Energize your practice with a tax innovation challenge

A new type of competition can generate ideas, inspiration, and tangible improvements for accounting firms and CPAs.
By Charlotte Frank, CPA, J.D., and Stephen P. Valenti, CPA

Energize your practice with a tax innovation challenge
Image by tttuna/iStock

Accountants working in tax faced significant challenges during the pandemic-powered busy season, which finally ended with the tax filing deadline on May 17. After 15 months of unparalleled uncertainty and stress (not to mention extensions), tax professionals would seem much more inclined to savor some shut-eye than to welcome another challenge.

But what if the challenge was not something imposed but rather something inspiring? What if it inspired CPAs to use innovation and ingenuity — skills they applied so well during the pandemic — to solve some of the most painful ongoing problems plaguing tax practices? What if the challenge had CPAs applying those skills in a proactive fashion that helps build the profession's future?

That's the idea behind a tax innovation challenge.

WHAT IS A TAX INNOVATION CHALLENGE?

A tax innovation challenge is an idea for a different and creative approach to address the needs of a tax practice and develop response plans to external factors, such as the COVID-19 pandemic. While this article was written with tax professionals in mind, the principles can be applied to create innovation challenges for nontax accountants, finance functions, and organizations of all types.

Technological advances provide options to address the needs of the tax practice and its clients. A tax innovation challenge provides a forum to evaluate these technological advances as well as other ideas and solutions. If widely launched across CPA firms, university settings, and professional societies, a tax innovation challenge could effectuate both cultural and mindset changes in tax practices for innovation. It could also produce impactful ideas and actionable solutions for the next generation of tax professionals and tax practices.

HOW WOULD A TAX INNOVATION CHALLENGE WORK?

Tax professionals would work individually or in teams of two or three to (1) identify a pain point in the firm; (2) come up with an idea for addressing that pain point; (3) develop that idea into an actionable solution for the tax practice; and (4) prepare a proposal for presentation. The proposal would contain a description of the actionable solution, expected cost, benefits, return on investment, and a recommended implementation timeline.

The proposal would then be presented to a panel of judges, who could include leadership, a combination of leadership and select others, or the entire practice. The challenge could be conducted outside of busy season (or other nonpeak times) with different goals and expected outcomes. The practice could open the challenge to all professionals or to target groups within the firm. For example, a practice interested in improving the engagement of the junior-level professionals could allow the participation of tax managers and below.

The goal for the challenge participants would be to deliver a proposal so compelling that the judges put their time and money behind the plan by investing and rolling it out within the firm.

The professional realm is not the only setting where a tax innovation challenge could work. Universities or professional societies could embark on a challenge of their own. Alternatively, CPA firms, universities, and professional societies could partner on one or more challenges to gain more diverse perspectives, build networks, and identify far-reaching solutions to large-scale issues facing the profession.

The challenge is more than a test of knowledge. It is a strategic effort to cultivate an innovative mindset in each participant, regardless of that participant's role in the project or current stage in their career. Whether student, professor, staff, or partner, every person who engages in the exercise will come away with a new perspective in addition to an expanded network of like-minded peers.

BENEFITS OF A TAX INNOVATION CHALLENGE

A tax innovation challenge is meant to achieve tangible benefits for the practice, its professionals and clients, and the broader profession. The goal of this challenge is not only to identify ideas or solutions but also to actually implement the solutions. It could be a "win-win" for both the professionals and the practice.

For professionals, the key benefits are engagement and recognition. Professionals have the opportunity to be included in strategic planning for the practice, to contribute outside of their normal responsibilities, and to be recognized as a difference maker within the practice.

The practice's clients could also benefit, either directly or indirectly, from the outcomes flowing from the actionable solutions such as potential tax or cost savings, improved timelines for service delivery, or improved communications and information exchanges. These positive outcomes can strengthen the tax practice's relationship with its clients and foster the clients' view of the firm as a known innovator and trusted adviser. This could also lead to client referrals and new business.

In university settings, the key benefit is increased student interest in pursuing careers in tax. Through the challenge, universities can highlight that today's tax careers require skills and knowledge that expand far beyond studying the Internal Revenue Code, understanding accounting regulations, and filling out tax forms. Knowledge of technology, process, and data analytics also will be essential in a marketplace that expects CPAs to be well-rounded business professionals who desire continuous growth and personal development.

For the broader profession, the key benefits are inspiring a future focus, attracting ideas from a diverse community, and developing tangible solutions to real issues that can be shared. As professionals encounter and engage with one another, an innovative mindset will be reinforced. Professionals will carry this new mindset into every stage of their professional journey, resulting in expanded ways of thinking, appreciation for different perspectives, and increased satisfaction for themselves, the peers they encounter, and the firms they work in.

SUGGESTIONS FOR PLANNING A TAX INNOVATION CHALLENGE

Below are practical tips for setting up a tax innovation challenge:

Step 1: Define the problem and the solution

The challenge topic must address a specific business or client problem/need and put forth an improvement (e.g., solve a specific client issue, recommend a tax practice technology improvement, solve a tax practice recruitment issue, recommend a client tax planning/structuring opportunity, etc.). The challenge topic can be either technical or operational. The greatest benefit can be achieved by designing the challenge topic with a stated goal or desired outcome.

Technology is an area of focus that could benefit from a challenge. That's because many measures adopted to respond to COVID-19 will continue to be routine practice after the pandemic ends. The adoption of tools and policies to support remote work during COVID-19 will continue to be essential. Tax professionals now have certain expectations for how they deliver work and interact with clients and one another in their work settings — and these expectations aren't going away. Clients will also have expectations regarding requirements for in-person visits to the client location, use of technology for virtual meetings, and potential changes in service delivery.

