Practical Accountant: Document Management: Dos and Don'ts Features Stephen Barrett

Practical Accountant | July 2008 Issue | By Jeff Stimpson
July 22, 2008
“Streamlining accounting practices by pulling paper out of manual processes and into automated document workflows can reduce invoice cycle times,” says Bill Brikiatis, director of corporate marketing at eCopy.

“The simpler a document scanning process is, the more likely employees are to use it,” he says, adding that an automated DM system can also cut exposure from fraud, as firms can use encryption to secure the flow of paper documents from the time a document is scanned to when it is distributed and ultimately stored.

Rob Carmines, managing partner of Carmines, Robbins & Company, in Newport News, Va., says his firm has been “virtually paperless” for more than nine years, and has among its some 20 staff members a tax preparer in Alaska and, for about two years, a tax manager in Germany. “We also have a full-time scan person,” he notes. “One of the problems you run into with scanning is similar to the problems with the old paper method of filing client documents. Some of us keep client files very orderly and neat. Some of our client files are particularly messy. If you’re not careful, your electronic documents will be the same way.”

DM does pay off, say firms that have made it work, especially in terms of savings in offsite storage and quickly retrieving files.

“We’re more efficient, less frustrated, and work smarter hours because of DM,” says Carol Kulencavich, principal with Brigante, Cameron, Watters & Strong, Torrance, Calif. Firms with experience in document management offer the following dos and don’ts.

Planning
Do determine what your procedures and processes are, and what makes sense in going to DM, says Kulencavich. “Think electronically. When the PDF is retrieved at a later date, what will assist in making sure that users are efficient in finding what they are looking for? We bookmark our PDFs through Adobe, and it was also important for us to have a sophisticated search feature in the system.”

Do plan, says Craig Erickson, partner at Livingston, N.J.-based Wiss & Company. “Chart your processes from every area, and re-think whether you need to make adjustments into this new environment. Keep in mind that the way in which you roll out your system isn’t the way it’ll look six months from now.”

Do reassess how documents are organized: by client, year, engagement, practice area, and other factors. Further questions recommended by Stephen Barrett, IT director at New York-based HKMP, include: Should documents be organized into “engagements,” or is a single repository for each client enough? How will permanent files be organized? And how will back-office files be handled? Will you be able to store all applications’ files? If not, how will these applications be managed?

Do discuss how you want to lay out your virtual file cabinets, “because after you start, it’s difficult to change,” notes Jeff Siegel, president of Siegel & Associates, in Waltham, Mass. “Do you want layout by year then by client, or by client with years inside the client virtual folders? How many drawers do you want by client? Will the software automatically create these drawers when you create a new client?”

Do have a DM team. In Kulencavich’s case, “it’s our technology committee. We regularly discuss what’s working, issues we need to address, and what’s coming out in the future. Our team is made up of a staff person, myself, an administrator, and our managing partner,” she says.

“It’s important that this team has members from all levels in the firm. This team is also responsible for communicating why this change is being made and the benefits to the firm and each individual, as well as making sure each person is trained and understands what the system is supposed to do.”

Do set up an action plan “to not only go paperless going forward but also to add pertinent old files from your network drives into the system to centralize all information, and also set up a plan to back-scan pertinent information in your onsite file room and offsite facilities, such as permanent file information,” Erickson also advises.

Do find a good system that lets you search by various items, such as name, date, size, words in a document, and other factors. “We realized that the retrieval of the documents was in many cases more important then the filing of them,” Siegel says. “We wanted a system that let us search across various spectrums of the data. Look for a system that lets you view your documents without having to open the application that created it.

In many of the systems we looked at, when we think we found the file we were looking for, we had to click on it and waited for the application to open. That was frustrating,” he also points out. “We finally found a system that let us view documents while we searched without having to open the app.”

Do determine how retention will be handled, “and make certain it fits your needs and regulatory requirements,” says Barrett. “Does the DMS provide a structure for locking down engagements as required by your local state society or other regulatory agencies? If yes, does the required structure accommodate your process, or will this require further modification of your standards, policies, and procedures?”

Implementation
Do prepare the firm for changes. “Be ready to answer questions like, ‘Why are we doing this?’ and ‘Is this more efficient?’ over and over again,” says Matthew Rudolph, IT manager with Las Vegas-based Johnson Jacobson Wilcox.

Do start slow. “In our first year, we started with archiving client correspondence files and admin/HR data such as payables, resumes, old T&B reports, etc.,” says Rudolph. “Our second year, we added tax returns and billings. The third year we added audit work paper and tax work paper data.”

Do start the process during the summer, using as much administrative help as possible. “Decide which files will be locked down, and who has administrative rights to delete files,” says Peri Ann Aptaker, director of tax services with Kahn, Litwin, Renza & Co., Providence, R.I. “Make sure that all of these procedures are written down, and that you have a back-up person.”

Do mimic original paper documents when creating electronic forms and templates. CAO Kathy Monteverde of Katz Ferraro McMurtry, Pittsburgh, says, “This will aid in making the transition easier. You won’t have to re-learn a new form as well as a new system.”

Don’t assume the system is for the audit and tax departments only. Integrate all practice areas into the system, Monteverde advises. “This may require flexibility and customization for the practice area’s particular needs, but the benefits far outweigh the time and effort. Our director of marketing uses the system to store all proposals and communications with prospects.

Do make sure the system can support dashboards. “Using Interwoven, our firm creates both client and partner/staff dashboards so we can manage both engagements and partner/staff workloads,” Barrett says. “Dashboards display information relevant to the user’s position and client assignments. Client portals show the last 10 contacts to the client, files related to the client’s engagement(s), task workflow, contact information, and others. Staff portals may contain data such as current engagements, recent engagements, last 10 communications with all clients, and current assigned tasks. Partner portals include the same information presented in staff portals, plus WIP and AR data pulled from our firm’s practice management system.”

