The accounting process has long been thought of as a solitary practice, where a long-suffering, caffeine-fueled worker toils away, sorting through a shoebox full of crumpled receipts and statements in disarray. But many accountants and their practices are adopting efficient systems and technologies that eradicate the drudgery of data entry and empower their clients to be part of the process. These practices streamline the workflow, educate the client in their own financial affairs, and deliver more accurate reporting. No longer does the accountant have to suffer through a busy, disorganized tax season. At the heart of these practices lies a reworking of the accountant-client relationship that calls for heightened communication.
Set up an organized bookkeeping system that keeps data in order
A majority of accountants manage bookkeeping duties for specific clients throughout the year. When tax season arrives and the rest of their portfolio of clients need taxes filed, they’re put into a state of chaos. They’re forced to sift through and make sense of a year’s worth of statements, receipts, and uploaded documents. In trying to meet the demands of their portfolio, they work 14-hour days until the tax filing deadline. This is an inefficient way of conducting business. Accountants can get organized by setting up a secure system where their clients can easily upload documents and accountants can access them. Clients lose patience and trust when the files that they have provided throughout the year have to be resubmitted due to poor organization. By adopting a solid bookkeeping system that delivers value, accountants will sail through tax season without the laborious hassle of waiting for clients to deliver the relevant documents and statements they need to accurately file taxes.
Adopt efficient technologies to reduce manual workflows
While burnout is nothing new in the accounting business, the “Great Resignation,” spurred on by the Covid-19 pandemic, heightened industry turnover. Lockdown landed in the middle of tax season, extending the usual 10 weeks to 10 months. This took its toll on the industry, exacerbating an already high turnover rate. Firms interested in survival adopted automated accounting software that eradicated the need for most manual workflows. The statement collection, data entry, reconciliation, and reporting workflows of accounting were automated, allowing firms to stay in business. With these systems in place, clients are automatically sent statement requests. The smart technologies then pull in the data and enter it into the ledger, helping the accountant avoid the data entry portion of the ledger altogether. Data is delivered in real time, allowing accountants to provide their clients with accurate reporting and tax filing, minus the headache.
Use accrual basis accounting with the ability to switch to cash basis
Businesses make an election whether to file on an accrual or cash basis on their initially filed return. Accrual basis accounting is a method in which revenue and expenses are recorded, regardless of whether money has been received or paid. Cash basis accounting only records money when it is actually received or paid. To get a more realistic view of a business’s current financial state, the business may choose to run on an accrual basis throughout the year but file taxes on a cash basis to avoid paying taxes on monies not yet received. Running on accrual basis accounting gives business owners a more long-term view of income and expenses during a period of time. Additionally, the accounts payable balances may reduce taxable income when taxes are filed. However, filing taxes on an accrual basis might not make sense; the accounts receivable payments may make the business look profitable, whereas in reality, it may have low balances or empty accounts. With the ability to switch to a cash basis accounting method when filing taxes, accountants can significantly reduce the amount of taxes a business might pay if filed on an accrual basis.
Review client accounts on a monthly basis
A year’s worth of bank statements is no fun to sort through. Multiply that by 100 or more clients, and you have a nightmare scenario. Get into the habit of requesting statements and receipts from clients on a monthly basis. This helps accountants avoid the painful request for a year’s worth of statements during tax season. Instead, filing will be seamless, and access to the necessary data will be instant. The flow of work will not be interrupted, and taxes will be filed in a timely manner. This process also can help the client understand the relevant expenses that they need to pay attention to throughout the year.
Set clear expectations with clients and have open communication
The accountant-client relationship should be a two-way street, though most clients are unaware of this. At the start of a new client relationship, set clear expectations about how to achieve favorable outcomes. Timely responses, document submissions, and a general respect for the accountant’s process should be expected from the client—or the system will fail. This strengthens the client-accountant relationship and sets boundaries around accountant and client roles and responsibilities. Consider meeting monthly with more complex or high-value clients. This establishes trust around the process and gives clients a clear picture of where their business stands. Also, when a client can see the big picture of their accounts in real time, it enables them to make decisions that grow their business faster.
The accounting industry is undergoing rapid changes with a large portion of the workforce retiring and the barriers to entry increasing. New and efficient technologies are being adopted. These allow for the accountant to focus on the client relationship while delivering accurate reporting and tax filing at year end. At the end of the day, what matters most is the ability to develop strong working relationships with clients and to educate them on the accounting process. That way, accurate accounting and tax filing can be a more streamlined process.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Sugam Pandey is the co-founder and CTO of Docyt, an AI-powered accounting automation software platform.
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