Information Management in the CPA Firm

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This article is provided by Knowledge Concepts, Inc., creators of FirmWorks.

Today's CPA economy has firms working harder than ever, struggling to find and retain staff and challenged to maintain profit margins. Combine the competitive market pressures with significant advances in technology, and we have a market ripe for true information management.

The CPA firm is a wealth of information existing in countless forms. For many years, we have struggled with the methodologies and searched through endless numbers of applications touted as the answer to managing our firms in the best manner. Today, partners walk around with critical knowledge in their heads to which firm members have little access. Critical client information is stored in a manila folder hidden in a metal cabinet. Client mailings are built and rebuilt from information extracted out of the time and billing system at high administrative costs. Staff inventory is maintained on an Excel spreadsheet, updated occasionally and used infrequently.

Why have firms struggled with such an easy concept of centralizing information for immediate retrieval? The answer is twofold. First of all, many of the applications conducive to the management of information have been cost prohibitive or lacking in functionality. Secondly, firms have been slow to change their processes (if it ain't broke, don't fix it).

Information Management (IM), in its simplest form, is the creation, storage, manipulation and retrieval of ALL data elements for immediate and centralized use. IM combines the client-facing requirements with the firm-facing requirements to automate and streamline data flow.

IM has four major components:

  1. Relationship Management
  2. Knowledge Management
  3. Resource Management
  4. Document Management

Many of these concepts have been evaluated separately, but the true IM experience combines the best of all worlds to ensure complete and immediate data access.

Relationship Management – As a professional services provider, we enjoy the trust of our clients' like no other industry. Successful maintenance of these bonds requires concise communication of information on all client-related activities – including the performance of actual work. On the service side, relationship management systems allow the firm to track client calls, e-mails, etc., record and monitor service issues and convey critical information on engagements. On the marketing side, the firm can mine, alter and use information based upon services performed, client demographics, and so on, to produce successful targets for cross selling opportunities.

For example, relationship management allows you to immediately discuss client billing issues, convey the status of the audit you are about to perform, review prior discussions with staff on the problems with data received last week, and access supporting workpapers and other documentation (scanned images, etc.) while the client is on the phone. The immediacy provides a greater professional image and a more informed client.

Harvard Business Review states “It Cost 6-7 Times More to Acquire a New Customer than to Retain an Existing One.”

Firms must identify new ways to expand the client experience, including the selling of additional services and extending the service quality provided by the firm. Relationship Management will continue to evolve as the key to ensuring that your client remains your client.

Knowledge Management – In its purest form, Knowledge Management (KM) involves the transfer of intellectual capital from information creators to a centralized location for later re-use. Whether the firm stores instructions for tasks performed by managers or support and administrative staff, software/hardware error messages and resolutions, firm newsletter contributions, software registration numbers, or even the video of the managing partner's shank off the first tee at the firm's charity golf tourney, KM systems provide the means to building firm intelligence, efficiently.

Another issue stressing the need for Knowledge Management involves the training and retention of staff. Firms with no KM systems often experience the expensive challenge in training new employees as former employees depart with the firm's intelligence still in their heads. By enforcing a policy of pervasive contributions, firms can increase transition time and decrease training time.

The greatest challenge facing firms implementing KM systems involves completing the buy-in by all firm members. Unfortunately, the people with the most to offer are frequently the ones who do not exploit the power of their computers, or are too busy or intimidated by technology to make a contribution to the firm's knowledge store. It is critical to the firm's success to get ALL firm members participating in adding intelligence to the system.

Resource Management – Resource Management involves the scheduling, managing and performance of all client services. Most firms do not practice any sort of pervasive resource management because of the large amount of maintenance involved in the process and because of the lack of good tools to implement a total managed resource system. There are two components of resource management: work inventorying and scheduling and staffing.

Work inventorying focuses on the work that is to be performed. Many firms practice partial work inventorying using due date monitoring systems for tax returns. These systems provide information about all the tax returns that must be prepared, their statutory due dates, and staff having responsibility for performing the work. A total work inventory system would track all services and firm tasks, not just tax services.

