484 Tax Prep For Accounting Firms - The Workflow Masterclass

This is a special one, gang. We worked really hard on a one hour masterclass for how to build the most efficient tax prep service line in your accounting firm. This comes from me acquiring and spending 15 years in tax practices. I had a team of 40, about 25 tax professionals. So it's the product of that, but it's also the product of the fact that I've now worked with over 1000 small firms and in the two years since I sold my firm and I've seen, I think, every flavor of tax service delivery under the rainbow. And so while this episode has a lot of best practices and what I do, it's also just a smorgasbord of what I've seen. So you can pull out the morsels that make sense for your team whether you're a brand new firm still figuring this out. Maybe you've never even worked for a firm. So you don't know what normal looks like or whether you're an old firt old as heck. And you want to make sure that your team is like leaning into kind of the coolest new stuff that folks are doing. Both. Both process wise, but also tech wise as well. That was the goal. To give you all of this stuff in a deep dive. Now you're going to come out of this one with a lot of of nuggets of oh man, we should probably consider this or that. Please do not go this alone. Your job coming out of this if you have a team is to prioritize. Let's do xyz. But also who's the right person in my team to take take the lead on this? Because you got enough jobs to do gat get some help from the beginning. I otherwise it'll be you rolling that boulder up a hill yourself. So if I can give you an action item, it'd be that like what are the three things you wanna do next after you hear this and who do they go to on the team? And for those people, share this episode or the time index of where I get into that thing so that they can help you put that in action. All right, let's get into, let's get straight into it. Eleven steps and number one, we often gloss over it, but it literally defines how profitable a project will be. And that is how we engage a client. How do we kick that process off? Let me give you the good, better and best version of this. And this kind of tracked with my own progression through how we engaged clients. Good. Like the most basic version of this is like sending that Word document or that Physical engagement letter off to the client. You know, the one that you just copy pasted from your insurance carrier, that's worth doing and it's better than nothing. But most of us, like most firms still, hey, judgment free zone. This is still all we're doing is we'll like, we'll send that engagement letter off. We don't even always make sure that we actually get it signed. But this is kind of the bare minimum. Like we gotta do this just to cover our own hineys and also to get an acknowledgement from the client that they actually want us to, to do their work again. Now I said that was good because honestly, that's more than I think most tax firms even do. Make sure you get a signed engagement letter. But let's talk about what's better. This was a big, big change for my firm as we evolved from the crotchety old word document to an actual proposal platform. And this is a lot of freaking work. We did this across like 1800 projects. And when you look at these shiny proposal tools that are out there, I can tell you what I originally thought, which was, how is this any better than just getting a docusign? Seems like a whole bunch of work, a bunch of cost, just to get a thing signed, right? Let me tell you what the two biggest benefits to me were. And this was in an 80 year old tax firm, a very traditional shop. Big benefit number one was this tool. Let me put a price in front of my clients before starting the work for the first time. Because we've all gotten to the end of the project before, where the client's like, I'm not gonna pay this. And you're like, whoa, we already did all that work, so they're kind of gonna have to. And they're like, no thanks. And they're like, okay, I'll mark it down a little bit. And then before you know it, next year has come up again and we're doing that same hokey pokey, right? Getting them to agree to a price up front. While it's nice to have to not like do work that you won't get paid for. The big opportunity for me was number two, taking a payment method upfront. And now that I got that payment method, I can just auto bill that project as soon as it's done. And that's because they agreed to an upfront project. Think about everything that that eliminates from the partner having to sit down and do the hourly billing, to the admins having to chase clients for AR with a proper platform to manage this Stuff we can give them the price up front, they can acknowledge they're willing to pay that if you want, you could take like deposits up front. I didn't fuss with any of that. If I had their payment method, which I made mandatory, they had to give me a payment method and they were agreeing to being billed when the work was done. So when the work was done, we just hit, hit a button and pull that money now. Biggest counter argument to this if you're in like the hourly billing paradigm is you're like well I don't know how much that's gonna cost. I haven't done the work yet. Here's how I navigated that in a big old traditional multi partner firm is in reality we usually do know more or less what it's gonna be. But sometimes things change. There may be a big like one off thing in that client's tax situation, but that's the exception to the rule. So what we got everybody to agree to was basically as long as WIP came in within like you know, 90% to 130% of what we expected or something like that, we set this sort of safety threshold where everyone would agree. As long as the project came in within that realm of what we expected, it could be auto built and something like 94% of projects did. And it was only when a project fell outside of those boundaries that somebody had to manually review it. And this meant that we saved partners from like having to manually put together thousands, genuinely thousands of invoices. Cause that stuff just got billed out automatically. And then the next year when the client renews, we already got their payment method on file. It's even easier for them. We're eliminating a whole ton of admin now. I said there was good, better, best. The best version, big brain like level three of how to do this is to not just use a proposal platform but to use it to then push out a three tier proposal to, to your client. And the value of three tier proposals is better capturing clients willingness to pay because everybody has a different ability and willingness to pay. If we can set up those three tiers like the Bronze, Silver, Gold to capture a more, you know, premium kind of service delivery. In fact, I'll put a whole bunch of ideas up on screen here for kind of add ons that will make the delivery more premium. There are a lot of people on your client list who will happily pay for these more premium things, but there's a lot of other clients and it's probably the people that you're thinking about right now. Who are the cheapskates that just want the bronze package? They just want the bare minimum. By putting these three tier proposals in front of your clients, you're letting them self select who they are. Do they want the premium path where they're paying twice as much or do they want the basic bronze path? Now the trap here is we get in our own ways because maybe we wouldn't choose the gold path like ourselves. But just because you wouldn't choose that doesn't mean you don't have clients on your list. That's that would. Now when it comes to engaging, what are the tools to do this with? Show me the tech. Get ready to look at this spreadsheet a lot because this is actually my app recommendation database for all types of tech for accounting firms. I'm gonna come over to the engagement tab. These are the tools that I recommend for doing this work. So my top recommendations are Anchor and Ignition. They're two proposal tools that will do everything that you need, let you do like three tier proposals and all that. These recommendations are the product of seeing like hundreds of firms be raving fans of these tools. Cause there's a whole ton of apps that say they do this well. In fact, many practice management systems now have a proposal solution, but none of them do like three tier proposals and have kind of the advanced functionality that I