Taming Your Firm's Paper: Although the main attraction is less paper, document management systems do so much more.
Above all else, Ronald Kranzler wanted consistency throughout Held, Kranzler, McCosker & Pulice. It was something the New York-based firm did not have in its workpapers, which were once set up on a job-to-job basis.
"Often this meant, when employees received small jobs, such as a two-day engagement, they didn't have the time to set up detailed binders," says Kranzler, the firm's managing partner. "We'd open a binder and there would be 20 documents with no tabs, sections, or table of contents. There was no organization with small jobs."
The 20-person firm began the process of automating document management four years ago by looking at how it prepared financial documents. "We found our workpapers lacked consistency, and we were amassing a tremendous amount of documents," he says.
But Kranzler says that his firm put document disorder behind it by moving to a paperless environment in which it utilized CaseWare Working Papers and CCH ProSystem Document fx. The firm is pleased with the results.
Moving to automated document management "has provided us with obvious cost savings; flexibility of staffing; the ability to back up all workpapers, tax returns, and permanent files; and savings in space requirements," he says.
In fact, the firm was so successful that it has offered paperless consulting services for about two years. The income from that source was 5 percent of total revenue the first year, and is expected to represent 15 percent of the total this year, with professionals billing $225 an hour.
Services for smaller firms that lack IT departments can involve product selection and implementation. With larger firms, HKMP primarily consults on CaseWare and helps develop in-house templates.
"Three or four years ago, paperless was innovative, but now it's necessary. It's not, 'Should I go paperless?' but 'When?' The longer a firm waits, the further they fall behind," says Kranzler.
That is the message coming through loud and clear among vendors and CPA firms alike. Whether the firm's priority is cost-cutting, client satisfaction, or regulatory compliance, paperless document systems are not so much the way of the future, but more the way of today.
"Paperless is the single biggest issue we see, and we have thousands of firms ranging from large to small enrolled agents using our document management systems," says Mike Sabbatis, vice president of sales for CCH Tax and Accounting.
"The market is maturing. Firms are starting to truly understand what technology can do for them. It changes the way a firm works," agrees Joe Harpaz, president of Immediatech. Immediatech, which markets the Web-based GoFileRoom, has seen the number of customers for the document management system increase by more than 100 percent in the last year, and predicts the number will triple this year.
Paperless Strategies
Many firms look to the technology department for developing a paperless strategy. But that's not where the leadership must come from, says Michael Johnson, partner of Pensacola, Fla.-based O'Sullivan Creel.
"Document management cannot be an IT initiative. It's a process improvement and it needs to have support from the top down," says Johnson.
The 165-person firm, which has been using CCH ProSystem Document fx since 2002, appointed a staff team to investigate document systems.
"Once we found the systems we liked, we brought in the IT people to help us make the right decision. And when it came time for the implementation, we had a team that consisted of employees from our tax, audit, and practice divisions that worked on procedures and re-thought the way the firm did things," adds Johnson.
The team approach also worked for the Fort Collins, Colo.-based CPA firm Soukup, Bush & Associates. The firm formed a Paperless Transition Committee to make its CaseWare Working Papers implementation go smoothly.
The committee included one partner, the IT manager, and four associates who represented the various professional services provided by the firm. The committee provided recommendations to the firm, as well as designing and implementing the systems, and also training the remaining firm associates on the paperless system.
Keeping It Consistent
A major change for HKMP was how to handle financial statements, utilizing CaseWare's CaseView, a report writer that, when included in an engagement file, allows the firm to create knowledge libraries that house the firm's standardized documents, such as footnotes and opinions.
If a footnote is needed for any financial statement, the accountant can merely go to the library and click on the note that is needed. CaseView automatically inserts the note in the respective client's financial statement, as well as entering the appropriate numbers in the proper place in the footnote.
"With CaseView, once you write and edit the note, it can be used for any client without further editing. Since the numbers are taken from the same database that the financials use, there is much less chance of error. All reports are the same, and I'm able to sleep better knowing somebody didn't do something goofy," says HKMP's Kranzler.
Meanwhile, the file cabinet in ProSystem Document fx file now organizes each client by year. "All a partner has to do is put a client's name in and it opens a file with all that client's papers. If a lawyer calls up and has a question about a mutual client, we can pull up the information immediately and send it," says Stephen Barrett, director of information technology.
