A guide to tax workflow management and automation

Businesses and individuals benefit from having a dedicated tax professional for assistance, guidance, and advice. To stand out, attract more clients, and deliver exceptional service, accountants should leverage tax workflow management and automation.

In this guide, we give an overview of tax workflows, explore how to manage tax workflows and implement automation, and walk through solutions to common challenges.

What is tax workflow management?

Tax workflow management is the process of optimizing how accountants complete tax preparation services.

At a high level, a tax workflow includes:

• Collecting, verifying, and processing client information
• Communicating with the client about any complex tax issues
• Preparing and reviewing a return for accuracy and compliance
• Finalizing and filing
• Invoicing the client

Managing tax workflows involves optimizing each step of the process, improving efficiency and accuracy with technology and best practices. Accounting firms typically use tax-filing software to achieve this. Other resources may include document management tools, tax research platforms, and data analysis and reporting tools.

What components should be part of your tax workflow management process?

The building blocks of your tax management workflow should be structured to save time and effort for staff and clients. A systematic approach to workflows ensures best practices are consistently followed. This enhances the client experience and helps uphold security standards.

To create an effective tax workflow, standardize the following components:

Document management

The tax workflow management process involves handling multiple shared documents including tax forms, bank statements, proof of income, receipts for deductible expenses, and investment statements. A client portal that centralizes all information in one place will help you effectively collect, maintain, and organize these important files. To build client trust, these portals also have features to protect sensitive information. Here are some steps to standardize and secure document management:

1. Prepare a standard document request list for new clients.
2. Establish and maintain file-naming conventions.
3. Enable 256-bit encryption to protect files in storage and transit.
4. Set up default access controls so only authorized individuals can access client files.

Client collaboration

Effective client communication is vital for streamlining processes such as collecting information, clarifying goals, and giving tax advice. Using technology to follow up with clients improves efficiency and makes it more convenient for them to work with you. These steps help develop unified collaboration practices for a better tax workflow process:

1. Set up an initial meeting to establish goals, set expectations, and clarify the scope of work.
2. Streamline requests for document collection with a document request list.
3. Choose a client portal with remote messaging capabilities to facilitate ongoing communication.
4. Determine conditions for scheduling any additional meetings, avoiding unnecessary live discussions that can be more time-consuming.

Related Read: Streamline tax engagements with ShareFile’s solutions

Research

Staying on top of changing regulations to strategically advise clients requires thorough tax research. Research can be time-intensive, especially for clients with unique financial situations that lack clear legal guidance. Consider these steps to make the process faster and more consistent:

1. Identify client issues that require further investigation.
2. Establish a list of primary sources for legal insight, such as the Internal Revenue Code, Revenue Rulings, and the Financial Accounting Standards Board.
3. Create a list of secondary sources that can help you solve complicated issues, such as IRS publications, newsletters, and commercial tax research solutions.
4. Conduct research and develop conclusions.
5. Communicate solutions with the client and explain your thought process at a high level to instill confidence and promote trust.

Tax calculations and tax filing software

Once you have all necessary documents and information, it’s time to prepare the return. Tax filing software can simplify the process of inputting, calculating, and reviewing financial information. To ensure a smooth tax-filing process, follow these steps:

1. Choose secure, cloud-based software to avoid issues with data privacy.
2. Use time-saving features including bulk processing, multi-state filing, e-signatures, and integration with accounting systems.
3. Take advantage of diagnostic tools within your software to check for mistakes.
4. Introduce automation where possible to streamline repetitive tasks and increase efficiency

Understanding tax workflow automation

Tax workflow automation is technology that eliminates manual steps within tax workflow management. Automation takes over tedious work such as entering client data in a database or monitoring for regulatory updates. Not only does this save accountants time and effort, it completes work faster with greater accuracy. However, we can’t fully understand what tax process automation is without understanding how it boosts efficiency.

How tax process automation improves efficiency

According to one report, driving operational efficiency was top priority for 36% of tax and accounting firms in 2023 — ranked higher than client service, growth, and talent. It makes sense that nearly one third of all firms (29%) automate more than half or all tax workflows.

