Articles

By: Dwayne Bragonier
Published by: CA Magazine, CICA

Many get nervous when talk shifts to the paperless office. They really don’t know what it means. Here’s a primer on how it’s done and where to start.

In 2002, the chartered accounting firm SB Partners adopted electronic document management software. Since then, it has scanned several years of archived paper files into electronic format and shredded the original paper, and now has much of the firm’s information at its fingertips. Nevertheless, Roy Sieben, a senior partner with SB Partners in Burlington, Ont., says, “We are getting ready for paperless — but there is a great deal of confusion on what constitutes paperless.” Why would Sieben, whose firm many would say is already there, say it is getting ready for paperless?

Most of us do not understand what paperless is about. We lack a firm grasp of its meaning or the processes it requires. No wonder we hesitate to move toward it, and that’s why we tend to wait for some sort of revelation to take place. When someone starts to talk about digital offices, electronic files or even use the expression “paperless,” most of us want to shrink into a corner so we can claim plausible deniability. However, no one would begin to suggest that you could provide public accounting services without the use of electronic technology.

One of the problems we have is that the term “paperless” is a misnomer. We’re not talking about removing all paper from our offices; rather we are saying we recognize that our offices are no longer primarily paper-based but are now electronically focused. We live in an age of electronic or digital awareness, and the stages of this awareness strongly resemble the stages of human awareness — childhood, adolescence and adulthood.

The ’80s and ’90s were the childhood where we experienced the naive stage of digital awareness. During these formative years, we played with our toys, thus allowing our cognitive capabilities to develop, and we primarily used our software in isolation. We were only dimly aware of the kind of integration that can take place.

Our adolescence came in the mid- to late ’90s, when most of us became aware of the interactions that take place in our digital world. As is the case with youth, we talked of great possibilities. Most issues had a black-and-white point of view. Nothing was impossible, nothing unattainable — in theory. Today, our profession is emerging from adolescence and its associated exuberance. We are attempting to make our paper and electronic world co-exist in practice. Our problem is we cannot look to our elders for their experience, direction or perspective, since no one has been here before.

What Sieben was alluding to with his comment about getting ready for paperless is that there are two independent mechanisms/systems that need to be addressed when we talk about our office environment — paperless or not — and SB Partners is now ready to address them.

There is nothing magical or complex about the paperless office. To a large degree, we simply apply the best practices, developed over the past 75 years, to our electronic world. Albert Einstein is credited with saying, “Everything should be made as simple as possible, but not one bit simpler.” Our problem is we fail to see, as Einstein suggests, the simple model we should be using, derived from our historical paper-based offices.

It is just this simple — our offices require that we address two independent stages/systems: (1) unpublished (work-in-process or can be changed) data/documents and (2) published (finished or ar- chived) data/documents.

Much of the confusion over a paperless office dissipates once we recognize that we have always needed and always will need to separately address the unpublished and published data/documents. Once you are aware that you will always have two decisions to make, it simplifies and focuses the paperless office.

There are four characteristics of an electronic office (see exhibit A “Electronic office” above). They are as follows:

1. Unpublished — Dynamic

This is the collection and cultivation stage. Data is entered, reviewed, adjusted and manipulated for what-if scenarios. We need to be able to roll data forward from prior years, copy it from other clients, review it and modify it. We need it in such a condition that the application can continue to mold it for us. Occasionally, we need to access prior data and make “prior period” adjustments to it.

Published — Static

This is the report stage, the finished document. We need to be able to take a snapshot of it, distribute it, reflect upon it and interpret it. We need to mark it for comparative purposes. We need it in such a condition that no application will change it. We need the assurance that when reviewed in several years, it is as originally issued. We must be able to rely upon it for credence that we have diligently adhered to our professional responsibilities.

2. Unpublished — Application-specific

We need our application for all the practical efficiencies it brings to us and for all the intelligence it provides us — diagnostics, research and business rules. The application assists with our professional review, compliance documentation and requirements. It releases us from having to perform the mundane, the rote activities of our work.

