As a result, we identified five rules for developing a successful paperless workflow. To protect the innocent, aliases have been applied. We will call the first firm Progressive & Progressive, LLC (P&P); the second will be referred to as Old, School Thinking CPA Group (OST).

On paper the firms are comparable—both Top 50 firms with multiple locations and similar in size. They are based in the Northeast and have similar individual tax clientele. The firms also utilize the same tax systems, including GoSystemTax RS and GoFileRoom. Both were also implementing the same scan-and-populate technology to support paperless tax workflow—automating tax data entry at the beginning of the process.

Despite the similarities, they experienced dramatically different results with their paperless initiative. P&P reported great success, indicating a profound, positive effect on workflow and overall efficiency. Although pleased with the results, OST's deployment remains stuck in pilot phase with low probability of full implementation

What was evident is that successes or failures had little to do with firm demographics or technology. It was all in the approach each firm took. By examining each case in detail, certain steps and tactics required for a successful implementation, along with pitfalls and mistakes to avoid, are revealed.

Rollout Details for P&P and OST
It is important to provide an overview of pilot implementation activity and broad results.

Progressive & Progressive experienced rapid progress during initial rollout, moving from 300 returns pushed through the paperless system in year one to 3,000 returns in year two. P&P is planning a 6,000 return push for year three. P&P processed both simple and complex returns through the system, saving average time savings of two hours per return. Costs associated with implementation were passed through to the client, resulting in an ROI ten times the initial investment. P&P also understood the limitations of scan-and-populate technology, but continued to embrace because of the results.

Old, School & Thinking CPA Group pushed an average of 100 returns through the system in both year one and year two. Only complex returns were processed. While the firm reported significant time savings, there has been no adoption of the technology beyond one partner. Seasonal staffing policies have remained the same, which involve running all simple returns through temporary staff using manual data entry in order to "keep them busy."

P&P Versus OST—The Rules of a Successful Implementation
Through detailed analysis of each firm’s implementation process, we found dramatic differences in approach. By comparing and contrasting these differences to each firm's final result, we were able to define five rules to ensure a successful roll out.

Rule 1: Appoint a Chief Paperless Officer
The roll out of a new process that impacts a major service area, like tax requires a champion at the top. P&P designated a Chief Paperless Officer at the partner level, who was not only a tax expert, but also adept with current technology. Clearly, Chief Paperless Officer is a novelty title, created to capture attention. As described by the firm, it worked.

"We realized that transitioning to a paperless tax workflow was a massive undertaking. The tax workflow is ubiquitous, affecting multiple departments and disciplines, including tax preparation, review, administration, IT, and others—not to mention touched all our remote offices. As such, the initiative required a key point of contact at the partner level (a Chief) that had the power and status to direct implementation and identify and assign the resources required to ensure long-term success."

As a single point of contact, P&P's Chief Paperless Officer made certain that the plan was rolled out properly, time lines adhered to, and firm-wide involvement maintained. The CPO communicated with staff and regularly reported results at partner meetings. Steady, consistent communication and exposure to the implementation also prepared partners and staff for future phases. And naming a partner-level CPO provided credibility to drive the implementation.

In contrast, OST handed responsibility over to a junior-level associate with a strong technology background. However, she lacked the credibility and exposure to senior staff or partners and as a result, communication was weak and inconsistent and partner buy-in was virtually non-existent.

Rule 2: Adopt incrementally.

No single implementation plan is full proof. However, through a phased approach, a firm can identify and correct issues before a full-scale rollout. In other words, you don't have to "bet the entire firm" to get the best end result. A secondary benefit is that results are quantified at each step and supporters created throughout the firm. Later, when a full-scale rollout is being evaluated, quantified results and a strong support base make for a solid business case.

In the first year, both firms limited paperless tax workflow to a single partner, pushing 300 (P&P) and 100 (OST) returns respectively through the new process. After that, however, the implementation plans diverged dramatically.