External pressures drove tax practices to seek technology solutions during the pandemic. A tax innovation challenge offers a forum to evaluate these technological advances as practices rethink their operations.

Step 2: Underline the importance

Participation in the challenge must be strongly encouraged and recognized as a differentiator in hiring, performance evaluations, and promotions.

Step 3: Put time on the schedule

In a workplace setting, a reasonable amount of professional development time each week must be allocated for challenge participants. This will allow them to collaborate, research ideas, develop solutions, prepare proposals, and make their presentations. If the solution addresses a specific client need for which the firm is engaged, then the time spent, or a portion of it, could be billed to the client.

Step 4: Choose a leader and build the process

The challenge must be a scheduled and structured activity with a designated coordinator to lead the competition. When building out the process, firms should:

  1. Obtain support of leadership.
  2. Appoint a coordinator.
  3. Define the objectives.
  4. Determine the timeline, milestone dates, and duration. To maintain the excitement, it is recommended that each challenge be completed in two to three weeks. Key milestone dates include:
    • Participant sign-up deadline;
    • Introductory meeting with the coordinator to introduce the teams and discuss the challenge instructions, topic, proposal and presentation requirements, and a timeline;
    • Preliminary presentation to coordinator (first-round elimination) judging for: (1) relevance; (2) impact; (3) practicality; and (4) adherence to challenge instructions. Prior to the preliminary presentation, the coordinator may also request an outline of the solution to be provided; and
    • Final presentation to judges and the selection of winning solutions.
  5. Decide on the logistics:
    • How will interested parties be made aware of the challenge and sign up?
    • What will be the size of participating teams, i.e., one, two, three, or more? Will the challenge be open to all ranks/levels or certain subgroups?
    • What will be the requirements for the proposal and presentation length?
    • How will the topic be determined? Will the coordinator provide all participants with the same business problem, or will the teams put forth their own proposed ideas/solutions for business problems selected by them?
    • Will there be any limitations on the solutions that can be proposed?
    • What will be the criteria and questions for judging and selecting the winning solutions? Since there will be time and costs associated with implementing a winning idea, return on investment (ROI) should be a factor in the analysis. ROI considerations include:
      • Gaining new clients or a certain percentage increase of services for existing clients;
      • Increasing revenues by W or shortening the accounts receivable or collection cycle by X;
      • Cost savings (e.g., reducing staff hours by Y hours annually or using lower-cost resources);
        • Shorter cycle times — Z hours per week;
        • Improved quality and reduced risks (e.g., risk of error or reliability);
        • Scalability;
        • Short payback period on investment (e.g., one year or less); and
        • Increased employee engagement (e.g., measured through survey, retention percentage over time, or number of employee referrals).
    • How many solutions will be selected as winners?
    • How will the winning solutions be prioritized for implementation?
  6. Identify the judges.
  7. Determine the recognition (and potential reward) for all participants.
  8. If the challenge is conducted by a professional society or university, determine if any external communication or media involvement is desired.
  9. Finalize the plans and kick off the challenge. (See the sidebar, "Documents for a Tax Innovation Challenge," for more about framing the challenge.)

Step 5: Implement the solution and measure the results

The challenge does not end when the winning solution is selected. After that point, the coordinator would assist the participants of the winning solution through the implementation phase. Steps should be taken to measure the impact of the challenge and track those metrics over time.

ACCEPT THE CHALLENGE

A tax innovation challenge is an engaging and visible way to gather actionable solutions for the transformation of a tax practice. A challenge can demonstrate a practice's forward-thinking culture, help practitioners be recognized as differentiators, provide better products and services to clients, and help the entire profession be recognized as innovative.

The competition can be designed for practices of all sizes — from sole practitioners with staff to the largest firms. Is your firm up to the challenge?


Documents for a tax innovation challenge

A firm should create the following documents and resources as part of a tax innovation challenge:

  • A webpage describing the tax innovation challenge. The webpage needs to be designed with the goal of attracting as many participants as possible. The objective must be written as an invitation to engage in an event designed to promote creativity and to enable the firm's tax professionals to demonstrate their analytical and communication skills before others. It should not be presented as a required task.
  • An entry form.
  • An agenda for a scheduled meeting date to discuss the rules and procedures. See the chart, "Sample Agenda," for an example of how to structure this meeting.
  • A formal set of rules, including:
    • Deadlines for submitting teams, topics, and an outline of the presentation;
    • Discussion of required supporting material;
    • Review of the topic with the coordinator and approval;
    • Discussion of time limits for the presentation;
    • Discussion of question period; and
    • Scheduling.
  • Description of the format for the outline of each team submission, including:
    • Evaluation of options;
    • PowerPoint slides and charts;
    • Written commentary; and
    • Division of responsibility.
  • A judges' form.
  • A sponsorship application form.
Sample agenda

About the authors

Charlotte Frank, CPA, J.D., is a managing director with Ernst & Young LLP in Minneapolis. Stephen P. Valenti, CPA, is owner of Stephen P. Valenti, CPA, in Long Island, N.Y., and a professor of accounting at New York University (retired).

Editor's note

The views expressed are those of the authors and do not necessarily reflect the views of Ernst & Young LLP or any other member firm of the global Ernst & Young organization.

To comment on this article or to suggest an idea for another article, contact Jeff Drew, a JofA senior editor, at Jeff.Drew@aicpa-cima.com or 919-402-4056.


AICPA resources

Online resource

Practice Management & Professional Standards, Tax Section

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