Automation software can significantly enhance efficiency throughout tax workflows by eliminating time-consuming manual steps and processes. Here are some examples of how tax process automation saves time:

• Document management: Automates document requests, follow-up reminders, uploads, and other file-related actions.
• Client signature collection: Instantly routes electronically-signed documents to the same folder as the original document.
• Data entry: Automatically completes forms with existing client data.
• Tax calculations: Calculates client deductions, liabilities, and credits.
• Internal collaboration: Sets up automatic requests for internal reviews when returns are completed.

Benefits of automating your tax workflows

Increased efficiency

Automation takes over repetitive tasks involved in tax preparation, completing work faster with fewer mistakes. This increases efficiency and reduces errors, saving time that would otherwise be spent on manual work and corrections.

Lower costs

With automation handling more administrative tasks, your team will save resources, spending less time on non-billable work. This allows you to allocate more hours to strategic tax preparation, increasing billable time and enhancing overall productivity.

Greater accuracy

Processes that are automated aren’t prone to human error. Comprehensive databases for consistency and accuracy can result in fewer (if any) mistakes on tax returns.

Improved compliance

Automation can handle compliance checks, verifying your work against the latest rules and standards for tax preparation. The regulatory landscape is complex and ever-evolving: using technology to ensure compliance offers peace of mind.

Client satisfaction

Give clients a better overall experience with improved compliance, greater efficiency, and enhanced precision. Automation in these areas can lead to long-term retention and an increase in referrals.

4 steps to implement tax workflow automation

Ready to reap the benefits of tax workflow automation? Start by effectively integrating new software into your existing workflows. Here's a step-by-step guide to help:

Step 1: Map out your tax workflow

Outline your ideal tax workflow, taking all steps, resources, and stakeholders into account. Use paper or a digital process-mapping tool to plan for every scenario. Include steps for dealing with common mistakes and who to contact in unexpected situations.

Step 2: Identify automation opportunities

Review the process you’ve outlined and identify tasks that can benefit from automation. Focus on tedious work that doesn't require much human insight. Automating these tasks saves time, speeds up tax returns, and enhances client satisfaction.

Step 3: Choose effective automation tools

Select tools that maximize the benefits of automation for your outlined workflow. Look for features such as:

• Integrations to enable seamless data flow and automation across systems.
• Security features to protect client data across every stage of your tax workflow.
• User-friendly and customizable interfaces that allow non-technical accountants to easily adapt software to their needs.
• High-quality vendor support to get help promptly when you need guidance.

Step 4: Educate and implement

Train your staff on how to best use a new automation tool. Explain the changes to tax workflows and the reasoning behind them. This will help employees use new systems consistently and correctly.

Common challenges when automating tax workflows

There are many advantages from automation, but firms sometimes face obstacles along the way. Here are common challenges to overcome:

Overlooking steps

Without a clear understanding of what each step in your tax workflow requires, you may end up missing critical information and making mistakes. To maximize ROI for automation tools, carefully map out your entire workflow as described in the section above. Involve stakeholders to help identify every aspect of your tax workflow that could benefit from automation.

Discomfort with change

Getting used to new technology and software can be a challenge. Give employees advance notice and offer comprehensive training so they can get accustomed to changes. You can also help staff adjust to new processes by offering resources and providing opportunities to ask questions.

Lack of integration capabilities

To avoid roadblocks and inefficiencies, consider how new automation tools will integrate with existing systems, especially legacy systems that store client tax data. It’s crucial to strategize around integration while you’re still evaluating which tools to invest in. It may be more cost-effective to replace legacy systems entirely, or to adopt a solution that integrates.

Neglecting to monitor and optimize processes

Without regularly auditing your tax workflows and automation strategy, you’ll risk missing out on opportunities for improvement. Establish an audit schedule and make adjustments based on feedback from staff and clients. This approach also helps you adapt to any changes in your business or the tax industry.

Related read: How to evaluate your team’s strengths and opportunities post-tax season

Take your tax practice to the next level with workflow automation technology

Automation is essential for accounting firms that want to get ahead. Introducing this technology streamlines repetitive tasks, reduces human error, and gives accountants more time to provide exceptional service for clients. While obstacles to seamless automation exist, you can increase your chances of success by following a thorough, step-by-step implementation process.

Take the first step forward. Discover automation solutions to transform your tax workflows and help your firm thrive.