Your Guide to Tax Practice Management in 2021

8 minute read

If you’re looking for some guidance on tax practice management, or even accounting practice management, then you’ve come to the right place. We’ll go over the basics you need to know, including processes and capacity planning. Let’s get started.

The Basics of Tax Practice Management

When you think about tax practice management, the first thing many people think of is software. Of course, software that helps with tax practice management can be a big part of managing your firm, and there’s many software options for accounting practice management software to choose from as well.

Typically, many tax firms will start with a good CRM so they can better manage their contacts. Remember though, many of these systems are only as good as what you put in them. Depending on the software you use for accounting practice management, you can track calls, emails, meetings and even details that alert you to make proactive contact—such as client birthdays.

If you’re taking advantage of software, then other ways to better manage your firm can include:

Understand Your Team: You need to have structure when it comes to the roles and responsibilities of your workforce. Are people placed well based on their competencies and proficiencies? Is the firm hierarchy working?

Understand Your Team’s Output: This means analyzing workloads and your team’s capacity. If you don’t know how much they are doing or can do, how will you manage further growth? 

Predict Future Demand: Do you understand what future demands will require of your team? This involves analyzing total time needed per process, roles per work required as well as people available per activity over time.

Tax Practice Management Involves Standardized Processes

Every tax firm has processes. Some just have better, more efficient processes than others. A big part of understanding your team is having a grasp of their work process and involving them in making it better. Here are some basic steps to improve your firm’s processes:

Determine which processes needs optimizing: You may not need to tackle everything at once, just start with what would make the biggest impact.

Discuss the specific processes you want to improve: Get your team involved and agree on what success is and how you can measure it.

Map out current processes: Discuss why your processes exist with your team and review each step in their process. Ask why each step exists and if it’s important, as well as how to improve it in an ideal world.

Create new processes: Test a new process that you and the team believe could be more efficient. Document it and start implementing it, optimizing as you go.

Throughout all this, here are key questions you can be asking:

What bothers you? Why?

What can be done better?

How are we measuring success today? This week? 

What is the process today? What is the ideal process?

Could technology improve this area? How?

How can we ensure this new process is adopted?

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Want Better Tax Practice Management? Begin Capacity Planning.

Capacity planning is about where you are today vs. where you need to be. If you want to understand your team’s output, you have to develop a strategy to get more out of your team as well as a plan to grow the team as you anticipate future demand for your firm’s services.

Capacity planning involves conducting a detailed estimate of your firm’s current and future demand. This can and should involve many questions, such as:

  • How many tax returns did you do? 
  • How many will you do next year? 
  • Will the firm start tax planning? 
  • Could software increase your capacity for each service?
  • What services should we spend more time marketing? 
  • How many people do we need to hire?
  • If we changed our pricing, how much more or less could we do?

As you can see, there are no easy answers here, rather this involves developing a strategy to align your capacity with demand. Analyze your existing capacity across all your services over time, including the capacity of each team member.

You can begin optimizing with better processes and technology. For example, maybe your tax planning capacity is 3 plans per month, but you learn you can likely do 20 plans per month with tax planning software. If you can estimate the gap between your capacity and demand, you are more likely to know what actions need to be taken. 

Checklist for Tax Practice Management

Having better processes often involves having specific lists to run through. For example, here is a checklist one firm uses to onboard tax clients:

  • Get prior year returns, at least 1 year, preferably 2 sent 
  • Get access to Quickbooks and/or Xero. 
  • Get Articles of Incorporation or business formation or organization
  • Get operating agreement
  • Get ownership schedule or cap table
  • Get copies of all Federal Form 941s
  • Get copies of all year end bank, credit card or loan statements

Rather than winging it, this firm always follows this exact checklist for each new tax client they onboard. Having a consistent process helps improve their efficiency and ultimately, their profits.

Remember that onboarding for a tax client will look different than an accounting client, much less a checklist for a CFO client.

As an example, here’s another firm that has a process that looks like this for their new accounting clients:

  • Get agreement signed 
  • Follow client on social media
  • Add client email to newsletter
  • Add client birthday to calendar 
  • Add passwords to the app 1password
  • Schedule follow up monthly meeting
  • Get bank access
  • Complete new client information questionnaire 
  • Get permanent docs from client
  • Schedule an introduction to cloud tools
  • Schedule recurring billing
  • Create a new Quickbooks file or take over the subscription from the client

As you look to improve your firm’s checklists for each service, be comprehensive, but also be asking yourself if each step is really necessary. Keep everything that improves your ability to deliver timely and quality service to your clients. Cut out redundancies or things that may not be needed. Having a checklist, even a large one, is usually much more efficient than having none at all.

While all this can seem like a big task, you can improve your firm’s processes step-by-step, it doesn’t need to be done in a day. Start with the basics of understanding your team, their output and analyze what your capacity is. Then, optimize your processes and begin predicting future demand.

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