wanna see. These are the tools I recommend you use. If you haven't yet, swipe this whole app database. We'll link that stuff down in the video description. So that was show me the tech. Can I de skill it? How do we deskill the act of engaging our clients? This is one way that firms get the same work done in vastly different ways. Some firm will be super reliant on very technical, scarce people, while other firms will just use admins for this. You can absolutely use admins to lead the way on re engaging clients. And then the fallback is to have a call with the Tax Pro if they've got concerns about like why are you making me do this or that different. Make that the fallback rather than you leading the way on all these communications. Last will it AI? Is there a way to plug AI into this step of the process? I'd say the most common things I see here are people using AI to help them build out their service descriptions. So in that proposal platform, when it identifies the work that you're doing, AI can be helpful to write some of that stuff. It can also be helpful. This is, this is actually a pretty big brain one. If you use a meeting Recorder that is like, you know, a fireflies fathom, something like that. That will give you a transcript of your client meetings. You can actually feed those transcripts into AI along with your service library, the stuff that you do for people. And it will build out kind of a proposal for you based on conversation. So it'll say based on XYZ that the client brought up. Here's a starting point for how you could send them a proposal. Actually seen a growing number of people that do that. It's pretty interesting. Okay, that's step number one. How do you engage a 1040 client? For each of these steps we're gonna run through, show me the tech. What are the tools that will help me do this step more effectively? Can I de skill it? Can I rely on an admin more than a senior tax manager to do this job? And will it AI? Is there a way to plug AI into that process to make us more efficient? Okay, let's keep going. Step number two, schedule. This is a big one. This is one of the fastest growing trends in small tax firms. Right now, actually is moving more to fully scheduled work. That is, you are defining the intake window when a client has to bring you all their stuff, but then also defining the delivery window where you're gonna send that stuff back out. And this is gaining popularity because every single tax firm I know goes through the exact same progression. You start out and you're like, boy, we'll. We'll take anything we can to get to capacity. Cause we need the work, we need the money right now. And before you know it, that tax season, it gets a little sweaty. And so the next year, you're like, okay, last year was kind of a lot. We need everybody to have their information by, like, April 1st. Get all that stuff into us by April 1st, and we'll get it done by April 15th. And then that becomes a lot because, you know, 50 people drop off their information on the deadline April 1st. So you're like, ah, gosh, we gotta move it back. We gotta move back to March 20th this year. Sorry, gang, we just need a little extra time. Well, guess what? All the people that last year brought you all their stuff between March 20 and 4. One, now they're just all bringing you their stuff on March 20. So we haven't actually fixed the underlying problem. That is, I can't guarantee a turnaround time until I control the intake flow. And so we all say something like, yeah, we'll get it back to you in, you know, three to six weeks or something like that. But we don't ultimately have any control over that because we haven't taken control over when clients give us our information. The only complete solution to this is moving to a fully scheduled tax year. And while this sounds incredibly foreign to most folks, because you haven't explored this, a growing number of firms are doing this and absolutely swear by it. In fact, the tax accountant that I use, aha. I knew he wasn't a real tax pro. I don't run firm anymore. I don't have the tax. Anyways, the tax firm that I use, they don't work any overtime year round. And that's because they plan out their capacity week over week and they execute to that plan the entire year. Yes, it's possible. It's the escape from the FIFO file cabinet approach, right? Like where everything's just going into a pool and you're just pulling them in the order that they came in. While that feels easiest, because we don't really have to communicate any sort of expectation to the client. It's also the same thing that Frank frustrates our clients because they don't know if their stuff's even being worked on or how long it's gonna take. And you can't give them a clear answer because who knows whether two tax returns will show up tomorrow to be worked on or 200 tax returns. We actually did an entire week on my podcast talking about this fully scheduled work. We can link that somewhere, talk to the bunch of people that are actually doing it. And so you can dig into those really nuanced questions. But something to consider if it feels like your tax season is out of control in terms of tech, that can make this easier. Not a great solution for this yet. What most people do is either some sort of like kind of janky calendly setup where clients can opt into a day or a week or something like that. Or other firms, they just plan all this stuff out in their practice management system where every client gets like a due date and they work backwards from that, you know, four weeks or eight weeks or whatever it is. And they just really communicate to those clients like this is when you need to have everything in by in order for us to hit that target delivery week. So the right tech solution for you is gonna depend on whether you let clients self select what they want their delivery week to be or whether you decide for them. If it's me, I'm probably doing the latter. I think I wanna take control of when we're gonna get that work done. Now can we de skill this? Absolutely this is a great opportunity for your admins to help your professional staff communicate. Are we still on track or not? What are the things we need to prioritize this week? Who are the people we need to follow up with, who we may still need information from? I mean, that is so much of what tax season really is, is the work of knowing what to work on next, right? Like, who do I need to follow up with? Who am I missing info from? Like, that can just completely paralyze your productivity rather than just being able to focus on getting work done. The coolest firms I see their admins look like superheroes because it's really their admins taking the lead on this process rather than their professional staff. Last will it AI? I don't know that AI is a huge amount of help here. Besides probably building out like your communication strategy cause any change in process like this for existing clients, you have to really over communicate those new expectations. And AI, frankly is probably better at that than us right now working backwards. When should I be communicating and kind of giving me the outline for what I should include in each one of those email blasts? Okay, step number three is a biggie. This is the fastest changing, most disrupted part of the entire 1040 process. And that is intake, how we gather information. And it is, for all the reasons that we just talked about, you know, just how much of your tax season can be thrown away by following up with people, figuring out what you have, what you don't have. Like, I think it's actually a very conservative estimate to say in most firms you can throw away probably 30% of your tax professional's time on following up on chasing people for documents, on trying to figure out what to work on next. I actually think 30% is very conservative. And so the original kind of the OG way to do intake was your pro forma organizer from the tax software. Right? Remember stuffing those things in the envelopes and just the piles of reams of paper? That's still how a lot of firms do this stuff. And the edgy, more progressive firms, many of them are just emailing that same thing. And to be clear, we're kind of backed into a corner here because our tax softwares really don't give us a cool modern way to collect this information. Some of them will have like, you know, say Lessert's Intuit link where it's like this kind of digital version of the same thing, but it's a super antiquated experience. In fact, I