper files. And, remember the last time you had to keep switching back and forth from Excel™ file to Excel file to get the information you needed?  
  
   
• Implementing Worflow Tools—Now is the time to add workflow tools, such as a tax document automation tool and/or a workflow management tool, to help you be more efficient during the looming tax season.
  
  

Additional Resources

There are many resources to research if you’re considering taking the next step toward automating your tax workflow, including process efficiencies, paperless solutions, and technology investments.

• Cloud-Based Tax Workflow Solutions:
  • AICPA Trusted Business Advisor ™ Solutions
    • Copanion GruntWorx – Tax Document Automation Tools
    • XCM Firm-Wide Workflow Solutions
• Books:
  • Managing your Tax Season—an AICPA publication and new edition—This book will give you fresh insight into tax preparation—and very likely result in significant improvements to your current system. You will learn to analyze your existing tax season system and target problems so that work will be more efficient, errors will decrease, and personnel.
    
    
• Articles:
  • Five Tips for Smooth Tax Workflow Management
  • Will You Be Ready for the Next Boom
  • Tax Season is Only a Few Months Away
  • Workflow Automation on the Rise
    
    
• Free White Papers
  • A Tale of Two Firms: Indentifying the Rules of Rolling Out a Successful Paperless Tax Workflow
  • Building Your Bullet-Proof Plan for Paperless Practices
  • 10 Questions to Ask When Considering Tax Document Automation
  • Automating the Tax Process for Maximum Efficiency – Taking a Phased Approach
    
    
• Free CPA Firm Case Studies
  • The Evolution of a Paperless Tax Workflow—Importing Data from Scanned Tax Documents, Marcum LLP
  • Automating Workflow for Firm-wide Productivity, Sandersen Knox & Company, LLP
  • Taking Paperless One Step at a Time to Achieve Maximum Process Efficiency, J.R. Helms & Associates
  • Fuoco: Sharing “Better Practices” for Sustained Growth

As you contemplate the upcoming tax season, consider what you could accomplish if certain tasks were automated, files were structured electronically, client documents were easily accessible by your staff, and so much more. How much would all of that be worth to you?

There is still time to research and evaluate products. Share your thoughts and experiences here.

In July, the PCAOB (the Board) issued a proposed revision to AU 330, The Confirmation Process, that if approved will modernize and expand the requirements of audit confirmations. Today, auditors use audit confirmations to obtain reliable audit evidence from third parties, which is an important part of the audit process. Since the current standard AU 330 was written more than 15 years ago, the Board agreed that the standard needed to reflect advances in technology—acknowledging that while technology can improve efficiency, it can also be used to perpetrate fraud, such as intercept confirmation requests and change confirmation responses before they reach the auditor.   

The proposed standard also addresses the continued deficiencies seen within the confirmation process itself by defining what a confirmation response is and isn’t, and expanding the types of accounts that are confirmed during an audit. Here are some key changes that will take place if the proposed standard is adopted by the Board:

1.      Expands Receivables Requirement expands the requirement of confirmation procedures to receivables that arise from credit sales, loans, or other transactions.

2.      Requires Confirmation for Cash requires auditors to perform confirmation procedures for cash and other relationships with financial institutions, such as:

a.      Lines of credit;

b.      Other indebtedness;

c.       Compensating balance; and

d.      Contingent liabilities including guarantees.

3.      Definition of Confirmation Responses—a confirmation response is audit evidence obtained as a direct communication to the auditor from a third party, either in paper form or by electronic or other medium.

4.      Confirm Validity of Addresses—requires an auditor to determine the validity of addresses in confirmation requests.

5.      Oral Confirmation Responses—An oral response to a confirmation request is audit evidence, but it does NOT meet the definition of a confirmation response.

6.      Internal Auditors Cannot Send Confirmations—To evaluate audit evidence obtained, auditors cannot use internal auditors to send confirmation requests, receive confirmation responses, or evaluate the audit evidence obtained from performing confirmation procedures.

7.      Negative Confirmations may be used to reduce audit risk to an acceptable level when:

a.      The combined assessed level of inherent and control risk is low;

b.      A large number of small balances is involved;

c.       The auditor reasonably expects a low exception rate;

d.      Auditor has no reason to believe that the recipients of the requests are unlikely to give them consideration.

An auditor should  perform other substantive procedures to supplement the use of negative confirmations.

