From an economic perspective, recurring tax compliance engagements represent a low marginal cost to a firm. Once you’ve made it past the first tax year and have identified the taxpayer’s unique attributes, subsequent years are quicker and easier because your tax software rolls relevant demographic data and tax attributes to the following tax year’s software—which means many returns are largely done.
I hear accountants describe this situation with the acronym SALY: “Same As Last Year.” While the previous year’s return can be an invaluable tool— particularly for complex tax returns—putting too much emphasis on it can inhibit value creation for clients, stifle tax talent development and hinder profit potential if you apply SALY to your taxprocess.
In the crunch of busy season, it’s easy to overlook opportunities for—or looming threats to—your clients, but there are ways to become more efficient and free up time to create value. To avoid the SALY tax trap with your clients next year (and the resulting fallout), I recommend this scalable approach:
- Assign one member of your firm to identify all new opportunities (new credits, deductions, etc.) and threats (new taxes, lower statutory thresholds, etc.).
- Try to identify impacted clients using your tax software’s reporting or data mining capabilities.
- Have the staff member prepare lists of affected clients and distribute them to the staff responsible for those clients. Then give the rest of the firm an effective process or reminder to assess these scenarios as needed—perhaps a status event or a global checklist item that’s available in your tax or workflow software.
- Assign a staff member to conduct brief “change of life” interviews with the rest of your clients through proactive mailings, emails or phone calls. Several professional tax systems contain mass-mailing capabilities for clients who meet certain criteria.
- Refer clients who indicate a change to the responsible party in your firm, particularly in instances where action by the end of the quarter or year may be to the client’s benefit. When you properly forewarn clients of looming changes, you may find you aren’t writing down as many of your tax billings.
Too much emphasis on SALY during training and the first year can create a culture where newly hired staff preparers feel like data entry machines instead of credentialed professionals. Firms often tend to limit new staff to well-defined existing returns. They omit new-client scenarios from training because they assume new staff won’t have to deal with them anytime soon. Although this might be true, it can create a talent trap, particularly when staff become more concerned with recreating last year’s return than with viewing the current year through critical eyes.
As a result, new staff may not develop the critical thinking skills to effectively onboard new clients, which prevents them from becoming candidates for advancement and could cause them to leave the firm in frustration.
To avoid the SALY trap in this scenario, I recommend the following:
- In addition to SALY examples, use materials from actual clients to build a comprehensive case study for new hires to complete as part of their training. However…pretend they’re first-year clients, and omit one or more pieces of supporting documentation. Then ask your trainees to identify what’s missing and instruct them on your firm’s process for finding it.
- If you’d like to reference a prior-year return, search for recently onboarded clients whose previously filed returns contained one or more errors or omissions. Then ask trainees to identify the problem and any necessary amendments or considerations for the coming year.
- Assign an internal peer reviewer for your client returns. Ideally, it should be someone outside that client’s review chain, on a different preparation team or in a different reporting hierarchy. Standardizing cross-team interaction will not only help break the SALY mindset for your clients’ benefit, it will help build a more open, consistent and collaborative firm culture.
Before Thomson Reuters officially offered tax consulting services for UltraTax CS®, I decided to run a pilot. I visited a firm and asked them to step me through their entire tax process.
I discovered that one of their administrative assistants was dedicating an entire month to recreating edits the firm had made to client documents and the global print collation in the following year’s UltraTax CS. They were flabbergasted when I pointed out that, like clients, those items could also be rolled from one year to the next.
For nearly a decade the firm assumed that manual recreation was their only option. This simple revelation immediately saved the firm one full month of staff time, roughly 160 FTE hours.
As we gear up for another busy season, here are a few suggestions for you to consider as you dissect your tax process.
- Encourage everyone in your firm to keep a running list of what they consider inefficient, repetitive or otherwise frustrating about the overall tax process—without worrying about what is and isn’t possible. These frustrations can easily slip your mind as the pain of tax season fades, only to resurface the following year.
- At the end of tax season, debrief on what you’ve documented through the season with representatives from all roles and teams. Afterward, have the team report their findings to everyone in the firm.
- Take time during the debriefing to journey-map your entire tax process beginning to end—from your client’s perspective.
- Dig multiple layers deep, into every aspect of your process. Keep the focus on process rather than people. For example:
- Question: “Where’s our best opportunity to regain time in the tax process?” Answer: “Returns take a long time to get from the preparer to processing.”
- Question: “Why do completed returns take so long to get to processing?” Answer: “Most of the time is spent preparing the paper routing sheet.”
- Question: “Why do we use paper routing sheets when we have an electronic workflow system?” Answer: “Because <Partner> still prefers paper.”
- Question: “Why are we allowing partner preference to dictate firm process at the expense of higher margins?” Answer: “Let’s point out to the partner group what this is costing us.”
- After your internal debrief, do an external debrief. Walk through your frustrations with current and prospective software vendors to determine whether you’re using the right tax software—and if you are, whether you’re using it to its fullest extent. This process will help you determine which service offerings could boost your use (such as product optimization consulting).
Too many firms take an “If it ain’t broke, don’t fix it” view when, in fact, it really is broken. However, lack of transparency, collaboration and failures of collective memory mean these problems often aren’t obvious—particularly if they fall on the shoulders of lower-level staff members who don’t feel empowered to question the status quo.
For firm stakeholders, banishing SALY in your tax practice requires you to make it clear that you’re comfortable with staff questioning the way you run your business. For staff, it requires clearly documenting frustrations and attempting to quantify the overall impact to the firm.
Firms that build a culture of questioning the status quo are more likely to engage and retain clients and staff, and to establish themselves as progressive leaders in their field.