Published — Nonapplication-specific

We need to distribute it so that all users can read it — now and in the future. It must be published on an internationally accepted and accessible medium. We need the stakeholders/recipients of this information to be able to read it regardless of which application created it or onto which operating system it is copied.

In prior years, this medium was paper. In recent years, the new medium is portable document format. PDF has been accepted and used by almost all government agencies, companies, Internet portals, etc., around the globe.

3. Librarianship

We need to apply many properties to our information in both its unpublished and published formats. These would include naming conventions; version control; storage locations, including backup routines/ tape rotation and retention policies. Although common sense will dictate that similar, possibly exact, policies will be applied to the majority of the unpublished and published data/documents, there will be exceptions on both sides.

Financial statements (an exception)

The unpublished financial statements will have one storage location (one file folder, one CaseView or Word file). However, the published financial statements will have several storage locations — a final/letterhead/signed copy; a copy with- in the annual report (available on the company website); a director-signed and returned copy, a white (no letterhead/no signature) copy; a series of draft copies.

Retention policies (an exception)

Published information must be retained for several years. Exact retention periods are a function of meeting legislative, and professional requirements. For example, you may keep a copy of published personal tax returns forever, as these contain significant client information, previous client home locations, capital costs, investment preferences, family member names/birth dates, etc.

Unpublished data is often not required beyond a very short time frame. Why would we require a personal tax data file for more than a year, when complete tax returns have been published? Any adjustments to previously filed returns are seldom done by accessing and modifying old data.

Steven Wisemen of Taylor Leibow LLP, a public accounting firm with offices in southern Ontario that implemented a paperless office in January 2004, says, “We only keep the prior year’s file as opposed to a PDF file. This short retention period, for the unpublished CaseWare data, is due to standards, quality-control, and litigation and liability issues. Our PDF file is our true file.”

According to Wisemen, Taylor Leibow has seen an astounding 1,200% return on its investment. “Our file preparation time has decreased by approximately 40%; we now are recovering about 95% of all time charges. This, needless to say, translates to a very large time-value dollar amount savings. And then there are the direct hard-currency costs associated with less paper purchases: label printing and photocopy maintenance costs.”

4. Control

This is a fairly broad category. It encompasses all the concepts of security as well as the concepts of auditability (audit trail/ document history).

Unpublished example At different stages of a work-in-process, we will apply different levels of security. The preparer may have complete edit rights with no audit trail up to the review process. However, upon first review, we may implement audit trail software features so we can track changes, thereby assisting the reviewer on subsequent review processes, when he or she will only need to review the changes. Once the file has had its final review, we may secure it so that only a few people will have modify rights. It should be noted that you cannot restrict absolute access, even among staff.

Published example Once published, we may grant access rights to all stakeholders (staff, clients’ staff and the public) yet disallow further publication by restricting printing and copying rights.

Electronic document management

Wisemen attributes the extraordinary time savings the firm made to two factors. The first was to revisit its accounting and auditing practices in accordance with emerging standards. The second, and by far the largest contributor to time savings, was the insight that the unpublished and published data/documents needed to be addressed separately — a recognition that both required the use of document management software.

Again, this recognition is no different from our old paper offices. The document management systems for our files, while works-in-process were file folders, binders or simply our briefcases. We allowed great freedom for staff to use different ways to organize these works-in-process, depending on application (e.g., the capital asset section versus the AR circularization section of the working paper file). However, the final document management systems, put away in the file room, were almost always defined officewide and strictly adhered to — paper folders with acco-fasteners (with no loose papers). Staff had little or no freedom to organize these documents differently.

You might want to call this year The Year of Electronic Document Management. Or perhaps, The Year of Talking about Electronic Document Management. Few have a clear image of what electronic document management means. The basic reason is that we are trying to apply one definition of document management to everything that is electronic. Instead, we need to recognize that our electronic office still needs to address our work-in-process (unpublished) needs and to separately address our final (published) needs.

To address these needs properly, refer to our electronic office model (see exhibit B “Electronic office” below). Note that the document management examples for our unpublished data/documents contain the word “and,” whereas the published data/ documents contain the word “or.”

