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Improving engagement efficiency is a topic of huge importance to accounting firms. In every part of the country, staff resources are scarce, and costs are escalating rapidly.
When you are assessing opportunities for improving engagement efficiency, start with the big dollars first. This means identifying the services that produce the most revenue for the firm as well as the tools that can help the high-value firm members do their jobs faster. For many firms, financial statement preparation and business tax returns are the core services offered. Additionally, these are relatively complex services and are performed by the highest costing firm members. Since these services generate high revenues and have high costs, they are good candidates for getting a good return on your efficiency improvement efforts.
Almost every firm has experience using some sort of electronic tool for manipulating the client's general ledger balances that serve as the basis for financial statements and business tax returns. The problem is that many firms are doing nothing more that electronically handling the grouping and adjustment of GL account information. They are not taking advantage of the tools and features that promote collaboration, standardization, accuracy and communication that can make a huge difference in engagement profitability.
The first step on the road to improved efficiency is to evaluate your firm's current business processes for handling these types of engagements.
Typically, you will find that different team members will be handling similar processes differently. So your first opportunity is to standardize processes, wherever it makes sense. Some words of warning: Many firms will try to build one single process that will be applicable to all financial statement/business tax engagements. Watch for opportunities to create different "standards" for different types of services. This approach will result in fewer "not applicable" steps and, therefore, less training and less review time.
Next, train team members on the new standard approaches.
Emphasize training here. While education is important in gaining the knowledge to set the standards (and continuing education is critical to continue the process), team members should clearly understand the steps, workpapers, formatting rues, sign-off procedures, etc. that have to be followed.
Third, look for integration and template opportunities.
Features that allow you to create information in a particular form and then re-use it on future or similar engagements are important. Three of the vendors in this article — CCH, Intuit and Thomson Tax & Accounting — are in the process of developing suites of tools that exchange data with a high degree of automation. Additionally, there are also many opportunities to create information in an application from one vendor and then use it in another vendor's package. Best-of breed tools can trump suites in many instances.
ENGAGEMENT WORKPAPERS VS. TRIAL BALANCE TOOLS
This year, this article has separate evaluations for engagement workpaper applications and trial balance tools. This was done to acknowledge the significant differences between the two types of tools. Some firms may need trial balance features but not the engagement management and collaboration tools found in workpaper tools. The new evaluation format will provide a more accurate evaluation of the applications.
The following five elements of workpaper applications have been considered in this review:
- EASE OF USE: In the context of a workpaper application, ease of use is a very relative term. The work process of performing a financial or business tax engagement is complex. Many steps, a lot of information and multiple team members are involved in the process. The tools required to perform these types of services in an electronic environment require planning, training and constant review in order to be used in an effective and efficient manner.
- DATA IMPORT/EXPORT/INTEGRATION: Using detailed information from a client's system is a requirement of every financial statement and tax preparation engagement. If it is easy to do, pulling the data electronically costs a lot less in resources than having it manually keyed. Additionally, a product's features for using this information with other applications, either through an export process or by directly linking to other systems, has a lot of value.
- TRIAL BALANCE FEATURES: Creating, grouping and adjusting a trial balance is the cornerstone for creation of the financial statement, tax return and the documents that support these products. Features that make it easy to create, review and edit the trial balance can make a substantial difference in efficiency.
- FINANCIAL STATEMENT PREPARATION: In many firms, the creation and formatting of financial statements is almost an art form. The problem with this is that quality art carries a high cost. Systems that have features that promote the standardization and preparation of complete high-quality financial statements offer many firms an opportunity to greatly improve on their current processes in this area.
- ENGAGEMENT PROCESS FEATURES: This is the big one. Workflow technology is one of the hottest technology areas in today's accounting firm. An increased awareness of the benefits and possibilities combined with the critical resource shortages most firms face have gotten firms thinking about how to use technology tools to implement or modify existing processes to increase engagement efficiency.
Because the Engagement Process Features are not relevant to the stand-alone trial balance applications, those particular products have not been evaluated in this area.
Tom Davis is owner of Tom C. Davis, CPA, LLC and President of Knowledge Concepts, Inc. in Valdosta, Ga. He can be contacted at tdavis@tcdcpa.com and at 229-247-9801.
author: BY TOM DAVIS, CPA