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By Rick Stuart, CPA, CFP
Published by AccountingSoftware411.com
Shifting from paper--based to a paperless environment can affect each person and firm differently. For me, a paperless practice means not having to jump up and run to get a client’s file off the shelf whenever they call, and having access to all clients files whenever or wherever I want to work – provided I have my laptop and Internet connectivity. Instead of hauling a box of client files around, I take my laptop home, snap it into the docking station and go to work. At home, I work with two 17” monitors; at the office, everyone uses three monitors so we can see the tax preparation software, a client’s scanned data and last year’s tax return at the same time.
Having a paperless practice means I can work productively from almost anywhere. Ultimately, being paperless makes my life easier. During the busy tax season, I can go home to have dinner with my family. Later in the evening, I log on to my office server through a Citrix connection and review and correct tax returns with the tax preparation software viewable on one screen and all of the client’s scanned documents on the other. When I finish reviewing a return, I click “print” and our accountant’s copy is preserved as a PDF file, the government copy is queued for e-Filing, and the client copy prints on our office printer regardless of whether I’m working from home or at the office.
Ten years ago, I dreamed of working in this way and being a paperless practice. Today, it is such a joy to actually have the capability to work effectively in this paperless way. Successfully transitioning to a paperless practice can be a reality in your firm, provided you perform due diligence and address the three major components impacting the evolution: hardware, software and people.
Hardware
We chose a competent and experienced technology service firm to design the right hardware configuration for our practice. The recommended hardware design when going paperless requires:
- File Servers: One or more will be needed to contain the data and make it available for all team members who need to use it;
- Scanners: One or more will be needed to scan the documents into a digital format; and
- Three Monitors: All workstations will need three monitors to keep multiple programs and documents viewable at the same time.
Software
There are a variety of vendors offering paperless document management software, with only a select few providing all of the features and capabilities we define as highly desirable. We recommend selecting paperless document management software with the following capabilities:
- Scanning with OCR functionality so that all documents can be indexed for easy retrieval;
- The ability to organize documents in folders and subfolders and to rearrange them during preparation and review of tax returns and financial statements;
- The ability to annotate and mark documents;
- Storage of documents in a logical structure for easy retrieval;
- Use of a standard (vendor-independent) file format (i.e. PDF) so information will be easily retrievable for years into the future; and
- The ability to change spreadsheets and Word documents in the client folder while preparing and reviewing workpapers.
People
The staff and accountants are the most important component of a paperless practice. The people on your team will need to have:
- Processes and procedures designed to allow all of the files to be structured in the same way (to increase efficiency) and information to be in a format that will make it easily
- Pre and post-installation training to allow team members to take full advantage of all of the features of the software and shows them how to economize their time by using
shortcuts; and
- Monitoring of the work product to insure that the processes and procedures are adhered to.
A Plan for Going Paperless
The “Going Paperless” process has to begin with a thorough plan. I know a firm that bought scanners with the intent of saving all client files on their computers. The scanners were the extent of their paperless plan. Essentially they operated without a plan, and their paperless project never really got off the ground.
When the decision has been made to shift from paper-based to paperless, the most practical advice we could give your firm would be to follow these guidelines:
CHOOSE - The plan must begin with choosing the right document management software (DMS), because the most expensive aspect is not the actual cost of the software, it’s the amount of time and effort that you will invest setting up the process and defining the procedures, including training staff and converting files to the new DM system. We investigated DM systems from six major vendors, and chose Doc.It because their technology had the most flexibility and adaptability for our firm.
DEVELOP – To ensure our scanned workpaper files for our firm’s 1,200 individual tax returns would have the same logical order, we developed the process and procedures as the second step. Doc.It played an instrumental role in planning this aspect by sending in their trainer to help us apply best practices for setting up workpaper files. It would be a costly mistake to skimp on time and effort with this step. Firms that try to shortcut this aspect often are tasked at a later date with redesigning their processes and files.
