The essentials of document management for CPA firms

Jan 12th 2011
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By Howard Brown

Document Management is a term that has become more or less synonymous with going paperless. I have seen both terms used in a variety of contexts and it appears that there is really no strict definition for either term, especially within the framework of the accounting industry. Consider that when we say “going paperless,” virtually every accounting firm has already been processing and storing a wide variety of documents in digital format since the introduction of the personal computer almost thirty years ago.

Technology, including early word processors and spreadsheet software like VisiCalc and Lotus 123, changed the way that accountants worked forever. The addition of tax software and engagement managers propelled the industry firmly into the digital age with improvements in efficiency and collaboration. Perhaps we can then agree that the paperless initiative refers to the practice of moving all documents to a computerized digital format. Let’s focus the rest of our discussion on Document Management and what its role is in the management of these digital documents.

“Document Management” is defined in the Business Dictionary as:

Coordination and control of the storage, retrieval, processing, printing, routing, and distribution of electronic and paperdocuments in a secure and efficient manner, to ensure that they are accessible to authorized personnel as and when required.

In using this definition to assess the numerous document management software programs that have been adopted by many accounting firms today, all such systems both small and large, manage the storage and retrieval of documents with some level of security to limit access. Some of these solutions store documents in their native format (Word, Excel, etc) while others convert all document types to a common format like Adobe’s PDF. More expensive and comprehensive systems may include a powerful search engine, routing and workflow tools, e-mail management, scan tools, and a wide range of other tools and utilities. However, it becomes quickly apparent that not all systems are created equal and that it is up to each firm to determine which of the available solutions meet their requirements and budget.

Now that we have established a few basics, let’s look a bit deeper into the way that accountants work and some of the less obvious challenges that they face in choosing a document management solution.

The way accountants work

For the previous century, accountants processed their engagements with two elements in common. Work-in-progress (WIP) was performed using a range of tools from the standard ledger pad to today’s sophisticated tax software and engagement management programs like Caseware and FxEngagement. At the completion of every engagement, the finalized WIP documents were printed, collated, and filed in the firm’s paper file room. The WIP documents placed into the file room represented the final copy that embody the firms opinion and met the professional standards of the industry. The version being placed into the file room would be in a published or unpublished format, terminology coined by BAI Bragonier & Associates.

A shift in professional standards

Upon entering the new millennium, there was a shift in professional standards. Firms began to abandon the time-tested practice of publishing the final engagement. Instead of creating a final file room version of the engagement, they chose to use the locked down unpublished version from the engagement manager software as the final version. This change in practice has most likely been driven by cost-cutting and competition to provide the client with the best product at an economical price. In addition, most firms no longer want to keep a paper copy of the file, yet most document management systems lack the ability to create a proper published version. As a result, the file remains in its unpublished state.

Publishing was a standard practice for over a hundred years. To better understand this shift away from publishing, CPAs, CAs, and industry consultants were invited to weigh-in on the contrasting differences between the characteristics of published and unpublished documents:

Characteristics of published documents:

  • They are static and cannot be changed.
  • They have strict librarianship with consistent filing conventions.
  • They are secure with limited access.
  • They are accepted in a court of law.
  • They are “cleansed” of unnecessary and unwanted information.
  • They are independent of the original WIP applications.
  • They are stored in a standard universal format.

Characteristics of unpublished documents:

  • They can be changed, even if locked down.
  • They have poor librarianship with inconsistent naming and filing conventions.
  • They require IT intervention to limit access.
  • They may be challenged in a court of law.
  • They contain unnecessary and unwanted detail.
  • They require the original engagement application to open.
  • They are stored in non-standard format and require the original application.

The risks of not publishing

In firms that have chosen to eliminate the publishing phase, one can review the characteristics of published verses unpublished documents. The risks to not publishing are to the preservation of the integrity of the documents, how the unpublished documents might be challenged in court or by a practice inspector, as well as the difficulty in opening older engagements with current versions of the engagement software.

One might assume an air-tight case in defending the merits of published documents. Surprisingly, this is not the case. Most CPAs and CAs are willing to assume these risks because:

  • The incident of court appearances is rare;
  • The time to publish an engagement is too costly; and
  • Document management and engagement solutions lack good publishing tools.

The greatest benefit of publishing

With practicing CPAs and CAs willing to assume these risks, one can surmise this is a prime example of “not seeing the trees for the forest.” In 2010, an independent survey of the Doc.It client base revealed the greatest benefit derived from publishing is not in maintaining professional standards or in mitigating risks, it is EFFICIENCY.

While efficiency is perhaps initially the main reason that most firms look to acquire a document management system, one cannot ignore mitigating risk, professional standards, and return on investment (ROI). Certainly all firms want to reduce risk and maintain the highest level of professional standards possible, but not at any cost. Considerable efficiency and ROI can be achieved with a small investment in time when a low-cost administrative staff member is provided with an effective publishing utility that creates an electronic published version of the file room copy at the conclusion of each engagement. Envision this staff member creating an easy-to-navigate, fully bookmarked, single PDF document with a table of contents, and you can begin to realize why efficiency surfaced as the greatest benefit of publishing.

Doc.It clients also reported the following benefits when accessing published documents versus opening unpublished Caseware or FxEngagement files to retrieve information:

  • Much faster retrieval of information for client requests;
  • Full content search capability when required;
  • Easier navigation of large files;
  • Unpublished files can be purged after two years, reducing storage and IT costs; and
  • Average saving of thirty minutes per person per day.

The requirements for a document management system within accounting firms will vary from that of other industries. Consider a best-of-breed solution that handles every document type efficiently, including paper, e-mail, fax, MS Office documents, and tax slips. Most firms that have started with a simple and inexpensive solution regret the time wasted, mostly because there is no way to migrate documents from one system to another. In most cases, an effective implementation of a higher-end product will pay for itself every month.

As your firm moves forward with document management initiatives into 2011, consider the characteristics of published versus unpublished documents, efficiency, risk, and ROI. Consider whether it is in your firm’s best interest to publish engagements, or not.

About the author:

Howard Brown, Chief Technology Officer of Doc.It, oversees Doc.It’s product design team, quality control, and customer technical support. Brown founded Micro Business Systems Inc. in 1984 to develop and market accounting and office automation software systems for a variety of industries. During the 1990's, Brown and his programming team developed Doc.It Document Management and Archiving System, which was brought to market in 2001 after many years of development and research. Doc.It provides complete digital document management and workflow solutions including software, training and implementation services, developed by accountants for accountants.


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Richard Robbins with eFileCabinet
By rrobbins
Sep 30th 2015 16:44 EDT

It is surprising to see how many accounting firms still haven't made the move to going paperless by implementing a document management system. It seems like those who are still relying heavily upon filing cabinets are older firms who haven't made enough of an attempt to learn about the technology that exists in the document management industry and how easier many of those solutions are to integrate with existing business practices without interruption.

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