Unpublished (document management systems)

Given the many characteristics of our unpublished data/documents — application constraints, project management and workflow and methodology — we must deploy more than one document management system.

The electronic office model illustrates three document management systems:

• working paper engagement file — CaseWare’s Document Manager can control all data/documents associated with the engagement;
• corporate tax filings — TaxPrep’s Forms Manager can provide access to most data/ documents associated with federal and provincial tax filings; and
• accounting/bookkeeping records — Quickbooks’ Navigator (company, customers and vendors) assists with the varied data/documents associated with this work process.

It should be emphasized that in the real world, we can use many additional document management systems — time and billings, EPR and HR systems.

Published (document management system)

Our published data/documents are, by definition, nonapplication-specific and have been produced on an internationally accepted medium (PDF), therefore we only require one document management system. Of the three examples of document management systems that service the public accounting industry, only one would normally be deployed by a firm. (See exhibit C “Published document management systems” below for additional information.)

Now, let’s return to Sieben’s statement “we are getting ready for paperless.” SB Partners implemented a document management system for its published data/ documents. Sieben says SB Partners is prepared to address its use of document management software packages in unpublished data/documents. As paper still exists in our unpublished processes, this re-addressing will include how and when paper is scanned.

Veres Picton & Co., a public accounting firm based in Edmonton, is also moving toward being paperless. It implemented a document management system in January 2005. Partner Bruce Picton says, “The [published] document management side of things is one benefit but is not the biggest one. It kick-started our firm in terms of really exploiting some of the benefits of our [unpublished] electronic working paper file.

“I’m not a big fan of the word ‘re-engineering,’ ” Picton adds, “but I guess you could say that that’s what we have effectively done in our practice.” Not only did the firm acquire and implement new document management systems for its published documents, it is again paying attention to its utilization of its primary unpublished document manager — CaseWare’s document manager.

Both Picton and Wisemen were surprised at how easy the more senior partners adapted to the new document management systems. “The older practitioner is already organized,” Picton says, “and therefore can see the simple electronic model is really not that much different and can easily adapt to the new document organizational structure.”

Immediatech Corp.
GoFileRoom
Based in Englewood Cliffs, NJ
www.immediatech.com

An ASP, Web-hosted solution for your published, and many of your live, documents. ASP advantages include little server hardware/software upgrade costs; access from anywhere you can access the Internet; soon-to-be-released extranet portals (client specific portal access). Documents are saved in a proprietary database whose metadata collection/retrieve system (with “sticky” technology) provides for excellent search and retrieval. CaseWare (version 2005) batch print capabilities but no scan and insert features. An attractive model for large firms or multiple-office firms. It has few installations in Canada but has an extensive installed base in the US.

Doc·It Inc.
Doc·It DM
Based in Hamilton
www.doc-it.net

Doc·It DM runs on your existing Windows server. It publishes your documents in PDF, in an easy-to-understand, file-cabinet storage model. Its excellent policy wizard, for easy metadata collection, and given each document’s complete text, is searchable — it has excellent document retrieval. Remote site access is achieved by Windows remote server, Terminal services and Citrix. CaseWare (version 2001+) batch print capabilities with scan and insert to CaseWare’s document manager feature provides for excellent CaseWare integration. It is an attractive model for large or small firms. It has an extensive installed base in Canada and good representation in the US.

CCH Tax and Accounting
ProSystem fx Document
Based in Torrance, Calif.
www.cchgroup.com/document

ProSystem fx Document (previously developed by Habif, Arogeti & Wynne under the brand name SIAN — purchased October 2004) runs on your firm’s dedicated Windows Sequel server. Your published documents are stored in an SQL database for easy retrieval. As of this spring, CCH did not have any native integration with CaseWare (or for ProSystem fx Engagement). Fx Document appeared somewhat awkward in the defining and applying of a documents metadata. Its target market is larger firms. It presently has little or no Canadian presence, but given the proposed integration with the US CCH suite of products, it will most likely acquire good US market presence in the upcoming year.