To successfully implement a total work inventory system requires the use of the time and billing application (to track information about the resources spent providing the service), and other software tools to maintain and present information about work type, staff assignment, work status, and important target and statutory due dates. Work inventory applications require constant participation of all firm members in monitoring and maintaining information.

The scheduling and staffing aspect to resource management looks at work inventory and other data such as personal and other assignments (vacation, CPE, etc.) and matches it against the firm's resources to provide information about resource shortages or surpluses. This requires a firm culture where all members keep accurate calendars and where inventory information is maintained with a high degree of accuracy. It also requires collaboration and other software tools to combine these different information sources into a single view for managing the resources.

Document Management – Document Management (DM) is the component that is currently the most interesting to accountants. The quest for a paperless office has been underway since the advent of personal computers in 1981.

Many document management systems exist today within the CPA firm. The critical issue is understanding the true creation, storage and retrieval and editing procedures. Historical document management systems are line-oriented and fail to consider how we interact with our clients. Combine that with the high price tag, and we must find a more complete answer. There are four critical types of documents created within firms:

  1. Client-Centric/Event-Centric Documents – The interactions with our clients result in the creation of documents. Whether it is the IRS notice that our tax client receives or the engagement letter that we create for the new audit client we have just gained, there are specific documents tied to specific events based upon specific clients. CC/EC document management involves the automatic creation of documents (scanned or system generated) based upon the activity involved. Future retrieval is more intuitive – we know who the client is; we know what the activity is – naturally, we know where to go to access the document. Add to this experience, immediate access to prior client contacts, discussions meetings, etc., and the staff person is completely informed.
  2. Engagement Centric Documents involve those workpapers and other works-in-process that must be "checked out" and taken to the field. These documents have copies stored on the main network for review by others, but the actual work is performed elsewhere. Systems like ePace!, Caseware, and other workpaper tools meet these needs.
  3. Traditional Client Documents involve all documents created by firm members that are not directly tied to specific activities or engagements. This is the most common grouping of documents and incorporates tax data, write-up data and other client-specific information. The successful implementation of an IM system takes into account this variation and provides for instant access to the firm's data folder hierarchy.
  4. Automated Documents include the most powerful layer of document management. This functionality is most prevalent in the more expensive DM systems and incorporates the automated storage mechanisms based upon firm defined standards. For example, a document created in Word and subsequently saved would be prompted for the actual client folder to save it in. Documents can be checked out and edited in a connected or disconnected fashion. The completed IM system provides for this fourth layer of document management, and it is an expensive technology.

Economically feasible answers exist that cover the first three document types – creating a firm that runs approximately 80% paper free. For the additional 20%, we have yet to find an answer that encompasses all facets of IM and is justifiable from an economic standpoint.

Critical Issues facing the implementation of IM systems:

Integration – IM systems must incorporate current firm information. Time and Billing systems have vast amounts of data primed for use. Firms having to re-key information experience a loss in the velocity and accuracy of information flowing throughout the various functional groups.

Pervasiveness – Each firm member has a specific view of the client, based on the services that member provides to that client. However, since many firm members work with the client, each person's view is accurate – but none is complete. To get the entire picture of the client, all firm members must contribute information (knowledge) to the central knowledge store. NO one is excluded. With all firm members contributing, information will be the most complete and most valuable.

Cultural Change – Think back to the days where tax returns were completed via input sheets. Hard to remember, isn't it? Could we convince you today to NOT prepare a return on-screen? Spend the time identifying your informational needs. What information do you need? Why do you need it? What are you going to do with it? Is there a better way? Once that data is gathered, you can truly understand whether the firm processes are antiquated and need revamping. It could be a simple variation of firm processes that gain the additional 5% realization, which is free money to the firm.

Implementation Strategy – IM does not have to be overwhelming. With a careful plan of attack, the firm can allocate the resources necessary to complete the transition. Once the information identification exchange has occurred, firms can identify and prioritize the necessary changes and tools to meet those changes. As Steven Covey states, "Begin with the end in mind." Know what your goal is and build the plan for achieving that goal.

Benefits from IM systems are enormous. Client satisfaction is improved, realization can increase by 6 –12%, and firms operate more efficiently and effectively. Once firms identify what their information requirements are, they can begin the process of identification for solutions that meet their needs and provide the greatest economic returns.

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