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Looking at Tax Technology Innovations at the WSCPA Pacific Tax Institute

Earlier this week, I had the opportunity to speak at the Washington Society of CPAs’ (WSCPA) Pacific Tax Institute about the changes coming to the accounting profession with big data, robotic process automation, and artificial intelligence technologies. These technologies have reached a point of practical maturity for use in supporting tax services.

It’s always interesting for me speaking at local events because we usually get to see the perspective of smaller firms, and this WSCPA conference was no exception. Over 50% of attendees who participated in my polls had 10 or less people in their firms. (See Chart 1: What is the size of your firm?; n=69)

Chart 1: What is the size of your firm?

The Greatest Impacts of Emerging Technologies

The first part of my presentation described the changes that accountants need to make to their practices to transcend technology innovations and still provide value to their clients. For tax practices, this was shift to more of a focus on tax advisory services, including tax strategy and planning, and more regular interaction over the course of the year to hold clients accountable for executing their tax strategy and sticking with the plan—or to adjust the plan as necessary for other changes that may be occurring over the year.

Chart 2: Which of the following big data impacts do you think are most critical over the next 3 years?

After explaining the impacts of emerging technologies to accounting and tax processes, I polled the in-person and online audience to see which impacts from the use of big data to support accounting processes they thought would be most critical. (See Chart 2: Which of the following big data impacts do you think are most critical over the next 3 years?) Fifty percent saw automated sales and local tax, and general tax compliance as being the most critical. This was followed by 40% who indicated that the use of non-financial metrics for real-time forecasting was most critical.

Are Pacific Tax Institute Attendees Using Tax Automations/Outsourcing?

After starting out looking toward the future, we shifted to look at the technologies currently available to support tax practitioners. (see Chart 3: What tax automation/outsourcing are you currently utilizing?) Electronic archive of tax returns (78%) and scanning incoming paper to electronic document (75%) had the highest utilization, with electronic signature of forms/returns (58%) a distant third.

Chart 3: What tax automation/outsourcing are you currently utilizing?

All of the technologies listed are already mature and have been used by firms to improve their profitability or interaction with clients, so there is quite a bit of opportunity for tax practitioners in Washington state to improve their practice’s use of automation and outsourcing.

The key to improving practice profitability when using tax automation and outsourcing is also adopting value pricing. This does not mean getting rid of timesheets, but rather using more of a fixed price approach when pricing return preparation services for clients. The automation or outsourcing of a return reduces the effort and cost to prepare the return, while value pricing keeps the fees charged to a client at its current level (or you can share some of the savings with them), increasing the profit margin to the firm.

What Tax Practice Tools are Pacific Tax Institute Attendees Using?

From looking at the tax return process, we shifted to look at the tax practice as a whole and polled attendees to see which tax practice tools they were using. (See Chart 4: Which tax practice tools are you currently using?) Client portals / secure file exchange was the highest by far with 91% indicating that they are already using this. This was no surprise as this was one of the earliest technologies pushed to tax practices. What was surprising though was that only about half of attendees were using paperless engagement binders, electronic invoicing, or electronic payment tools—again these technologies are already mature and ready for use by tax practices.

Chart 4: Which tax practice tools are you currently using?

Lots of Opportunity to Increase Impact to Clients

The final section of the presentation focused on how tax practitioners can have a greater impact on their clients by providing more support for management planning and decision making—often thought of as outsourced controllership services (i.e. beyond basic bookkeeping). I described for attendees the decision making process and explained how if they go beyond reporting and analysis to actually providing insights to their clients to help drive better decision making, that they can have up to a 300% positive impact upon their clients’ performance and ability to meet their goals.

I again polled the audience to see how many of them are getting to this point of impact and found only about half are providing insights to their clients, and only 20% were even going past providing insights to truly have an impact upon their clients. (See Chart 5: To what extent are you providing decision support to your clients?; n=61) So there is a lot of opportunity for Pacific Tax Institute attendees to increase their impact upon their clients.

Chart 5: To what extent are you providing decision support to your clients?

Transcending Technology and Increasing Tax Innovation in Washington State

The results of the polls showed that there was a lot of opportunity to utilize more tax technology innovations to improve the profitability of firms and digitize more of their workflow and interaction with clients. However, I always like to remind firms that clients do business with us CPAs because of human factors like personality, creativity, and emotional support. Technology can help us to do the work, but it can’t help us provide clients with peace of mind, vision & clarity, or hope. By transcending technology, we can leverage our human only traits to build stronger relationships with our clients and truly have a meaningful impact upon their lives or businesses.

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