How to Get Moving Again

Now that you have seen the simple model, what’s next? It’s easy: stop printing. If you want less paper in your office, common sense dictates that you print less. But, Picton says, “You should not even talk about document management without first talking about dual [video] monitors. A lot of the benefits of the electronic model is attributed directly to dual monitor efficiencies. The second monitor empowers the staff to more effectively use the software they are already used to.”

Accountants compare all the time; this year against last year, financial data to tax data, etc. With only one monitor, how do we expect our staff to accurately and efficiently perform comparisons electronically? They must print in order to view both the electronic current version and the paper comparative version. If you want to decrease the need to print, you must provide additional electronic desktop space so electronic documents don’t have to be shuffled but rather can be spread out.

In the past year or two, the cost of flat-panel LCD monitors has dropped dramatically. Given that they take little space and require no or little additional hardware investment (notebooks already have a second external video port and a desktop two-port video card is less than $100), it appears to be a no-brainer.

“The best advice I can give a firm is to leap in,” says Picton. “Don’t hesitate. If you just throw yourself into this it will happen very quickly and you will see how simple the logic model actually is. Yes, you will experience difficulties, but you will overcome them quickly, as you will need to address items as they present themselves.” Wisemen continues, “As far as implementation, we could not afford to have one person not on the system. It’s an all-or-nothing endeavour, therefore, orders came down from headquarters: everyone is going paperless.”

One office of Ross Pope & Co., a public accounting firm in northern Ontario, went paperless in November 2003. In explaining the real-world adaptation of paperless and paper, Joe Parisi, the partner in charge of the transition, spoke about Reg Pope, who is in his 80s and is still working with clients. While Pope is an effective user of electronic software, the firm recognized the importance of his 50-plus-year-developed review process and so his team members provide him with a paper printout. Given that the review is the firm’s last line of defence to ensure an appropriately documented file, Pope did not take the review process lightly. “In our offices, with little exception, all files are prepared, reviewed and archived electronically,” Parisi says. “Our managers and partners are quite comfortable with this. Sure we still get paper from third parties — these we scan. However, for Pope, the file is still printed completely for his review. Once he has finished his review, written in his comments and his approval signature, the whole file is scanned and archived with the other files.”

The Justifier

There are three kinds of payback to going paperless, according to Harold Garfinkle, partner at Segal LLP in Toronto. Segal implemented a paperless approach in January 2004. The advantages are:

• Time efficiency — “There is no question our work is being performed more efficiently. But it is also because our staff can produce more as it takes less time to do it,” says Garfinkle.
• Firm marketability — “We market our electronic office as an indicator of the advanced office environment that we maintain. We like to think of our practice as a forerunner in our city,” he says.
• Staff recruitment — “Attracting and keeping our present staff is much easier,” says Garfinkle. Picton agrees: “Our implementation kick-started our staff. They felt we were paying better attention to them and are quite excited about the change.”

Picton says, “My final reviews are substantially improved because it is so easy to get at things that I couldn’t easily get at before. It is nothing to retrieve a previously generated document simply to verify some small fact.” His partner Trevor Lukey adds, “We have the complete historical filing cabinet right here on our keyboard. When a client calls there is no ‘I’ll call you back’ or ‘please hold while I go to the file room.’ It’s wonderful to be able to pick up correspondence, at any moment, and leave casual notations or read them from the file — effortlessly. There is no hesitation to verify information that I think I remember correctly.”

“Public accounting firms have to be crazy not to go paperless,” Wisemen says. “The costs are nominal and if you make a concerted effort, you could argue that these costs are, in fact, investment costs. You can make money at going paperless — efficiency gains, cleaner offices, increased collectability, improved quality control, enhanced staff morale — the returns are endless.”

It may be tempting to continue to take a do-nothing approach — but the real costs appear to be lost productivity, inadequate security, misplaced documents and office disorganization. A leading indicator of your firm’s future success rides on how effectively you move your office into a maturing, technological, paperless age.