IMPLEMENT - It’s beneficial to set up a few client files and work their returns all the way through the paperless DMS process before it’s rolled out through the entire firm. Any kinks in your design and procedures will be brought to light, allowing the firm to make necessary adjustments before a full-scale implementation.
TRAIN - By testing the processes with a few client files in advance, all staff can be trained on the software while learning your firm’s internal paperless DMS process and procedures. Staff may need refresher training courses periodically.
MONITOR – To get quality workpaper products that are well organized to support the tax returns, the staff work product needs to be monitored for any evidence that additional training is necessary. Doc.It offers free downloadable training tutorials for staff, and free one-hour training webinars for firms to ensure all are gaining the maximum level of productivity from every feature within the Doc.It Suite.
Vendor-Independent File Storage
Prior to using Doc.It, we chose a DMS that stored tax returns in a proprietary format rather than PDF files. The process of adding Word, Excel, and PDF documents to that filing system was very cumbersome. Furthermore, once stored, files did not retain their Word and Excel characteristics.
One of the features that we really like in our current system is their Work-In-Process (WIP) Binder which retains files in their native format, allowing Word and Excel files to be reopened as fully functional Word and Excel files. Those documents can be modified during the process of preparing returns, and ultimately can be saved as permanent PDF files when the tax return workpapers are ready to be archived. The file structure is vendor-independent, which means that we could move away from Doc.It at any time in the future and we would have all of our files and file folder structure in an easy-to-access, windows explorer tree structure.
Working in a Paperless Practice
We continue to do the same work we have done in a paper-based practice, but now are able to do it in a much more productive and profitable way. For tax return preparation, we start by scanning all of the client documents using Doc.It Scan, which creates a PDF file of each single or multi-page document into the client’s WIP Binder folders, such as the client’s folder for W-2s, 1099-INT, K-1s, and many more. With the documents organized in subfolders it is easy to navigate through the workpapers on screen during the preparation and the review processes.
We save client e-mails into a client’s correspondence file - or to their WIP Binder – which Doc.It has made easily accessible by placing a “Save to” button on our Microsoft Outlook toolbar. We click the button, select the client folder and then name the document. Our established retention period for the document is automatically applied.
Doc.It presents the completed tax return(s) and/or financial statements, including the related workpapers as a “published file”. A published file is one that you would put back on the shelf because the job is complete. For tax preparation, once the completed tax return and e-File documents have been added to the WIP Binder, the process of preparing a published file automatically converts any Word or Excel documents to PDF files, creates a bookmarked file of all documents, and eliminates any unused subfolders in the workpaper file. The system then sends the document to the Doc.It Archive (much like our old file room of client paper files). With access permission, anyone in the firm can view the bookmarked tax return and workpaper file at their desk or from home using a Citrix connection.
The “Work-In-Process” (WIP) documents are used when gathering data from the client, preparing the tax return, reviewing the tax return, printing the tax return and receiving e- Filing documents from the client and the government. Then the file is published in permanent form and saved in a bookmarked and viewable format for the entire file retention period.
The Doc.It Viewer contains the toolbar of annotation tools to use for the purpose of writing on, marking up, highlighting, approval stamping, tick marking and adding a calculator tape to any PDF document. Any notes or markings that you would put on a paper version of a workpaper can be added to a PDF document using these Doc.It tools. The added markings and text can be applied in a variety of colors and sizes depending on preferences or needs.
It is a great benefit to a firm when the DMS technology provider has worked with a lot of different CPA firms and has experienced hundreds of implementations. A vendor that deserves your consideration has that level of extensive implementation experience, knows what works and what doesn’t, and will customize the system to fit your practice. If you expect to buy software and set it up yourself, your learning curve goes way up. You will have to experiment through trial and error to find out what works and what doesn’t. It will be incredibly costly and a waste of resources to change file setup after you have completed several hundred files – the frustration may cause you to give up and go back to a much less productive practice of working with paper files.
Going paperless has been a journey for our firm. We continue to take steps to fully develop our practice to use less paper and more electronic files. For us it is an evolutionary process, and we are already reaping great rewards and benefits of going paperless.
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