During the first-year, P&P's Chief Paperless Officer constantly evaluated the new process and technology to pinpoint areas needing improvement. Results of this analysis were reported to the partners. Armed with data from year one, the firm was able to improve the process before moving forward. In year two, the firm expanded implementation to select group of staff and partners and boosted the number of returns processed to 3,000.

OST, on the other hand, followed an all-or-nothing approach. At that point, only the single partner had tested the system with a few hundred returns. Nonetheless, the firm’s paperless advocate continued to "sell" full adoption, relying only on results from the single partner as proof of success. Without qualifying data and obtaining reliable evidence of value, partners viewed full implementation as too great a risk to approve. While the original partner continues to leverage the new paperless technology and workflow, the rest of the firm has missed the opportunity for firm-wide realization of productivity improvements.

The incremental adoption approach has proven successful in many firms.

Consider these additional facts:
•Today's SaaS solutions offer small-scale pilot versions that support a phased implementation. Solutions can be used on a trial basis while firms test the technology to ensure usability.
•Firms can test different types of returns as each phase rolls out. For example, P&P initially only considered paperless tax workflow technology for form-driven, complex returns (i.e., returns with multiple brokerage statements, W-2s, K-1s, etc.). In subsequent phases, the firm found that simple "Kiddie" returns followed the same standardized process. Automating simple returns further increased realization rates because fewer tax professionals were needed.

Rule 3: Make it mandatory
Change is never easily accepted. When you ask staff to change the way they work by using new technology, you can always expect significant push back. This is especially true for a process as complex and intensely seasonal as tax preparation. Most firms are very traditional in how they approach tax—following a long-standing process is always safer than risking a change that may disrupt an already stressful tax season. And you can bet the firm that if incremental adoption is NOT mandatory, once the pressure of tax season hits, staff will revert to what they know.

To be clear, during the pilot period, it's recommended to approach partners on a voluntary basis. However, once you've gained the support of your executive leaders, you must mandate adoption going forward. Getting mandatory and complete adoption for a smaller number of partners or offices will yield better quantification of results, enable the firm to identify areas for improvement, and build a base of support.

There are key advantages with this approach:

•Quickly Moves Staff Past the Learning Curve—When staff are not allowed to move backward, they are forced to dig into the technology and learn how it works through practical application.
•Accelerates Motivation and Momentum of the Implementation—When staff members can see the value of the paperless tax workflow and supporting technology, they talk about it, which boosts staff motivation and starts to get the positive word out—preparing other groups for its adoption.

In year two, P&P made participation voluntary for partners. Those that used the system were sold and partners made using the system mandatory for their respective staff members—including preparers, reviewers and administrative employees.

OST, however, maintained a voluntary approach during year two as the firm's designated advocate continued to “sell” partners and staff on the transition. A few partners said they would try the new approach, but most never found the time to do so.

Those that did never made the process mandatory for their staff. At the end of year two, only a few partners, and even fewer staff, had tested the system. With no extended exposure to or training on the process, all reverted back to the old way of doing business when the pressure of March 1 rolled around. At the same time, any issue with the technology or process was used as "proof positive" that the new paperless workflow didn’t make sense for OST. Instead of a process of learning, modifying and improving, OST threw in the towel.

Rule 4: Manage Expectations; Don't Over Sell It

A typical mistake when rolling out any new technology or process is over selling it. To get people engaged and motivated, advocates over promise the benefits of a system, while under-emphasizing the pain of change.

The first thing to remember is that technology is just technology; it's not magic. A paperless tax workflow system is a tool that reduces the time consuming tasks of gathering, organizing, book marking, and populating tax source data into tax preparation software. It is not a single, all-inclusive resource that eliminates the tax review process entirely.

Too often, firms expect 100-percent  error-free data capture. The end result, typically, is abandonment of the system at the first sign of data error. It needs to be made clear up front that tax automation systems deliver 90 percent or greater data capture accuracy rates, which dramatically improves productivity rates, but a firm must still maintain a dedicated review process.

