Since many of us are in the middle of our hectic tax seasons, I thought a nontechnical article might offer a nice respite (primarily for me).
The volume of financial and tax data that passes through our hands this time of year can be overwhelming. Therefore there are several key elements that must be present in any well-run tax department, whether you are running a corporate-tax department or a tax department of a public-accounting firm.
While the following list is far from all-inclusive, in order to have a well-run tax department, you need the following core elements:
- Well-documented and effective data-management systems in place, including a thorough back-up systems to avoid loss of data;
- Appropriate and up-to-date software tools; and
- Adequate training for personnel.
Additional suggestions with respect to each of these core areas of focus are reflected below:
- Effective Data Management
- This process starts with securing documents from clients.
- Electronic (scanned) documents received from clients should be immediately filed under a segregated annual folder on your server.
- Consideration should be given to encouraging clients to fill out electronic organizers that can be imported directly into your tax processing software. Pricing your services to offer a discount for the efficiency gain will likely encourage client adoption.
- Hardcopy client documents supplied should immediately be converted to electronic form upon receipt and stored in the client's folder on the company server.
- Audit and tax files should generally be segregated since there should be different file retention rules for each.
- A detailed file retention policy should be maintained, periodically updated and relevant provisions shared with clients.
- Remote access of such data should be limited carefully to higher level employees.
- A fool-proof back-up system for ensuring the data is not lost due to server damage, energy spikes or other surprises. Also restore data periodically from back-up sources to confirm the back-up system is working properly.
- In addition to backing up the main server(s), make sure individual staff's/managers'/partners' desktop and laptop computer data are backed up periodically to an offsite service via a variety of web-based back-up service providers.
- Evaluate all these systems for compliance with U.S. Securities and Exchange Commission (SEC), Internal Revenue Service (IRS), other regulatory authorities, as well as your insurance policy.
- Appropriate and Current Software Applications
- Care must be taken to match specific software to current and future needs. For example, a mid- to large-CPA firm may need the sophisticated power of GoSystem Tax RS or ProSystem fx, but the cost and sophistication may be overkill for smaller practices. TurboTax or Lacerte may be sufficient for these smaller practices.
- Fixed-asset packages such as Fixed Assets Creative Solutions or ProSystem fx are critically important if your tax practice is working with capital-intensive businesses. Such programs allow practitioners to track depreciation under multiple methods such as: book, regular federal tax, alternative minimum tax (AMT) - federal, regular state tax, AMT-state. Careful analysis of specific practice needs and the ability of these applications to import into your tax-processing software program are critically important to minimize unexpected problems.
- With the popularity of Apple products amongst your younger workers, it is important to identify incompatibility and other issues associated with certain applications. For example, the iPad(R) does not open PDF documents and PowerPoint presentations can encounter compatibility issues as users migrate between PC and Mac hardware. Ensuring that you have all necessary cords, etc. to "plug and play" are important and early arrival for presentations is a good idea. When presenting to a board of directors, delivering a proposal, conducting a training session or making a speech, make sure to bring along hardcopies in case your brilliant presentation gets trapped in the technology maze.
- Ensure that your employees have valid licenses to avoid heavy fines from software manufacturers and to be certain that your employees can effectively work on client-prepared or internally prepared documents. We have probably all experienced the frustration of being unable to work with a PDF or QuickBooks file since a client or co-worker has sent us either a newer or older version of the document.
- In addition to possessing the right software, obviously your tax department must also have the right hardware, including fast computers, the right scanners and printers and the all-important monitor set-up. The current preference is at least two and preferably three monitors to be able to review current-year tax-return data, prior year returns and other applications such as Excel, depreciation software or tax processing software concurrently. Laptops are certainly the computer of choice with their increasing speed and decreasing prices and tablets will likely be evaluated carefully later in the year.
- Employee Training
- Just as important as having the right software and hardware is making sure that your employees are adequately trained. We often assume that college grads are well versed in Microsoft Office applications; however, with the popularity of Macs, this is not always the case.
- Excel is clearly one of the most oft-used applications in the Microsoft Office suite, yet the average user likely only uses five percent to 10 percent of its full capabilities. There are many other examples of underutilized software tools that can increase efficiencies and accuracy with some basic training programs dramatically. Depending on your firm's size and budget, such training can take the form of in-house training, online training or outsourced training at a private training company, your state CPA society or through a local university, junior college or trade school.
- Assigning staff and managers to become the resident "expert" on given software can work very well in larger organizations. They can then train a back-up person and be responsible for disseminating technical information and updates to the rest of your staff for that given software.
- Investing in training will generally pay significant dividends in the form of efficiency gains and quality control.
"Busy Season" can be an excellent time to identify strengths and weaknesses in your tax-compliance processes. This evaluation process should extend to your personnel, software, hardware, as well as your clients' processes for submitting data to you.
When things slow down after summer, you can then begin the re-engineering process and hope that next year runs smoother than this year.
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