remember the very first versions of these. There was literally like a exe like executable file that you were supposed to email to your client. Which I don't think that, I don't think that email tools like will even let you send an executable anymore. But the tools we get to do this stuff from our tax software vendors are just hilariously antiquated. But the good news is we've got like a crop of tools that now do this really, really well. So show me the tech. I'm gonna go back to my app database here. There's a whole section for tax workflow. We've got. This is probably the fastest growing category in tax tech. We've got four leaders now that are doing intake really, really well. Soroban. So Stanford Tax and Trusts. And here's what they do that's really, really important one, they create like pro forma questionnaires based on real prior year tax info. Either an import of like a backup from your tax software last year or by ingesting the pro forma organizer that it produces. So based on that real prior year data, it builds a customized list of what you need from your client. And that's so, so important because the boilerplate questionnaire, that's not enough for me. That doesn't dig into like the 40 client specific items that I need from them. From brokerage statements to 1099 interest to W2s. That is where 1040 projects go to die is on all of that minutia. And it's that minutiae that these platforms handle really, really well. Now the second big thing that it does for me after building that customized pro forma list is it will follow up with the clients until they've provided all those items and like the whole kind of starty stoppy picking up a 1040, putting down a 1040, like if you have to touch that project eight times, good freaking luck making money on it. The day when you get a 1040 project in and it has everything that you need to actually get the work done, you're like, wow, you are thinking your lucky stars, right? And the counter argument to this is oftentimes, well, we don't know what all we're gonna need to do the 1040 project until we get it in, right? Cause there could be new stuff. And that is absolutely right. But you also know that almost always you need all the stuff that you had last year. And if we compare this to the old paper organizer process where the paper organizer really gathered actually a pretty small percentage of the stuff that we actually need. And then it would require a professional going through during your busiest season to then build the list of what you actually need in addition to the organizer. Like this is prime time, busy season time that we're eating up by manually building these requests rather than the software doing as complete of a request as possible and as important it not touching your professional team's hands until they've given you all of those items. That's the beauty of these intake solutions is they will follow up with the client until each of those items are resolved, rather than your professional team managing that entire intake process. These tools are super legit. Like a huge number of firms have become raving fans of them the last couple years. And as much as I don't want to have to plug in yet another tool to my tech stack that is seemingly like endlessly growing, right? We all know like that software expense line in an accounting firm has never been bigger than it is now. But this is putting a tremendous amount of time back into the pockets of my tax professional. They keep times in their pockets, you know what I'm saying? Okay, so that was. Show me the tech. Can we deskill IT tax intake? That is arguably the biggest benefit of this is your admins can lead the way on info gathering and getting all that stuff together. Helping clients if they're having issues, uploading it when they fax something to you, when they mail something to you, your admin can then take that information and submit it to the same portal where the client would have otherwise submitted it. Again, we're taking work that historically has been done by our most scarce professional staff and instead using the admin team to do it. That is such a win last will it AI. AI is actually a really core aspect of how these tools work. So when they build out a customized checklist of what information we need from the client, the client can just pile any old docs that they want in there. And many of these tools will automatically separate, say a PDF that's six different documents into those six different documents. It will automatically identify what those documents are and then check off the item in the checklist to say like, yep, we've got that now. It'll identify, you know, maybe they accidentally gave you a 2023 document instead of a 2024 document. These tax intake apps are using AI behind the scenes to make that auto detection better than it's ever been before. And it is honestly is having a huge impact on how you build out that 1040 workflow from end to end. This episode is brought to you in part by Makers Hub, who's right now using AI to crush all things accounts payable. I was recently at Scaling New Heights in Orlando. Makers Hub kindly let us use their booth to host a meetup. We had over 100 people come out and hang and it was funny, like the conversations meeting folks, because we were at the Makers Hub booth, a lot of conversations ended up that we talked about Makers Hub. And I was surprised. The number of people who have listened to my stuff, watched my stuff, seen the Makers Hub ads and they're like, yeah, it's actually pretty freaking good. Heard some pretty cool stories about like really hairy client situations that Makers Hub handled well. And that's kind of their sweet spot is complex accounts payable stuff. Do you do inventory management? Receiving? Do you have to fuss with purchase orders? I sure hope you don't. And do you work with vendors that send stupid invoices that have all these different nuances and fiddly things? Megasub is the first tool I've seen that is malleable enough to literally, on a vendor by vendor basis, pull those dumb details that ought to impact how an invoice gets processed, even, even right down to handwritten text because they're using AI vision models. Really, really cool tool, Makers Hub. Even if you don't do this stuff for your clients, I've got a bunch of videos demoing it on my YouTube channel. If you've got clients with gnarly needs like this, shoot them one of my videos. They'll be entertained for five to seven minutes. And it truly like transforms. Transforms the entire accounts payable department. Really, really powerful stuff. Learn more about Makers Up. Check out the link down in the show notes. This episode is sponsored in part by Verdot. Here's a hard truth Incoming. Oof. Bomb. If you're still managing your own IT, relying on generic IT guy, you could be non compliant with FTC safeguard rules, IRS Pub 4557 and WISP requirements. That's exposure you don't need. But enter Barado's Barrett Guard Ferret Guard. Can I get some feedback on that? No? Okay. Bear Guard gives firms fully managed IT that's purpose built for compliance. That means your systems are monitored, patched, protected and documented continuously. Over 1400 accounting firms rely on Verito to stay audit ready. Gang, the reason we're actually talking Verito here. Can I go off script? About six months ago, I put out a post on social media and I said, oh, first party hosting from the usual characters you've heard of. Not great. What's everybody using? What do you like? And I saw A level of love and fandom from Verito. And I'm like, hang on. Why is everybody so enthusiastic about like a hosting provider? I mean, don't get me wrong, that's it's important. And so verdo, they have had a place in my recommendations ever since then. Because firms are just like, do it. You won't regret it. Whether it's. I'll assert Drake QuickBooks Desktop. They speak your language because they work with a bunch of other accounting firms to schedule a free consultation. Just to learn more. What do you got to lose? Check out the link down in the show notes. Today's episode is brought to you in part by Teamup. Who helps you hire direct in the Philippines. What is hiring direct? Hiring direct means you own the relationship with that person. You're not paying a middleman, a middle person. You're just paying the person that works for you. And that's all they do is work for you. It's an extension of your culture. It's no different than hiring somebody in another state. You're responsible for training them. They're just part of the squad now. Things to figure out. The first time you're doing that, what does it look like? What? There are a number of things to work out. If you do tax work, you've got some disclosure requirements. But that's why pulling in someone like Team up, where this is all they do is really helpful. In fact, Team up has been around for 26 months. These are, these are real numbers. They've now placed 250 hires into firms. 