Improve Your Work Flow: Automate!

Automation: the Holy Grail. But what is automation?

If you have ever found yourself on the verge of insanity as a result of these seemingly mindless —albeit pertinent— tasks, I would like to introduce you to the concept of automating your firm’s financial statement report process. Automation, according to Encarta Dictionary, is defined as: “the conversion of a workplace to one that replaces or minimizes human labor with mechanical or electronic machines or processes.”

Allow me to clarify; I’m not talking about replacing your staff with robots or replacing the value of a human’s intellect by using a “one size fits all” fill-in-the-blank program. The automation of which I speak is an extraordinary vehicle for streamlining your inefficiencies by eliminating taxing redundancies like those mentioned above. In essence, automation will make your life easier by “minimizing human labor with mechanical or electronic machines or processes.”

Put simply, automation is the Holy Grail of maximizing efficiencies.

What can be automated?

Automation does not mean the end of CPAs as we know them. A computerized process is never going to replace intellectual capital, especially in the field of accounting. Automation will not decide the quality of the numbers you use, nor will automation tell you that a single-year statement will be more beneficial for your client than a comparative statement. However, automation will allow you to collaborate with other partners to create a library of pre-edited footnotes, opinions, stylistic guidelines, and other processing-related functions that can be drawn from as needed.

For example, this means a generic but commonly used footnote will be written by designated members of your firm. That individual footnote is then edited and technically reviewed, resulting in an error-free, grammatically and stylistically correct, firm-approved footnote that can be dropped into a client’s financial statement (when necessary) by the simple click of a button. In many cases, firms opt to import PPC footnotes and opinions to use as the foundation for their knowledge library. This expedites the development of the knowledge library and maintains the consistency of firm standards and procedures if they were using PPC (or AICPA) to begin with.

The knowledge library can always be added to, allowing for the customization of client- or situation-specific disclosures. Such additional notes will be retained in the library for future use, sparing preparers and reviewers from having to re-craft these statements each time that note is needed.

Other automated features include, but are not limited to, the following:

• A client’s pre-determined year-end date is entered in one place and is then automatically placed in all appropriate places throughout the report. No need for a person to risk entering the wrong date or forget entering the date at all; it’s done for you!
• Upon entering the client’s entity type, the entire report is populated with the appropriate reference to shareholder’s equity versus shareholders’ equity versus partners’ equity in all relevant locations.
• The spelling and formatting of line items, once firm-wide standards are set, are applied automatically once the trial balance is imported. Therefore, “Cash” will always be “Cash.” “Cash” will never be “CASH,” “Csah,” “ Cash,” or any other variation. As a result, all financial statements produced within your firm will be stylistically consistent and grammatically correct.

These features virtually eliminate your need to “reinvent the wheel” every time you produce a financial statement.

How does it work?

Automation of financial statements requires two primary components: a centralized knowledge library and a client datasheet.

A centralized content library is a storage location for pre-edited, pre-approved, and firm-standard footnotes, opinions, line item headings, and formatting details. All content is edited and approved by all partners prior to being included in the library, which guarantees no errors are present. Staff accountants simply select the appropriate note from a list, and a typo-free, up-to-date version of the note is automatically inserted into the proper financial statement location.

Because the inserted content retains a link to the library, if FASB changes or amends a required note, the specified changes need only to be made to the note in the library and all appearances of that note within all clients’ files can be changed automatically with one click of a button. If your firm uses a traditional Word/Excel hybrid, then you know that any changes typically require someone to manually change the note in every location for every client by repeating this tedious process of drafting, typing, editing, redrafting, and approval, a process that is eliminated with automation.

A client datasheet (which holds all client information such as name, entity type, number of owners, basis of accounting, etc.) is the central location for entering all client-related information. As changes in company information are made to the data sheet, the financial statement will be automatically adjusted accordingly.

Information included in the centralized content library and the client datasheet automatically populates fields within the financial statement template, leaving a report that is 90% edited upon creation. Both components are significant time savers and have become the best insurance we’ve found for maintaining stylistic consistency and preventing grammatical and typographical errors.

Together, the content library and the client datasheet, along with an imported trial balance, create a report that will limit the amount of time reviewers spend on editing style and grammar, thereby allowing them to focus more on the content. Our firm has been able to eliminate the need for a report processing department.

What are the benefits?

The most obvious benefit of implementing automation is time savings. While the initial investment of time and energy is considerable, the ultimate outcome is a significant reduction in the amount of time high-level managers and partners must spend reviewing and re-reviewing reports. Automation ends the infinite loop of edits and reviews that can hinder efficiency at this stage of production.

