What accountants can learn from industrial engineers
As the calendar year races to an end, another tax season is already on the horizon. Which means that now is the time to be preparing. Are your processes in order? Are your staff sufficiently trained (or even hired)? Are you as ready as you can be?
I have the privilege of working with hundreds of firms each year, and I am too-often surprised when I look under the hood. Undocumented, outdated and inefficient processes are just the start. These are a critical foundation, but don’t address all the issues that prevent how you:
Smooth out your work production system over tax season
Ensure staff can meet demand without having too little or too much supply
Allocate resources to the right projects at the best time
Achieving this rests on your ability to get visibility across the work, and confidence in its quality and completion.
The best source of inspiration that I have come across? Industrial engineering.
Industrial engineers often work with businesses who have seasonality spikes. While your practices aren’t factories and you sell knowledge instead of a physical product, the same principles and concepts apply. Demand forecasting, capacity planning and production planning need to be tools leveraged in conjunction with your processes, pricing, and training to enable the best outcomes.
Here are some critical activities that will help you achieve these outcomes this upcoming tax season and beyond.
Access the production / job completion data that you have. Your CRM, tax, practice management, time tracking, billing and other systems will all have valuable information that you should be looking at. Get your hands on this data and begin to play with it.
Make sense of the data and determine how it can come together to enable your modeling. While you might have imperfect information, you still can build a system and model. Being directionally correct is better than being completely blind.
Rethink your production system. Are you a pull or push production system? How are your processes designed to fit the system? If your clients are the bottlenecks, have you thought about breaking up your tax process from a single waterfall project into two processes, where one fetches the documents while the other is the completion of the return itself — a pull production signaled by client document completion. Are you the bottleneck at the review stage? Have you looked into building a Kanban board to provide visibility across the work and realign priorities when it matters?
Focus on the processes that exist within the production system. How can they be improved to get more done in less time? Where are the bottlenecks? What is the critical path? Can the processes be re-imagined? “This is how we have always done it” dialogue in your firm as not an excuse. You need to determine how long your processes take, what variance they have and what role/skill is required for each step from start to finish.
Model the demand that you expect (and don’t expect). How many tax returns across each type? What about clean-ups / catch-ups, tax planning, consultations, client onboardings, drop-in files versus electronic document exchange, and more. How long does each variant take? Review data year-over-year, and make approximate guesses on the volume and mix. Build what/if and sensitivity models. Get to a series of possible answers on the expected demand so you can choose one that you have the most confidence around.
Build a resource plan with capacity to spare. Using the collective knowledge gathered above, re-look at your staff, skills, availability and needs. Compare their output versus the production levels required day over day, week over week, and month over month. What resources do you need and when? How much? When will they be idle and what will they do? When is your internal deadline to move returns to extensions? Who do you need to hire, when do you do it and can you do it? Have you left extra capacity in the system to deal with issues, shocks and the unexpected? All these factors will help you determine how much work can enter and exit the work system while ensuring each job is completed on-time, at quality and as promised.
Industrial engineering holds the key to some critical solutions that will result in a tax season of comfort compared to one of nightmares. To help make this a reality, join Jim Boomer and myself, Ian Vacin from Karbon, for a one-hour webinar to walk through the points above, and gain valuable insight and guidance on how to do this before tax season starts.