98 bookkeeper slash accountants. 80 senior bookkeeper slash accounts. 42 tax accounts. 11 team leads slash managers. 10 EAs. They've recruited for 135 firms. Ooh. And 184 of those hires are still with the firms. That's fascinating. 184 out of 250 hires. That's a pretty good number. And team ups even got like a six month guarantee where if that person doesn't work out for the role that you had defined, they'll find you another person. Team up. What they're really good at is direct hiring. If that's what you're looking to do, schedule a call with them at the link down in the show notes. Okay, number four, work paper prep. We've got all the documents in now. How do we organize them and put all the numbers and all that stuff so they'll tie out to what goes in the tax software? I would love to tell you that there's a cool, slick, super hip way to get this stuff together and organized. Unfortunately I can tell you the answer for most firms here is still a big ugly bookmarked PDF. And usually with that you're rolling one of two Acrobat plugins. Either PD Flyer, which is like a little extension for Acrobat that'll let you do like little stamps that'll like link between pages. Just kinda how you reference stuff. If you use CCH engagement almost always you'll be using PD Flyer. The other option is Ticktoch Calculate does something similar. The only real alternatives we have to this is there's probably two of them now. So I guess this is getting us into show me the tech one. Stanford Tax, the checklist that you use for intake is now evolving into kind of more of a workbook where inside of Stanford Tax you can mark up those different pages and do a lot of annotation. It's not quite as fully featured yet as say a PD Flyer. The main thing honestly that it's missing that I wanna see is stamps that will let you jump between pages. But it does have stuff like you know, a 10 key tape. You can mark entire pages, you know, prepped and reviewed and stuff like that. And frankly I love this and the direction that it's headed because it is a totally cloud based way to do work paper prep. The only similar to this thing that we have. And it's probably the most powerful example of like cloud based work paper preparation for 1040. Really the only example is Spbinder. And so this is by a company called Sh. SurePrep and Spbinder. It's a very, very powerful tool, gives you a single place to manage all of your 1040 work. Even supports like sort of Excel work papers in addition to PDF work papers. But it's kind of a big lift to learn most of the firms I've talked about like it takes a year or two to really get productive with it. Like while I think it has kind of the highest ceiling for how cool of a workflow solution you can have here, it's definitely not an immediate win for most firms. And the bigger concern for me now is is Thomson Reuters has acquired SurePrep, the company behind it. And that's just where frankly innovation usually goes to die. Unfortunately, another part of this acquisition was actually Taxcaddy, which was under SurePrep. They're in the process of shutting down Tax Caddy cause then last year they acquired SafeSend, which actually does some versions of tax intake. The reality is when a company acquires a software company, usually the folks Working there like they're sticking around for a couple few years on an earn out. But let's be real, if you were the type of person that would found a software company and build it from scratch, how long would you stick around when you go to work for some big behemoth old school company, right? So it's just not a good signal for like where that tool could be headed. SP Binder, to be clear today, like it's still a really cool platform and if I were on it today, I don't know that I would jump ship. But if I were picking the next platform for my team, I wouldn't go to SP Binder just cause I don't really know that it's going anywhere. Especially when you see folks like Stanford Tax creating their own version of this, which is really exciting, particularly as they have like obvious proficiency with AI stuff. So you start thinking like, okay, how can AI actually make work paper prep more efficient? Is SP Binder gonna do that? A tool that really hasn't changed much in the last six to eight years? Or is it gonna be like the Stanford Taxes, the Sorbands, the trusses of the world, which have evolved a ton in the last couple of years? Okay, work paper prep. Can I de skill it? This is actually a really cool sneaky benefit of pulling admins into the intake process is if they help you get all that stuff into the same place, it then becomes like a very small next step to be like, well hey, once all those documents are gathered, here's actually how we annotate it. And you could just, you could do the highlighting, you can do the page markups. Now you've got your admins doing a version of work paper prep. In fact, like in the previous kind of pre AI era where it was very OCR centric and they were trying to do extraction off of tax forms and automatically push that stuff into the tax software. If you ever played with that, and SurePrep was actually one of the big companies that really pushed this, if you ever played with that, you knew the OCR wasn't perfect and so they would augment it with like either offshore people or onshore people validating the entries. But then it's like if you can't 100% trust what it extracted, then kind of what's the point, right? Cause you still have to double check it. I've actually found that the folks who are happiest with those solutions that would do the automatic extraction would use an admin internally to double check that stuff before the tax professional ever got into the tax software. And so it wasn't actually exclusively the software that was doing that perfectly. Because I know a lot of people that tried to use that software and just didn't like it. Cause it wasn't accurate enough. The folks I found who liked that software the most used an admin after that to verify what got extracted. And so if we come back today to the more modern paradigm of how we use these new AI apps to do intake, by the way, these same apps are working on. Okay, then how do you do extraction to push that data to the top tax software? The answer is still to have an admin come in and take it even further after the intake's complete. So can they help me with putting together those work papers with basic input of, say, government forms into the tax software? They absolutely can. And there's no reason to have them stop at intake. And this is where I say it's amazing to see the spectrum of tax firms, how they have wildly different skilled people doing the same work. Many tax firms, for everything we've talked about so far, have had no admins involved in the workflow at all, while other tax firms have genuinely had admins leading the way for the entire process of what we've talked to up to this point, from engaging, to scheduling, to overseeing the intake process and now to even doing like half of work paper prep by marking up that file, getting it annotated, actually doing a bit of a future step, getting some of that even input into the tax software. And then when your tax pro picks it up, that's in just a totally different place. Right. Okay, last for work paper prep, will it AI? Not yet. And the problem here is like you have all these different documents in a giant PDF file and we don't really have AI tools that can do very useful things with that yet. Certainly not annotate it exactly the way that you and I would annotate it. But this, in my opinion, is why it is worth betting on the horses. That is the software horses in the space that are using AI to kind of help us with these workflows. And so it's this crop of tax intake tools is who it is, who now have a really good solution for intake and are now moving towards work paper prep. They're moving towards populating the tax software, even moving towards automating the delivery of the completed tax return. Those are going to be the companies that are putting AI to work in interesting ways for work paper prep for review. And it's why those are the folks that I want to buy into. In my firm, anytime you pick a software vendor, you're hitching your wagon not only to where they are today, but where they're headed. And if you had to bet on somebody that would start using AI in more interesting ways, it's gonna be them, right? Okay, that was number four, work paper prep, number five requests. These are the stoppers what make you put down a project because you need X, Y and Z. And the way to not do this, which is the way that most of us still do it, is to send an email. Because I don't want clients emailing me sensitive documents. 