Implementation took three months and costs were approximately $17,000 for installation and the CCH software, which is priced at $1,750 for the first user and $450 for each additional user. The firm spent another $7,000 for a server. CaseWare cost $4,000 for the software. The firm also purchased laptops and additional monitors in order to implement a dual-monitor system. It bought laptops for about $3,000 each, and six monitors at $400 a piece. It acquired a Ricoh IS400 scanner for $4,000, and purchased multi-function devices from Canon for use as field scanners at $400 each.
"With CaseView, once you write and edit the note, it can be used for any client without further editing. Since the numbers are taken from the same database that the financials use, there is much less chance of error. All reports are the same, and I'm able to sleep better knowing somebody didn't do something goofy," says HKMP's Kranzler.
Revamping up
The growing interest is shown in the new products and enhancements entering the market and the response of tax and accounting professionals. Beside CCH's entry into the business with ProSystem fx Document, there are a number of firms that are augmenting existing offerings.
Mountain View, Calif.-based Intuit plans to introduce its Lacerte Document Management System to its other tax preparation software audience, ProSeries users.
"Most of these firms are not looking to eradicate all paper, but to reduce paper. They're happy if they can eliminate three file cabinets," says Neal Humphrey, DMS product manager.
Last year, about 10 percent of Lacerte's approximately 3,800 customers used the document management system. Intuit expects this year to reach about 20 percent, while Humphrey expects to see the same interest from ProSeries users.
DMS, priced at $315, allows users to send tax returns directly from Lacerte to a client's DMS folder as PDF files. It scans documents directly into a client's folder, tracks notes and client tasks, and accesses and edits documents in a client's folder.
Sage Software's Pensacola, Fla.-based CPASoftware unit recently introduced CPAWorkpaper Manager, an electronic document management system for use with CPAClient Write-Up. Priced at $695, CPAWorkpaper Manager lists all engagements with default folders for assets, liabilities, equity, and income statements.
Accountants can move documents within an engagement and can insert new documents into existing files, including scanned documents in PDF format. Users can also create new Word documents and Excel spreadsheets with version numbers.
"For old timers who are used to pen and paper, this is an easy transition," says a beta tester, Paul Campbell, owner of Huntington, West Va.-based Paul Campbell and Associates. Campbell, whose firm has a staff of five, uses the application's trial balance view to help in bringing together end-of-the-period information. He also finds that the notes and customizable tick marks let him see which staffers have worked on which jobs. Campbell also plans to begin utilizing CPADocument Manager to organize all documents. The product is priced at $795.
Meanwhile, when it comes to Web-based products, most vendors haven't seen strong interest, but are keeping their options open. Torrance, Calif.-based CCH Tax and Accounting plans to offer a Web-based version of its ProSystem Document fx in the second quarter of 2006.
"We hear from our customers that they want the choice of hosted versus not hosted," says Sabbatis.
It's more than that, according to the plan outlined earlier this year by CCH CEO Kevin Robert. The ProSystem document software, purchased from Habif Arogeti & Wynn, is SQL Server-based and is too sophisticated and too expensive for small firms. The CCH system is priced at $1,750 for the first user and $450 for each additional user. But CCH also retained the accounting firm for consulting services needed to implement ProSystem fx Document.
The plan is for the Web-based application to reach the lower end of the market.
Already operating exclusively on the Web, Immediatech is adding the optional GoFileRoom.Net to enable users to automatically replicate documents saved on Immediatech's servers.
Which Software Flavor?
There is another category of document management software: workpaper software. Many firms entered the document management world by purchasing workpaper applications. Some try to extend their use to full-fledged document management. They weren't meant to be used that way, according to L. Gary Boomer, owner of Manhattan, Kan.-based Boomer Consulting.
"Many firms were led to believe that a workpaper container such as CaseWare, Engagement Solution, and CCH's Engagement fx were document management solutions," Boomer noted in an interview late in 2004.
Traditionally, workpaper products are used to store documents from works in progress such as an audit, and once the audit is wrapped up the final product will be stored in a document management product.
"Workpaper products don't allow users to search documents and don't work well for record retention," says Immediatech's Harpaz.