Aside from time savings, there is a high potential of cost savings by eliminating the need for a report-processing department. Reports that used to require three days to produce are now being done in hours. As you can imagine, eliminating that additional step in the work flow process has resulted in savings on many levels.

Although not as tangible as time and money savings, another valuable benefit is the consistency and accuracy these automatically-generated reports have. By selecting pre-edited footnotes and opinions, pre-formatting line items and headings, and automatically populating client-related data, first drafts of reports are about 90% edited upon creation. The process has reduced the margin for error, increasing confidence that the end product will be a good one.

How can your firm automate?

Surely you must be thinking this all sounds too good to be true. In actuality, automation is a process that requires a significant upfront investment of time, money, and vision. Currently, we are aware of only one existing engagement management system that allows for the programming of the functions we have mentioned. CaseWare’s CaseView offers a platform that can be used to create a template to fit your firm’s specific needs.

Beyond purchasing the right software, your firm will need to analyze current work flow processes, identify and correct inefficiencies, and establish an agreed-upon style that best suits your firm. Upon re-evaluation of your firm’s standard policies and procedures, you must find a person (or a combination of people) who is capable of programming CaseView to perform the firm’s desired functions.

In our experience of consulting with other CPA firms, the general consensus is to seek outside guidance from someone who has extensive experience in developing an automated report process. As an example, Kiesling Associates, LLP, an 80-person Midwestern firm with five offices, chose CaseWare/Caseview in their quest to go paperless and automated. Initially, they didn’t seek outside advice on how best to implement and maximize their investment in CaseWare/Caseview. “We have a fairly industry-specific niche practice,” says Steve Harms, Technology manager at Kiesling, “and felt we needed to design it ourselves to make it fit our practice. We expected everyone in the firm to become as proficient with CaseView as they were with Excel, but people struggled with the template that we designed for the write-up of financial statements.”

After obtaining assistance from an external source, Kiesling is now enjoying substantial efficiency improvements in the financial statement report process. If the firm had to do it over again, though, it would do things differently. “I think there is so much value in hiring someone who has done it themselves and really knows the software and how to best implement it in practice,” advises Harms. “We tried to do it all ourselves and experienced a lot of dead ends.”

As for the implementation of automation within your firm, expect to use the same steps required in the adoption of any other new technology. We would advise you to assemble an “early adopters” team to learn and champion the new efforts. Then, launch a pilot program that will allow certain users to employ the automation technology in a live setting before a firm-wide release. This allows for the programmers to find any flaws and to iron out any bugs that could cause user frustration down the road.

Keep in mind that the process of adopting automation technology is a long and tedious one. However, the resulting benefits we have outlined should provide early return on your investment while setting your firm up to be highly efficient for the future.

What is next on the horizon?

Recognizing the substantial improvements automation has afforded our firm in the financial statement report processing area, we consider the automation options to be limitless. In addition to automated financial statements,we have already developed intelligent compliance forms. Because of how they are programmed, these forms are able to determine which questions on the form are irrelevant (based on the answers to previous questions) in addition to informing the user or reviewer if the form is incomplete, amongst other bells and whistles.

Automation has clearly proven to have significant potential for transforming the way accountants have traditionally conducted their business. Improvements in technology continue to help us find ways of increasing efficiency by “minimizing human labor” when it comes to accomplishing those ever-present tedious and redundant tasks. We expect automation to revolutionize the future of our profession, and with our automation technology, we are well prepared to handle whatever exciting development comes next.

About the authors

Ron Kranzler, CPA, is managing partner of Held, Kranzler, McCosker & Pulice, LLP (HKMP). His primary areas of expertise are taxation, bankruptcy, forensic accounting, and IT consulting services. Joining HKMP as a partner, he brought to the firm his technical skills and a commitment to providing personalized service to each and every client. Since becoming managing partner in 1985, he has been instrumental in contributing to the firm’s growth through his emphasis on quality and customized service. Ron earned a B.S. degree from Long Island University.

Stephen Barrett, CPA, CITP, & MCP, is the partner in charge of technology for HKMP Technologies, LLC, He has played a significant role in HKMP’s establishment as a national leader in accounting technology. His unique combination of accounting skills and IT mastery has made him a true expert in his field. Stephen actively consults with firms of all sizes to help construct and customize paperless and automated environments. He graduated in 2000 from Queens College with a B.A. in Accounting and B.A. in Economics.