20, 25. It's not a secure way to exchange information. And as frustrating as it is to have to send them through some other system that maybe they don't wanna use, the reality is that's the only secure way for us to exchange that stuff. And so with all the tech we've talked about so far, let's talk show me the tech. What are the right solutions for gathering information? When you're like, can you send me this W2, please? That's the very simple example, right? It's probably gonna be one of two different tools. It's either gonna be your practice management system, which is more kind of the operating system for your entire firm, the backbone how you manage all of your projects. It's either gonna be that practice management system where we stage a request that says, john, I need you to send me this specific W2. The client then gets a notification from the system saying, hey, can you give me this W2? And it will auto remind them until they provide it. Or it could be your tax intake tool, the same tool that they did the initial submission of information with most of these tools. You can also add. Add in a different additional questions along the way to say, okay, we also need X, Y and Z. Now again, it's really nice to use software to do this type of request because then you don't have to go back and do the refiguring out of like, okay, they got me 3, 5, and 7, but not the other ones. Whereas the software will just soullessly and relentlessly follow up until you've got all these things. But keep in mind, we actually did a whole podcast episode on this. If you're blocked on like, oh, my client's not gonna use this portal. Please go and check out this podcast episode. When you make the change to using software to request information from clients, most clients won't do it. And it's not because they object to it on, like, a fundamental level. It's because we're all habitual and they will just keep doing things the same way until you retrain them to do it a different way. So many firms will make a change to something like this and then do it and then be annoyed and they're like, this doesn't work cause my clients won't use it. The reality is we have to communicate and recommunicate. Here's the right way to send me this stuff. And if they don't pay attention to that email notification from the software, then we fall back to our normal communication method, whatever that is, not to ask for that W2 but to remind them, hey, you should have an email from this platform asking for that W2, can you go submit it to me securely there? I don't want you to be disappointed when your clients disregard those notifications. Cause for many people they just will until we over communicate like, hey, look out for this from this platform. This is how we're gonna gather documentation. But the upside for you is you don't spend all of your time just hounding people for documents. Like I would actually argue that if 80% of the emails your client gets from you are just asking for documents, they will think that that's 80% of what you do is gathering documents. And you and I like do not sink to that level. Like that makes the perception of what we do be such more administrative than it really is. So this is an opportunity. Like as much as we really have the servants mindset and get on that high horse and be like, buddy, the best use of my time is not chasing you for administrative stuff. So I'm gonna trust the software to do that. You need to pay attention to it so that I can do the big brain stuff that'll actually save you like money, save you some tax. Okay. Requesting can I de skill it? Yes, I would actually say using software to request documents from clients. It is descaling it because we're using software to do something that your professional staff you have to do. Last will it AI. Is AI really impacting this at all? Not yet. But I will tell you a killer AI feature that is in the pipeline and in the next couple of years we'll have a juicy version of is. Imagine when a client submits something to you or you hop on a meeting with a client and the meeting recording the transcript from that meeting gets sucked into your software. Imagine if the software then sees into that transcript and they're like, okay, I can see the client answered this question. This question and than this question and Then it resolves those outstanding requests. How sick would that be? Like that's actually completely possible with the tech that we have today. So AI will stand to make these requests easier to manage. Today's episode is brought to you in part by Mercury, the fintech platform that over 200,000 companies trust for banking and running their financials finances. Because traditional banking websites, at banking apps they what words are we allowed to use here? They're no good, they're very bad. You hop into Mercury, you're like, oh, okay, this is like What a modern SaaS platform for managing this stuff in my business ought to look like. Stuff like being able to invite clients to set up their own accounts, manage multi user stuff, manage access. It's actually pretty fully featured like invoicing, bill, pay card management and all the stuff you need for like moving money around wires. Ach, all that stuff. The before and after of working with a client with a modern platform like Mercury versus a traditional bank. I mean if you're doing bookkeeping, it's a tremendous time saver, vastly simplifies the month end close. But oftentimes we don't feel like we're, we don't feel like we can be opinionated about what bank they use. It's actually a great example of when we talk about in say a three tier proposal letting someone just rock up with whatever bank they want to use, that's going to cost them more money for me and at a certain point, honestly that like that may not even be an option. There is an easy solution for crusty old banks and the workflow issues that they create. I encourage you to check out Mercury, like you will hop in there and be like, okay, you know, I get it, okay. I can tell you that with confidence because it's what I use. Honest to goodness htg. They're even doing more stuff with accounting firms now. You can even get up to $1,000 referral bonus per eligible client. Okay. Disclaimer time. Mercury is a fintech company, not a bank. Terms apply for bonus eligibility. See Show Notes for details. Learn more about Mercury. Look down there. Check out the Show Notes. This episode is brought to you in part by Missive. Missive is a platform for managing email in a team. And if you've heard me talk about email, you know we need to break down the silos where we all are managing our own. Email inboxes, please. Email is the receiving bay of your accounting firm. Let's take the team approach. Okay, now missive, actually a huge percentage of Missive's Users are accounting firms probably because most practice management systems these days like with very few exceptions their email implementation like the client for sending emails kind of sucks. But also outlook awful place to manage team based inboxes. Missive we talk about like building your org chart around pods and managing client groups and all that stuff. Missive will let you set up like email management the same way in pods. Everybody can have their own inboxes but you can also share those inboxes as well. So people can help each other out, cover for each other. Makes it way easier to delegate the work that's coming from those emails. Really cool platform. Some G2 reviews from actual accountants. It massively improved their workflow. Makes inbox management a dream. Fantastic tool for my busy accounting firm to manage multiple inboxes for clients. Missive is all caps. Amazing and I can't live without it. If you are wasting too much time on email man, give missive a look. More info down in the show notes. Today's episode