8.      Alternative Procedures for Non-Responses requires the auditor to perform appropriate alternative procedures for all non-responses to positive confirmation requests.

9.      Investigate All Exceptions requires the auditor to investigate all exceptions in confirmation responses to determine why each exception occurred and whether any exceptions, individually or in the aggregate, are indicative of a misstatement or of a previously unidentified risk of material misstatement.

10.  Reliability of Electronic Confirmations—In assessing the reliability of electronic confirmation responses, the auditor should take into account the following risks:

• Process might not be secure or properly controlled;
• Not from a proper source; and
• Integrity of the data may have been compromised.

11.  Direct Access—If account access codes are given to the auditor by management of the company and not the confirming party, evidence obtained by the auditor does NOT meet the definition of a confirmation response. It’s only considered audit evidence. If access codes are given to the auditor by the confirming party, the confirming party must also represent its acknowledgement of the use of the direct access by the auditor and that the files to be accessed are responsive to the auditor’s request.

12.  Disclaimer or Restrictive Language—If a disclaimer or restrictive language causes doubts about the reliability of a confirmation response, the auditor should obtain additional appropriate audit evidence.

To learn more about the PCAOB, AICPA and IAASB  proposed/new standards for audit confirmations, listen to our September 27 recorded webinar “Understanding the New Standards for Audit Confirmations” with speaker Brian Fox, CPA.

For more about standardizing your firm’s audit confirmation process, reducing your exposure to fraud, and increasing efficiency visit www.CPA2Biz.com/Confirmations today.

Recently a discussion topic was posted on the AICPA Trusted Business Advisor Solution LinkedIn group about what it means to be a trusted business advisor and how to best keep an open communication stream with clients.

When thinking about marketing strategies for trusted business advisors, one of the LinkedIn group members said, “It’s all about positioning yourself as not only your client’s trusted financial advisor, but also as their trusted business advisor.” He went on to say that advisors need to focus on general management issues, not just tax and accounting matters, and to visit with clients at least once quarterly to ensure you are kept abreast of what’s happening in their business.

Another member concurred that one of the most valuable techniques a trusted business advisor can employ is the “human touch” method of checking in regularly, outside of the service cycle.  She wrote, “Nothing says I’m thinking about you and I care about your success more than an outbound e-mail or phone call out of cycle.”

“Avoid being on the wrong side of the price/value curve,” commented another member. “Now more than ever, we need to communicate value.”

Some of the marketing strategies several people mentioned included:

• Webinars to communicate legislative/regulatory changes and how those changes may impact your clients’ business;
• Client newsletters and white papers on broader, general management topics demonstrating your command of not only the profession, but of the business world overall;
• Speaking engagements aimed at value-added services and issues clients face  in the current economic climate; and
• Hiring marketing, communication, and/or public relation staff to assist the firm in establishing its position as a trusted business advisor.

You might consider joining the AICPA Trusted Business Advisor Solutions LinkedIn group to learn more about best practices in the profession, to share advice, to ask questions, and to become a member of a 1,000+-person group of professionals like you.

Additionally, “Becoming a Trusted Business Advisor: How to Add Value, Improve Client Loyalty, and Increase Profits” was recently released. Find out how to uncover critical client needs in ten minutes or less; how to help your clients prioritize their wish lists; and how to help them quantify the value of addressing each of the issues that keep them awake at night!

Further, CPA2Biz is also here to help you build your Trusted Business Advisor brand and relationship with your clients by offering several marketing programs to help keep your firm’s trusted business advisor status prominently in the marketplace, including:

• CPA Client Bulletin is a monthly newsletter designed by the AICPA as a marketing and communications tool for your practice. Choose to send as an email newsletter, print newsletter or as a pdf file you can post to your site. Your firm stays top of mind, and your clients and prospects will appreciate the tax, business, and financial planning ideas. Build your reputation as a trusted business advisor with CPA Client Bulletin.
• Google AdWords provide you with expert Search Engine Marketing (SEM) and consulting services to help you target local, regional, or national clients in a cost-effective way with your own customized online Google advertising campaigns.
•  Ready-to-use and customizable emails, flyers, and web site content and PowerPoint slides that you can download and share to help explain the benefits of cloud-based accounting services directly to your clients.

If you have trusted business advisor tips and marketing techniques, please share your thoughts and comments here.