Lean Tax Quality Control Opportunities

by Roman H. Kepczyk, CPA.CITP, CGMA

In our Lean Six Sigma consulting within CPA tax practices, we sometimes find that firms that have transitioned to a paperless environment in a piecemeal fashion actually became less efficient in certain components of their tax production processes. In this article, we discuss specific areas where firms should be looking to implement lean tax processes with a focus on how to build quality control (QC) into these processes so they can be effectively relied upon from the start. The reasons for paperless failures vary but, with another busy season rapidly approaching, it is the optimum time to look at the firm’s processes. 

One of our primary mantras when conducting a Lean Tax Review is for firms to look at how information can be captured at its root source and verified with quality control procedures such that all firm members accessing the data from that point forward can confidently rely upon it. Below are five areas that firms can target their tax QC efforts this busy season:

Standardized Contacts: When we ask firm personnel where they go to get a client’s email/contact information, we get a variety of answers ranging from practice management software to the tax program, to Outlook, to CRM. When we ask staff what they are supposed to do when they are aware of a change in client contact information, we also hear a variety of answers which results in inconsistent information being stored in the firm’s various databases. The optimum QC solution is to have all contact changes sent to a centralized location where a well-trained firm administrator can go into ALL firm databases and update them at the same time with the same firm standard format (upper/lowercase, abbreviations and punctuation), which ensures they are done timely and consistently.

Source Document Scanning: We often see firms that scan source documents at the front end still route the paper file to the preparer and reviewer. We hear from tax staff that they want to make sure that no documents were missed. Instead of having each preparer re-review the manual data and work with the digital image, the QC solution is to have tax source documents verified with a firm administrator so the digital document can be relied upon for preparation. This will create better consistency and efficiency as personnel learn to rely on the onscreen image.

Preparation Express Review: Sending a return back to the preparer with a list of points to be reworked is one of the biggest productivity wasters in the tax process, especially when the reviewer can, but doesn’t, correct an error and spends more time writing up those points instead of fixing them. Firms can build efficiency into the tax preparation process by allocating time at the completion of preparation for the preparer to work through an express checklist of the most common errors so, in effect, they are doing a QC check while at the same time learning to be reviewers. If a reviewer can then complete a return and push it forward, the margin will be significantly higher than sending that return back for re-preparation and re-review.

Tracking Missing Items: Another area where we find a lack of standards is in the handling of missing items, which some individually track in a spreadsheet or physical list, others in the tax return, tax binder, and still others in their emails. QC can be built into the process by utilizing a workflow tool or notes page within the tax program allowing for a standardized, centralized location that anyone can look at to see the status of a missing item. Again, providing training on the application and firms standards is critical for consistency.

Centralized Workflow: Every firm today should be utilizing either a digital workflow application or projects within practice management so anyone can see the status of ALL projects in one screen. When firms manage multiple lists for due dates, missing items, client assignments, etc., all these resources have to be manually reconciled between the various tools which unfortunately is how deadlines are missed. Educating all staff to use a single workflow/project tracking system, and allocating time for personnel to properly update the system at the completion of each step, creates a system that everyone can rely upon and builds QC into workflow management.

The old adage of “If you don’t have time to do it right the first time, when will you have time to do it over” applies to how firms should look at their tax processes. Identifying the points where quality control can be built into firm procedures will help firms be more productive in the future.

Roman H. Kepczyk, CPA.CITP, CGMA, LSS BB is the Director of Consulting for Xcentric, LLC and works exclusively with CPA firms to implement today’s leading best practices and technologies incorporating Lean Six Sigma methodologies to optimize firm production workflows. Roman is also the author of the 2017 Edition of “Quantum of Paperless: A Partner’s Guide to Accounting Firm Optimization” which is available to members of the PCPS section.