Your second-year associate, Tim, prepared 150 personal tax returns in his first tax season, but only 90 this past year. To borrow a phrase from sports, that’s quite a sophomore slump. After the first year, you were certain Tim was partner material. Now you don’t know if you can keep him. Why?
From a sample size of exactly one tax season, Tim concluded that he had tax season all figured out. Rather than hang on and pray, as he did during his first tax season, he knew how to improve your preparation process the second time around.
Tim was wrong.
Management gurus and professors love to criticize Frederick Taylor, known as the father of scientific management. You may remember his name from management class as the meanie, who took the meaning out of work. Taylor, at least according to our professors, espoused the “one best way” to accomplish any task. According to our professors, he took the fun out of loading iron ingots onto railroad cars.
Despite what the gurus and professors teach, Taylor knew there wasn’t just one best way to accomplish a task. He knew that, while there may be more than one good way to accomplish a task, there are many more bad ways, and people gravitate towards the bad ways in the absence of good guidance.
Tim discovered a bad way. You care about this, because during pre-tax season planning, you were counting on Tim to prepare 150 returns, but he fell short by 60. Those returns had to be prepared by somebody. Goodbye to all of that great capacity planning. Hello to more 14-hour days for you.
Standardizing and enforcing good workflow practices prevents your tax season Titanic from hitting the iceberg with Tim as the self-appointed captain. There’s a word that explains why Ray Kroc, founder of McDonalds, died rich and your professors didn’t. Standardization.
First, standardize the flow of documents and information between stages of tax return preparation. Consider all of the ways clients deliver documents, and standardize how your front office processes and finally turns over the tax return information to preparers.
Standardize when and how preparers approach clients with questions and requests for missing information. For example, ask clients for stock basis using wording that has proven effective, and require that all preparers use it. Publish templates with your choices and refuse to approve questions lists that deviate.
Standardize the review process. Define when a return is ready for review. We prohibit “done but” returns. If there are open items, a return is not ready for review. Standardize whether you return reviewed returns to preparers for fixes, or if the reviewers fix the returns.
Standardize the tax return delivery process. Eliminate paper delivery of returns, and you’ll save your front office staff hundreds of hours.
The process is important, but having a process is even more important.
Finally, standardize, in writing, your best practices for tax return preparation. Should preparers start with a review of the prior year before beginning data entry? Should preparer’s begin entering W-2 information first? When should the tax return checklist be prepared? Do you want to use analytical review as a part of self-review?
You decide for your entire firm – not Tim. That doesn’t mean you ignore input from others, but you make the final decisions on workflow.
You may not find the one best way to prepare tax returns, but your standard process will be better than the myriad bad processes your staff use now. Take over the bridge, Captain, and steer clear of next year’s tax season iceberg.
Frank Stitely is a CPA and managing partner at Stitely & Karstetter, CPAs. He is also CEO of Clarity Practice Management, a publisher of cloud-based practice management software. Frank has owned his practice for over 29 years and developed Clarity Practice Management over the previous 10 years to serve the needs of both his practice and his clients. His recently published book, The Relentless CPA, can be found at CPATrendlines.com.