Do provide employees with remote access to the system. “Without remote access, you will be limiting the efficiencies,” Monteverde notes.

Communication
Do communicate with employees throughout the process. Implementing a new system can be difficult. Besides the technical issues, the staff reaction to the change is one of the most important parts of the implementation process. “Make staff a part of the process from the very beginning. Write articles, hold meetings, and encourage firm-wide discussion,” says Steve Sandahl, a director at Postlethwaite & Netterville in Baton Rouge, La. “Take all concerns seriously.”

Don’t expect instantaneous change or immediate buy-in from everyone. “Make sure you have the right employees leading this,” says Kulencavich.

Training and Equipment
Don’t provide only one training session. “People are making their decisions about the system in the first month. If they get frustrated right away, it can take a long time for the bad feelings to go away,” says Sandahl. “After some real-life practice, new questions will arise and if they’re not answered, people will start getting discouraged.”

Do train staff on all electronic programs such as spreadsheet and word-processing programs, but especially Adobe Acrobat, Monteverde recommends, and purchase the full version of Acrobat.

Do invest in technology, such as dual screens, scanners, flash drives, memory sticks, and other technology. “The decision for who gets dual screen monitors and who doesn’t is a tough choice,” says Erickson. “With the declining cost of monitors, however, it’s a fairly easy decision.”

Don’t skimp when it comes to the hardware. “And don’t expect that three-year old admin computer to work as an OCR machine unless you want a major bottleneck during scanning,” warns Rudolph. “Buy a good production scanner and match it with a powerful workstation. We went with a Fujitsu 5750c scanner and a dual-core workstation. Quad-core stations will be replacing the dual-core soon.”

Do use the right scanners. “I love the multiple-scanner approach, but for scanning in old stuff, I like the heavy-duty scanner and scan person,” Carmines says. “The problem I found with individual scanners is that some staff thought it was a clerical function, and some don’t have the technologically oriented temperament you need to scan documents.”

Do scan smart. “Generally, we scan after the return or financial statements are completed and ready for review,” reports Carmines. “Ideally, we would scan prior to the inception of the process and manipulate and annotate documents within the file cabinet program. Right now, this is a fairly easy process, but it needs to get a little easier before we can completely handle work papers from start to finish in the file cabinet program. The down side,” he adds, “is that a bunch of stuff is scanned that isn’t needed.”

App Integrations
Don’t assume that products sold by the same vendor will integrate well. “Be wary of systems that are ‘simple solutions,’” says Barrett, “which are often short-term solutions that require change in two or three years.”
Do make document management an interactive system, not an after-the-fact storage system, says Michael Johnson, partner and head of the IT department at O’Sullivan Creel, in Pensacola, Fla. “All work should be accomplished on catalogued digital documents through software such as Adobe, Excel, and other apps directly from the system,” he says.

Do integrate other solutions and tools with the system. Look for other software and apps that will assist you in making the environment efficient, Kulencavich recommends. “We make sure that we have the right hardware and software, and have implemented a client portal, the proper document imaging technology, at least dual monitors for everyone, standardized work paper templates, and other software and hardware. Make sure that the proper backups take place.”

Don’t mismanage e-mail. E-mails could account for more than half of the documents in the DM system, Barrett warns. “Direct integration with your e-mail application is critical.”

Common Sense and Commitment
Do rely on the scanned version. Too often firms that go paperless still rely on the paper version of documents, Erickson points out. “You should consider setting a firm policy that requires that all paper documents scanned into the system should either be shredded or sent back to the client,” he says.

Do keep the system clean. “Make a point to regularly clean out the unnecessary items,” says Monteverde. “Otherwise, you’ll take up unnecessary space on your server, plus you will end up with a lot of clutter that will make it difficult to find what you really need. Train everyone to store only documents that are relevant and necessary to reduce the clean up you will need to do. Keep an eye out for redundancy, and combine documents and remove duplication as much as possible. Develop naming and filing protocols to ease searches, and be prepared for how much documentation your server can hold, regularly monitoring available space.”

Do have a scan sheet which must be filled out in order to scan a document into the system. “Our scan sheet forces you to use a certain naming convention for documents, such as ‘year,’ ‘client number,’ or ‘document description,’” Carmines says. “Since many of our documents are scanned by our full-time scanner person, the scan sheet lists all of the file folders available for storing documents. You merely check which folders you want it to end up in. It also has a space to tell if you need it scanned in higher resolution or lower resolution, and what to do with the document when done. It directs you to shred, file, mail, etc., once you’ve scanned it.”

Don’t back scan. “This can take up an enormous amount of time and space on your network,” Aptaker warns.

“We began the system with the calendar year following installation. As each year passes, we’ve moved the oldest files to offsite storage that can be retrieved when necessary.

“Originally, we kept three years of files in-house. Now that we have been paperless for five tax years, all of our old files are offsite, and the physical space in our office that was for file storage has been converted to working space for staff.”

Do make tax-prep procedures paperless “from the very beginning of the process” by digitizing the client’s data upon receipt by the firm, not after the return is completed, says Johnson. Tools that scan, sort, and bookmark data should be used to place the client’s data into the DM system before the preparation of the return begins.

Do have a disaster recovery plan, says Monteverde, and run daily, monthly, quarterly, and yearly backups in multiple and offsite locations.

Finally:
Don’t expect the DM system to solve your problems, advises Rudolph. “DM may cause more problems than it solves at the start. Be patient,” he says. “It was our third year when we saw real efficiencies and ROI.”

For related material, see "Document Management Software Review" in the March 2008 issue of Accounting Technology at www.accountingtechnology.com. See also the "Technology" channel at WebCPA.com.