is sponsored in part by cloud accountant staffing who helps you find talented offshore and nearshore accountants to come to work for your firm. It is run by former accountants and a cool thing they just launched is what they're calling a candidate portal. That is you can hop in, see the candidates they found that could come and work with your firm. Filter by years of experience, filter by software experience filter filter by region. Are they in the Philippines, Latin America, South Africa? That matters. Depending on the role. Is it important that the time zones align? Are they going to be doing anything client facing? But they've now got kind of a self service portal where you can go in, see the folks, book interviews. Like in real time? No, like weird kind of recruiter gatekeeping. Right. And like I mentioned, cloud account staffing. The folks who put this company together and actually still run it to this day, they're former accounting firm owners. So they actually understand what you do and what it takes to like effectively integrate folks into your team. If you wanna learn more about cloud accountant staffing, check out the link down in the show notes. Okay, step number six, input. This is the inputting of the goodies into your tax software. And you know the tax software is kind of like the dinosaur in this whole workflow that we're all having to sort of work around and there's people building cool tech all around the tax software. But because rebuilding a tax platform from scratch is so ridiculously complex and costly, we're stuck with like these old school tools. So I don't really have any workflow hacks for you here. But in show me the tech, I'll show you again my app database. Down here we've got tax prep software. The three leaders in the category in my opinion are Drake Tax, it's the good budget option. Ultra Tax, it's the more expensive but like more powerful option. And then Intuit Pro Connect, it's the only really cloud based option worth using. But it doesn't always handle the complexity that you need. And it means giving Intuit your money. And Intuit just hasn't had the most healthy relationship with tax professionals lately. You're leaving me for a turbo tax expert who charges me less but gives me more. Now the bigger opportunity than like finding a better tax software because you know, switching from ultra tax to say CCH access, you're actually going to take a huge step backwards in productivity because so much of being efficient with tax work is muscle memory. The bigger opportunity for time savings in this workflow is like the tax intakes like we talked about. But rather than changing your tax software, consider how can I deskill the work that's happening in my tax software? And as we've talked about, this is where you can actually use admins to kind of pre populate the tax software with all the low hanging fruit stuff from that work paper prep stage so that when your professional staff gets in there, it's already partially complete. Last will it AI. So this is interesting. There isn't like such thing as AI tax software today, but a big trend in AI is moving from AI chat assistants to AI agents. That is AI software that will like go out and autonomously do things for you. And we have examples now of this where AIs will go out and say navigate a web browser to do whatever you need automatically. And we're still in the very early days of this ChatGPT operator is the best example of this. But in the near future we will have desktop AI agents where they navigate your desktop computer and can then do stuff like navigate your tax software. So and this is something that's probably in the next 24 to 36 months, something we could realistically have is a desktop AI agent that's good enough to be able to navigate your crotchety old tax software. Review inputs, make inputs itself. And that kind of totally changes how tax prep happens, right? Really, really exciting. And you better believe we're gonna be here talking about it as soon as it becomes possible. Have you subscribed yet? Why are you not subscribed? Do you know how long this video's gonna take to edit I'm sorry, that was number six, input number seven, self review. And most bigger firms do this. This is a bigger one for like micro firms. Some shops will have like a sort of work paper that's like a quick and dirty sort of math check to make sure that what's gone into the tax software lines up with work papers. So the idea is that you like complete this Excel spreadsheet looking just at the work papers and make sure that it fits to what you're seeing in the tax soft. If you actually want an insanely powerful tool to help with this, check out excel1040.com I absolutely love this thing by Glenn Reeves. Anybody can download it for free. It's an Excel spreadsheet that like recreates a huge number of the schedules, like the government form 1040 schedules. It's got a set of like work paper tabs where you set up all the inputs and then it like calculates this stuff and the level of detail. He's gone into this. It's incredible. I know a lot of itty bitty firms that actually use this as kind of their 1040 work paper and if not it's kind of the core work paper itself, then at least as a double check they'll use this as a self review. Check this one out. It's pretty freaking great. I actually plugged it in my newsletter last week. I sent out a weekly newsletter that's like the best stuff I think you should be aware of. We'll link that up above something like, I don't know, 9 or 10,000 accounting firm owners on that email list right now. But this thing I absolutely love. It's probably the most powerful self review tool that's out there. Can self review be deskilled? I don't know, you probably have an admin, maybe do a version of that. Actually, if you're trying to upskill your admins a bit, having an admin, you know, fill out that Excel thing based on the work papers and double checking it to the tax software could be a great way to get them some exposure to slightly more technical stuff. I don't know about you, many of the best tax preparers I ever knew started as admins. And if you try to deskill this work as much as possible, not only are you saving the time of your professional staff, but you're creating new tax professionals from your admins and that's pretty freaking cool. Last will it AI? There's not really any cool AI review applications yet, but like we've talked about, I think the current crop of tools that do tax intake really well, don't be surprised if you see them starting to apply. AI More on the review side. Okay, number seven, self review. Some firms do that, some firms don't. But number eight, find first review. This usually goes one of two ways. It's either a detail review or a technical review, or all the above. I guess that was three ways, wasn't it? So bigger firms oftentimes they'll have two layers of review here where it will first go to a peer for review. And the peer is just like more checking the numbers to make sure you didn't make any obvious errors. And the next review is the technical review. And that's not double checking the numbers as much as thinking more big picture, like, does this make sense? Is there a better way that we could have done this without getting into the minutia of double checking what got keyed into the tax software? And so for some firms, it makes sense to separate the detail review from the technical review. Other smaller firms, it just makes sense to roll that all into one. And there isn't really any tech that'll help you out much here either. But I can give you a really big tip here to de skill review work and that is to introduce a difficulty yardstick for your 1040s. And so I'll run you through how we did this. In my accounting firm, we were doing about 1800 1040s a year. 1040s were all level one, two, three or five difficulty. And so level one is like government form only I think it didn't even have Schedule A's. I want to say Level 2 was government form and schedule A just itemized deductions and you know, only W2s, 1099 hours, 10 interest, that sort of thing. So very, very simple. Returns were level one and two. From that it gets into, I think level three had schedule E's, level four was schedule cnf. And then after that was everything else, including pass throughs. And all 1040 shops struggle with review. That's usually gonna be your bottleneck. Cause you've got that unicorn reviewer and that can only pump so many returns through. But the problem with having a really