Why You Need to Document Your Firm's Processes
Every firm develops its own set of processes and workflows for getting the flood of tasks completed. In a very small one, these may be informal and created on the fly. But as a firm grows, developing systems and standard processes is a must for delivering a consistent experience to your clients.
The best firms also have mechanisms in place to capture and share the hacks, tricks and apps various team members have discovered that get the work done faster, more accurately and more easily. These innovations, along with your systems and procedures, are a part of the intellectual capital of your firm. If your team members aren’t documenting and sharing them, they’ll be lost if those bright and creative minds move on or (heaven forbid) are suddenly disabled. You’ll be losing a chunk of what could make your firm more valuable.
At Accountex last August, Amanda Aguillard told an audience that the days of accounting firm owners selling their businesses or an interest for a multiple of revenues are over. “It’s a buyer’s market. Buyers today want firms with processes, technology and talent.” Buyers are looking for efficiency, technology stacks and people who know how to use that technology.
At one of the firms where I worked, we had a set of spreadsheet tools a former employee had created for business and personal tax returns. Over the years, we added or subtracted pieces of those Excel workbooks as tax laws changed, and they became the backbone of our standard process for getting tax returns done.
For business returns, that spreadsheet tool acted as a sort of visual checklist to make sure we didn’t miss any crucial steps. We had a master tab that showed all the adjustments, from the unadjusted income in the client’s records to adjusted book income and tax income on the tax return. Other tabs had equity roll-forward worksheets for different entity types and fixed asset roll-forwards, as well as ones for for calculating book-tax differences. When all the relevant worksheets were filled out, that master tab made it easy to reconcile book and tax income on a business return to our workpapers and to the client’s books.
The workbook for individual returns included helpful worksheets for tying out federal and state tax payments, as well as worksheets for allocating mortgage interest, property taxes and tax prep fees between various schedules on a tax return. Yes, it was extra work to fill out all of those schedules, but nailing down all those numbers meant we produced a better work product. Plus, it made reviewing returns a piece of cake.
We also freely shared – and documented – the tips and tricks we came upon that helped us move data from a client’s records into a tax return. We had occasional meetings to share things we had learned. We also had several documents available on a shared drive to walk new staff members through the steps in setting up a new Engagement binder or tax return.
We all knew how to import trial balances from QuickBooks into Engagement and how to import that data into ProFx Tax. We used scan software to create our workpapers for 1040s and to import it into tax returns. Every January, we’d have a day-long meeting to go over changes to tax law, software and our workflow for the coming year.
As a firm, when we went paperless, we spent days discussing our standard processes and conventions, and those decisions went into a document in a special folder on our shared drive so when a new person came on board, we could easily direct them to it.
Establishing and documenting our processes freed up brain space to look at the more challenging parts of the work. They didn’t restrict our ability to innovate.
Instead, they provided a framework that helped us produce high-quality, reliable work, an idea echoed in Atul Gawande’s book Checklist Manifesto:
“The fear people have about the idea of adherence to protocol is rigidity. They imagine mindless automatons, heads down in a checklist, incapable of looking out their windshield and coping with the real world in front of them. But what you find, when a checklist is well made, is exactly the opposite. The checklist gets the dumb stuff out of the way, the routines your brain shouldn’t have to occupy itself with.”
By starting each return with an equity roll and a fixed assets roll, big problems in a client’s books jumped out at us immediately. Fixed asset acquisitions or deletions were easy to spot, so adjusting depreciation schedules was straightforward.
Unfortunately, as I discovered when I left that firm, not all have such well-developed systems. When I moved to a small firm whose current owner had bought it from the retiring founder, I found out that there were no standard processes. Everything was still done on paper, following the founder’s idiosyncratic processes.
So, I created a paperless workflow. Because I knew I wouldn’t be there forever, I also documented how I did everything, including all the time-saving hacks I developed along the way. The new owner loved having a standard process that could be easily taught to new team members.
Then, that small firm merged into a larger one. By coincidence, that larger firm was also where I’d had a tax-season internship at the beginning of my career in public accounting.
At the beginning of my internship 13 years earlier, I went through a two-week training program with the other new hires. The firm was developing a standard training program, and we were the inaugural class.
Various tax managers and supervisors taught us the firm’s standard processes for preparing tax returns, how to document our work and how to use the various software packages. Also, because pieces of this course were taught by the supervisors and managers, we developed relationships with those people. I still stay in touch with some of those folks to this day.
Fast forward to my second encounter with them: It was like joining a different firm. Sure, the occupants of the corner offices had mostly been there when I was there the first time, but very little from my earlier rotation had survived. All of the supervisors and managers I’d worked with the first time were in different firms.
All those standard processes and procedures had disappeared with the departure of the people. Team members told me every partner had their own idiosyncratic preferences for workpapers and tax return preparation. Even that terrific training course was no more than a distant memory.
Now no one in the firm knew how to import data from Engagement into ProFx Tax. The last person who had known how had left some five years earlier without teaching anyone else how to do it.
So, yes, in 2017, tax preparers were manually typing numbers and descriptions into software. They were also unsure how to import trial balances from QuickBooks into Engagement, so they were keying in trial balances as well. Anyone who’s done that knows how easy it is to make mistakes and how inefficient and how mind-numbingly boring manual data entry is.
All that valuable intellectual capital – all the systems and processes for getting the work done efficiently and easily – was gone. New team members had to muddle through on their own to figure out how to do the work. To add to the confusion, each of the five tax partners had their own preferences for what they wanted in tax workpapers and tax returns. One of my former co-workers said she’d asked a question at a department meeting and gotten five different answers!
As a service, the very last thing I did for that firm was to demonstrate how easy it was to perform this little bit of technical wizardry (which really isn’t all that advanced). I also left behind instructions for each step of the process as well as links to online training. I just hope they saved those directions somewhere safe!
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Liz Farr, CPA, spent 15 years in tax and accounting at small firms in Albuquerque, NM. Besides tax returns of all flavors, she worked on audits of governmental entities and not-for-profits, business valuations, and litigation support. Now she's a full-time freelance writer specializing in content marketing for accountants and bookkeepers around...