P&P’s approach was to not over sell the value of the technology and keep expectations realistic. In fact, P&P maintained a focus on the time savings and consistency of the process. The firm repeatedly compared system error rates with the cost of hiring seasonal staff to manually input tax data. Because results consistently surpassed 90 percent accuracy and productivity went through the roof, P&P recognized continued to use.

OST viewed the technology differently, setting an expectation of complete accuracy and assuming that the tax review stage could be eliminated. After one partner tested the system by running a return with several hundred source documents, his review detected some entries deemed “questionable.” The reaction was that the entire return had to be reviewed, which was considered a waste of time. In reality, the firm’s traditional tax process required two full reviews where each entry was ticked and tied. The partner failed to recognize that by using the automated system, not only was the data entry process automated and the time savings of great value, but the firm eliminated one review round.

Rule 5: Osmosis is NOT a Sound Training Strategy
A planned, structured training program is an absolute when rolling out any new technology and process. With proper education, staff members are far more likely to accept change.

P&P leveraged the training tools provided by the vendor to educate their staff as the process rolled out. Proper technical documentation, sample scenarios, and web-based and on-site training were all part of the training strategy. The firm also developed and documented internal best practices and cheat sheets that detailed tips and tactics for successfully using the system. Initial users took advantage of the vendor's support program to ensure they were up to speed and could answer staff questions that came up.

At OST, the firm's advocate created her own training program instead of using the vendor’s tested program and materials. The firm also did not document internal processes for training purposes. During year one, the firm was silent about the process and did not reveal intelligence gathered during that period. The few other partners that ran returns during year two also remained silent, failing to document workflow or mentor others. It was later found that partners experienced issues with the system that caused great frustration and eventually the abandonment of the new process. Many frustrations were user errors or known issues that could have been easily overcome.

Successful Implementation Takes Dedicated Effort
Transformational change takes time and dedication and real value can only be realized if adoption is successful. To ensure that you are successful rolling out your paperless tax workflow, consider the rules:

Appoint a Chief Paperless Officer—By naming a Champion, you are more likely to see implementation through to full adoption. A Champion at the partner level provides credibility to the cause and ensures follow through.

Follow an Incremental Approach—By implementing in phases, a firm is better equipped to makes changes and correct issues along the way before full rollout occurs. Incremental adoption also builds broad base support across the firm.

Make the Adoption Mandatory—A phased approach is ideal in order to slowly introduce staff to the new process and allow firm leaders to get up to speed. However, it must be a mandated approach. If given the choice, your staff will most often reject change and revert to familiar, comfortable processes.

Manage Expectations—Don’t over sell the technology to yourself or your staff. Be sure to express the benefits of the technology in a realistic manner. Make staff aware that there will be a learning curve and that the technology is not meant to replace all human interaction, but rather to streamline the tax process and increase time savings.

Proper Training is Critical—People don’t learn through osmosis; they require dedicated and structured training to get over the learning curve. Firms should be prepared to train staff on new technology and workflow and expect a lot of questions along the way.

The paperless tax process is the way the profession is moving, and it will require some major changes to achieve it. Progressive & Progressive represents a firm that really got it right—dedicating the right people to ensure full adoption and aggressively sticking to the plan. P&P understood that the technology and firm demographics alone would not make a successful transition to a paperless workflow. It was also critical to get the approach right. The firm’s implementation plan was well thought out and therefore received the support it required to be successful. And successful it was—saving the firm an average of two hours per tax return.

Old, School & Thinking CPA Group failed for the same reason P&P succeeded—the approach. OST did not think through a proper implementation process, naming the wrong person to lead the fight and focusing on the limitations of the technology instead of the value. OST failed to see the “bigger picture”—time savings and increased efficiency. Additionally, failure was inevitable because the firm did not phase implementation in small digestible chunks—but rather forced the firm to make a high-risk, go-big-or-go-home implementation decision before they had enough proof of value or support. In the end, implementation was abandoned and the firm returned to the old way of doing business.

The technology and support to fully adopt a paperless tax workflow are available. By following the example of P&P, and avoiding the issues identified with OST, you can experience a smooth and virtually pain-free implementation in your progressive firm.