clear delineation between preparer and reviewer is it makes review this big sort of mysterious thing that only certain people are capable of based on like years of experience. Whereas if you have a system like this with varying levels of difficulty, then you don't have your unicorn reviewer doing level one reviews. The way we've approached this in my firm is basically everyone had A number they were allowed to review up to. And pretty much everyone did some level of review. Because what level of expertise is really required to review a level one return? Like that's almost administrative. You're just making sure that the government form numbers went in correctly. And so by breaking this down, a huge percentage of our 1040 work could be reviewed by lower level staff. But it also took a lot of the fear out of review, because review was everybody's job. Rather than having a group of people whose job it was to prepare and a group of people whose job it was to review, everybody was in on the act in some way or another. And then over time you could like grow them up that ladder to go from a level two to a level three. And this is where like documentation around kind of your procedures for how to review get really important. And the notion of building like an sop, an explicit process for how to review a tax return, that's like impossibly difficult, right? Because you can see there's so many different potential things that you would have to cover there. But building an SOP for how to review a level one tax return that's only pulling from government forms that you can kinda see, right? And so that's where you start. Like you build documentation and training to show your team, here's how to review level one. You learn from that, you refine that documentation, you figure out what you got wrong, and then you move on to building documentation for here's how to prep and review level twos. And so you've kind of democratized how review gets done. You've protected the time of your most scarce technical people who can do the really hairy stuff. And so you get a bunch of their time back. And in my experience, virtually every 1040 we then worked on was going out the door with like a lower level of sort of cumulative skill being put into it. I'd also argue that that was actually a much better progression for our preparers as well to be doing a bit of review along the way. Because we've all seen kind of that whole split brain thing where it's like a preparer is seemingly incapable of reviewing their own work. And you've got a camp of preparers that see one way of doing things and the reviewers are like, no, it'd be a lot easier if you could do it this other way. Well now everybody's wearing both of those hats. Cause they're kind of hybrid preparer and reviewer. So for review, not really a lot of tech solutions here, but you can certainly deskill it and will it AI? Not really. But like we talked about, I hope that we can see some more AI solutions here. In fact, the best way to put AI to work is with like very clear sops. And so even step one to getting AI to do some version of review for you would be for you to have like an explicit outline of. Here's how to do review on level one tax returns. In fact, now that I say it out loud, this may be a thing that we could actually like build out a GPT to do a decent version of. But you have to start with the really, really simple stuff. Right? But off the shelf, not great AI tooling to do tax prep review yet. Step number nine, partner review. Just sign it and get on with your life. Okay, that's it. Number 10. One other thing I will say on partner review is if you're to the point where you don't actually review the return when you sign it and send it out the door, let somebody else sign sign it. Stop pretending that you're doing the work. The same person that's like, I just can't find good help anymore. And I wish these people could take on more of the client managers and all that stuff. They're the same people that insist on signing the return so that it looks like they did the work. Don't be afraid to get out of the way. Okay. And don't sign stuff that you didn't actually review. Okay, number 10, billing. How do we bill for this 1040 work? Ideally, we've set ourselves up for success at the Engage step where we took in payment information. We got them to agree to a price or even a price range. These proposal tools will let you say, like, it'll be between 1200 and 1500. And at that point when the client gives you their blessing, then you have permission to auto bill them when it's done. You notice we're also talking about billing before the delivery step. Ha ha. Anyways, if you did the Engage step the right way, this is really easy. It's really trivial. You just hit the button, you take the money. Now again, I recommend, like, have some boundaries there where a scope conversation with the client only comes up if it's kind of outside of this threshold of where you expected it to be. And when we re engage clients, we're really clear in that engagement that we're assuming the scope is gonna be more or less the same as it was the prior year. Otherwise, we're gonna reassess this and clients can understand this. If you haven't had A conversation that would make you realize, oh, they sold a rental or they started a business or something like that. Then of course you're not gonna know that their needs have totally changed. But to get to this billing step. Cause the return's done, but it hasn't yet been delivered. And if you are still an hourly shop, I can tell you like where I ended up, where my firm started was everything was billed hourly. By the end we were tracking time. Cause I still think that's a very important metric. But we're doing what most people would call either fixed fee or value billing. Fixed fee stuff for high volume projects like 1040 work. Value billing. For our cast practice, which was more like an accounting department in a box. Monthly recurring revenue, we would value price that before our 1040 work, we moved away from hourly billing. And an unexpected benefit of this was getting the partners back a tremendous amount of time. Because to have to manually bill all that stuff worth remembering, billing is time that you can't bill for. And if you can get a whole bunch of those projects off your plate where you're not having to fuss with it, the client shouldn't be complaining about the bill at the end of the project because they've already agreed to the price up front. You will still have the exceptions to handle. But genuinely in our case that was like 5% of 1040s. That would come in outside of the thresholds that we had set up ahead of time where we said, okay, if WIP is, you know, 200% of what we expected, then we gotta look into this. Was this our fault? Was this a change of scope? And then you navigate that. But that's billing the exception rather than billing every single project. And clients like they appreciated that transparency. Actually seeing that price upfront in our case, it was kind of a win all around. Now show me the tech. We'll go back to the engagement tools that I showed you up front. Kind of the best way to do this. I will say one practice management system that does this really well. Because most practice management systems like their engagement solution, how they do proposals, very, very basic, doesn't support three tier proposals. The invoicing is pretty basic. One practice management system that does this really well is actually taxdome. They can basically lock down the return delivery until the client pays, and then immediately when the client pays, that return is released. And that's really cool, right? And you may be a little blocked on that. Cause you've never done that before. And it may feel almost offensive to a client to withhold a tax return. Until they pay for it. But I think it only feels that way because we've never had a way to do this in the past, right? Like we didn't have a way to paywall access to a tax return. So we just give them the return and then we invoice them and then we hope that the client pays the bill. But at that point, like they've gotten what they want from us and we don't really have anything to hold over them to get them to pay. And even if, even if we trust our clients. And this is kind of what I've gotten to on this. Cause I did like my clients would pay and if they didn't pay, we'd send them packing. So it's like, was that really that big of a deal? What I've gotten to is like I was blocked