For example, GoFileRoom's features include TaxFlow, a workflow tool that routes and tracks documents in the tax preparation process, and ClientFlow, a client portal designed to publish client documents to the Web.
Still, firms are trying. Last fall, Steve Schottenfeld, director of technology at Boston-based Gray Gray & Gray, noted that, "We would like to see if Engagement Manager can be used for document management in general."
One major difference, says Stephen Barrett, director of information technology at HKMP, is the search capabilities of true document management systems. For example, the firm had a partner who needed to gather information on previous projections the firm had completed. "All the partner had to do was type in 'projections' in CCH Document and the list came up. In the past, this would have easily taken at least a half-day. It's a huge time-saver," says Barrett.
Kranzler also notes that one reason the firm uses both CaseWare Working Papers and ProSystem fx Document is that, "CaseWare works as a binder, while CCH works as a file cabinet. In the past, you wouldn't walk into an office and have binders without a file cabinet or vice versa. Having both products makes each one more productive," says Kranzler.
Increased Customer Service
Another product, eFilecabinet, came out of the day-to-day experience of CPA James Baylock, who was sitting in his office seven years ago watching his highest-paid employee walk back and forth to the firm's file room with stacks of paper.
"I realized I was paying my best employee $40 an hour to carry paper. I went shopping for a solution and found everything was too complicated," says Baylock, president of eFilecabinet.
It was then that Baylock created his own systems to improve his firm's procedures and increase client satisfaction.
eFilecabinet was launched four years ago, and Baylock has seen sales double each year. The Provo, Utah-based company has approximately 1,500 firms using its product. "I designed it for CPA firms, and made sure it was fast and easy to use. Otherwise, nobody would do it," adds Baylock. The product costs $1,700 for a five-user system and $100 per workstation for each additional user.
Scanned documents are saved to a file drawer, and although Baylock suggests using the PDF format, any kind of file that Windows recognizes can be used. "When a firm sees paper in a bunch of file cabinets, it's the tip of the iceberg. It's now become an indicator of a problem," says Baylock. He estimates that a paper-filled environment leads to a wasted hour per day per employee, $1,000 per person per year in toner and paper, and an additional $5,000 to $10,000 per employee in labor costs.
In four tax seasons, the Orem, Utah-based firm of Hawkins Cloward & Simister accumulated 40 filing cabinets' worth of documents online rather than in filing cabinets, and they haven't had to find or build the space to store all that paper.
The 50-person firm implemented eFileCabinet in February 2002, spending about $5,000 on software and $2,000 on additional storage space. Although the firm hasn't actually calculated the ROI, partner Eric Nuttall says, "We've saved hundreds of hours by not needing to re-file client files, and by not performing entire office searches for lost files. When a client provides us with some necessary forms in a client meeting, they are blown away when we simply scan the documents and hand the originals right back to the client."
The Roseland, N.J.-based CPA firm of J.H. Cohn continues to utilize Immediatech's GoFileRoom to create better procedures. Partner Lewis Gikow began implementing the product in 2002 before the Videre Group merged with J.H. Cohn. Gikow originally rolled out GFR to Videre's 125 employees, but when the firm merged with Cohn, he helped them roll it out to eight offices and 700 employees.
"I realized document management could be more than just document storage. It could create better procedures and allow us to service our clients better," says Gikow.
And this year, he has created four new file drawers to do just that. The drawers include:
Accounts payable. The firm uses four-drawer lateral files to store two years' worth of vendor invoices and related papers. By filing them in GoFileRoom, "we will save the space for the four filing cabinets in our new office. Eventually, we will scan in invoices once they are received," adds Gikow.
Mentoring. This drawer will securely store the documents produced in the mentoring process and make them easily available for the mentor, the staff member, and the HR professionals to review.
Partners. Partners will utilize this drawer to store any non-client-specific documents.
CPE. This drawer will hold CPE documents such as sign-in sheets, course material, and certificates from outside courses.
Carly Lombardo is Associate Editor of Accounting Technology and can be reached at carly.bohach@sourcemedia.com.
Refer to pages 19-26 for the full article.
Reprinted by permission ©2005 Accounting Technology, Thomson Media, One State Street Plaza, New York, NY 10004 - 1-800-221-1809
