What tax firms need to know now about technology

By Andrew Kenney

When Donny Shimamoto, CPA/CITP, CGMA, talks about technology, the people listening to him often think he’s speaking about the future.

“People keep thinking, ‘This is all future stuff, this is all future stuff,’” said Shimamoto, founder and managing director of IntrapriseTechKnowlogies LLC, a CPA firm that helps small and midsize organizations leverage technology.

“When we get to AI and robotics, yes, some of it might be more futuristic. But there’s quite a bit of it that’s already here.

“It never fails to amaze me why people aren’t leveraging what we have now.”

On Wednesday, Shimamoto teamed with sole tax practitioner Dan Moore, CPA, at AICPA ENGAGE 2019 in Las Vegas to address how emerging technologies are enhancing tax practices. In their session, Shimamoto and Moore said that while artificial intelligence (AI) represents a quantum technological leap, firms of all sizes can prepare today with smaller jumps in technology and management philosophy.

Technologies of today

The first step in leveraging technology today is to understand what’s available and how it’s changing the business. Here’s are six areas tax practitioners should consider:

The paperless office. This is the baseline of technological change: Firms have been working for decades to digitize their documents and processes. “Some people are working dynamically with the information in its electronic format. Some people are working with paper returns,” Moore said. Small firms in particular have been slow to abandon paper, especially because so many clients still submit physical tax documents.

Cloud and collaboration tools. Digital documents now can be shared and manipulated more seamlessly. Online document management portals allow clients and colleagues to quickly exchange and organize documents. Other digital platforms allow easier comment review, invoicing, and payment. Cloud software allows for anytime, anywhere access to data and applications, reducing the need for in-house hardware.

Moore has transitioned some of his services — such as document management and QuickBooks integrations — to cloud services that allow 24/7, on-demand data exchange with clients. “That makes things so much more seamless than getting a backup of their QuickBooks file,” he said. Still, he hasn’t converted the firm’s central tax-preparation work to a cloud product, in part because he’s considering contingency plans for a disruption of internet or cloud services.

Client communication tools. As communication channels multiply, it’s becoming more difficult to get clients’ attention when further information is required. Phone calls go unanswered, and voicemails are ignored. Firms need to look to newer platforms, such as desktop communications software with text messaging options like Slack, Skype for Business, or Microsoft Teams. Alternatively, Moore recommends the Liscio messaging platform, which was designed with CPAs in mind and uses a smartphone app.

Tax outsourcing. Digital platforms make it easier to collaborate with contractors — including, for example, the growing number of knowledge workers in India. Firms that master offshoring could find relief from tight labor markets and rising labor costs, but offshoring comes with new management challenges and isn’t yet widespread among small firms, Moore said.

“It takes a special type of personality to do that because you’re giving up control,” he said. But Shimamoto sees it as an inevitability. “Because [the cloud] makes our system more accessible, we can then leverage the best talent, wherever they have to be,” Shimamoto said.

Visualization. Data visualization tools, such as dashboards, maps, and interactive charts, have become commonplace. Options range from Excel tools such as Power Map to more specialized software like Tableau and Microsoft Power BI. “[Visualization is] getting easier, so you’re seeing it in more and more places,” Shimamoto said. That’s good, because as Moore pointed out, clients are increasingly looking for visualization options.

Automation. Simple methods of automation are broadly available. It’s now commonplace to use scan-and-fill technology to extract digital information from paper documents. Some firms are using robotic process automation (RPA) software that can automatically click through software interfaces to translate information between programs. In the long run, RPA could take over most basic data-entry services, according to Shimamoto.

Taken together, the six areas point to a tax practice marketplace where automation and outsourcing capture an increasing share of routine work tasks.

“In today’s world, you’re either going to automate it, meaning you’re going to use technology, or you’re going to outsource it to a cheaper labor market,” Shimamoto said. “And this is again, all these lower-end, menial, repetitive tasks.”

The tasks most likely to be automated or outsourced are repetitive and simple. That means the firms of the future will be competing on the ability to manage automation/outsourcing and deliver specialized products or meaningful insight.

How to prepare

How can firms embrace emerging technology tools? Some are tempted to pursue every option — the more tech, the better. But Shimamoto urges a business-first approach.

“Make sure that you’re not starting with the technology. What you really should be doing is figuring, ‘Where do I have a problem in my firm, and what really is the problem?’” he said.

The answer will be different for each firm, but some significant overarching trends are emerging. The most important of these is that new technology will reward the companies that are best organized.

“It’s not so much of a skill set as a maturity,” Shimamoto said. “To really be able to leverage outsourced services, you need a higher maturity in those processes and the management and the flow of your data.”

When a firm completes work in the office, it’s easier to take an ad hoc approach. Employees use their institutional and personal knowledge to complete processes and deal with aberrations. That changes when a firm needs to export the work, whether it’s to offshore workers or to AI. In both cases, structure helps.

For example, a sole proprietor might need a checklist of just four or five steps to document a process for herself. To teach it to an inexperienced colleague might take 15 steps. But conveying it to a worker outside the company — especially when there are language barriers — could require a 60-step plan, Shimamoto said.

A company with more uniform, documented processes also can capture more granular data — which is exactly what AI will need to thrive. Therefore, the company with the best-documented processes today will be best prepared to take advantage of new technology tomorrow.

Training for tech

Whether you’re thinking of the present or the future, consider these focuses for employee recruitment and training:

  • Process analysis. Employees who are versed in project and process management will be able to incorporate new technology into the workflow.
  • Data analysis. Analyzing the underlying data through current and emerging software tools — whether it’s Excel, a programming language, or a machine-learning tool — will allow employees to improve processes and see where technology fits. It also allows them to deliver more meaningful insights that can’t be automated.
  • Communication. Tax CPAs will need to figure out how to best communicate insights in a way that’s meaningful to clients.

More than anything, companies must prepare their employees to be deeply knowledgeable but broadly adaptable.

“Say you’ve got a technology disruptor that says, ‘This part [of your business process] is all invalid.’ Can you actually adjust those processes?” Shimamoto said. “Or let’s say it’s actually an enhancer. Do you have enough understanding to take advantage of it?”

For Moore, it’s a question of whether new hires can truly grasp how data are flowing through the organization. But, beyond the technical skills, he also thinks that accountants can future-proof their work by providing the human guidance that their clients need.

“That’s a great need that will continue,” he said, “whether or not we can get more of their tax return automated.”

Andrew Kenney is a freelance writer based in Colorado. 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.

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