on this simply because it wasn't how we did it before. And it's always good to think about if a new client walks in and you explain to them, here's how we actually schedule all of our tax work, or here's how we require you to provide a payment method upfront. How we auto bill at the end, how you have to pay before you can get access to the tax return. A new client to any one of those things will be like, oh, that's interesting. Okay, sounds good. It's really only like a subset of your current clients who are kind of change averse, where it's going to be a little bit of a fist fight to get them to change to a different process. But one of the biggest traps in accounting firms is letting your C and D clients, that is, and your client grading scale, letting your C and D clients stop you from building the firm. That's great for your A and B clients. And so if this is a good change across the board, but you're gonna have a few just crappy clients who already complain about the bill anyways. If you're thinking of them and they're like, ah, they're never gonna go along with this. We can't let those people hold us back. Right. So show me the tech. Can you deskill it? Yes. Admins should be handling all of billing. You don't need the partners to get involved unless in A, it's an exception or the, you know, the tax manager or whoever's doing the billing and then will it AI. There's not really a way to plug AI into this part of the process so much yet. And in a perfect world, it just kind of happens like it's automatic on rails okay, last step. Number 11, delivery. And this is actually a pretty big opportunity. If you were like me, there was a phase in my journey where I would write these just super bespoke emails to my clients with bullet points of all the to dos. I would use like a little kind of secure sending thing and the body of the email so they could click through and get access to, to the tax returns. That stuff took a lot of time though, and a lot of times your clients want to hop on a call. And I absolutely hate having to take client meetings at delivery because usually at that time in the year I got a million other things to do. And the last thing I want to do is get on a call with them to show them a tax return so they can be like, oh yeah, okay. They don't understand anything they're looking at. I'm literally sitting there watching them process and then two days later they have questions. So delivery meetings, 90% of the time, total waste of time. What I do instead, and we've done some videos on this in the past, is I do like a three minute video explainer. Here's the stuff to look out for on your tax return. Here's the two year comparison. And they're like really appreciative of that. Cause I can actually show them some stuff on the forms. I'm like, here's why this is this way. And they actually learn a little bit. But then as part of that delivery, I include my scheduling link, my calendar link if they still want to get on a call. Because I don't wanna make them feel like I've kinda pushed them off, like I don't have time for you. I'm gonna give them a video delivery and give them the opportunity to book a call and what you'll find, and I've heard this so consistently across firms that have switched to video delivery, is 80% at least of delivery meetings go out the window when you send a video explainer because they're usually appreciative. They're like, wow, cool, thanks for walking me through this. They think it's like impressive to make a video. It's like, it's honestly, it's so trivial and easy these days. I know how that sounds. Wow, videoboy, is that trivial for you? It is. Pick up a tool like Loom, get comfortable with recording these kind of little three minute recaps and it doesn't take any longer than sending an email. But you'll find that doing this, clients love it and it will actually save you a pile of time from not having to take those delivery meetings. Now, there is some good tech to help with automated delivery and the best one, and it's been the best one for the last decade, is SafeSend. Unfortunately, end of last year, SafeSend got acquired by Thomson Reuters, which, as we've talked about, usually you don't see a ton of development from a tool after acquisition, but SafeSend is still the very best in this category. Asoraban now, which is another one of the leading intake solutions, they're doing a version of Delivery which is not as good as SafeSend yet. It's still in beta, but I'm glad to see them working on it. Basically what these tools do is you give it the entire tax return. It splits out the vouchers, splits out all the signature pages, gives them like a very explicit checklist to do, list of things to do, rather than them having to make sense of that cover letter, that transmittal letter that like no normal human can actually read and make sense of. The software ingests the tax return and makes all that stuff more human readable. And then, and this is Biggie, it will follow up with them to get the 8,879 signed until they actually do it. And that can be a real waste of time if you got admins spending months just trying to get an 8879 signed. Now, can delivery be deskilled? This is the big opportunity, I think, and this is why it's worth using software to deliver tax returns. As much as I don't want to add, like yet another one on here. The really nice thing about automated return delivery services is an admin can do it. Like, I've already signed off on the return, the return's done, the return's locked in the tax software. But by using a tool that will help you do delivery, and I would say probably SafeSend and Sorban are the leaders here. Right now, using a tool that'll automate delivery means an admin can do that. I can still record my little video explainer that just gets pulled into the email template that the client receives along with my calendar booking link. The admin pushes it out, the returns delivered. I don't have to see it again unless the client wants to schedule a call. This is kind of a tricky one to know, like, do I pick up software to do automated return delivery? Because the best ones at that right now, like at least Safe Send, it doesn't do intake very well. I would say if you're buying one or the other a tool to automate return delivery versus automate intake. Buy the intake tool. There's more time to be saved on intake across all of your clients than on automating delivery. Although that is like there is still time to be saved on delivery. I hope some like the intake providers get better at that automated delivery. So delivery, it can absolutely be deskilled. Will it AI? I've actually seen some people who will use ChatGPT to rewrite the COVID letter into like a more actionable checklist. Actually know a number of firms that are doing that now and that's actually a pretty cool use of AI. So if you don't have an automated delivery solution, build like you know, a custom GPT or something like that in your firm that all the users in your firm can share where they then give it the COVID letter and it returns like a more concise to do list for your client. Again, anytime we're talking about ChatGPT, make sure you're using the ChatGPT team plan comes with much better security. You can actually use it with client information. It's actually got as good or better security as many of the leading cloud based tax tools and practices management systems that we use these days. That's it. Is that all, Jason? Yes, that's all. Hopefully you got some useful stuff from this one. If you got value from this, I can tell you these videos are attracting like a really cool, new, more progressive type of accounting firm owner. And I run what is basically like a small accounting firm alliance now. It's got almost 600 firms in it. It's called Realize. The reason I set it up is that I learn most from other firm owners, not from like stage presenters or webinars or software company education. I would argue that's what makes my content actually much more real, is I ran a firm and everything I learn is from other firm owners. And if you don't have a network of firm owners that you can like shoot them a text, ask them a question, talk to them about how they use a piece of software before you change to it. Man, it is such a powerful hack for your firm and this content, this stuff that you're watching, it's attracting a really, really cool type of firm owner. If you want to learn more about that, check out Realize RLZ IO or I'll link it down in the description SA.