Agile for your tax projects? Sounds crazy....? Read more.....

The tax return preparation and review process in most of the tax firms is hierarchical, means the initial draft is done by an Analyst, then it goes through certain number of levels of review depending upon the complexity and size of the tax return. The accountants receives the financial statements from their clients after the financial audit is done, so generally there is a 3 to 4 months period in which the all the tax returns should be ready for filing, in some cases the available time is even less

Tax return preparation is a financial service in which the client is billed based on the number of hours spent by preparers/reviewers/CPA who sign off, as per their per hour billing rate, that also tells us that more the number of hours more the revenue of tax firms so in some firms the focus is to work more and earn more. As depicted in the picture inspect and adapt cycles are not frequent enough for adaption

The leaders at these firms also promotes a certain number of charge/service hours as a goal that every employee must achieve, and the goal can be between 60 to 85 hours per week and each tax return comes with a tag of Budgeted hours which were estimated by the project managers and this estimation is based on historical data. Organisations are growing rapidly from year to year which means more transactions and more complexity, thus the estimation based on historical data is not helpful. The budgeted hours per tax return increases the stress and puts the employees under pressure

The high charge hour goals doesn't support consistent performance and quality as more people will be focused on hours as opposed to quality that these hours should translate into.

There are other implications as well which are as follows

1. Eating time: Means charging less amount of time than actually spent on each tax return because completing the tax return within budgeted hours is considered an achievement (but only in the short term) and due to poor quality on these returns the annual review (long term) rating is affected.
2. Over charging time: It may encourage a behaviour wherein employees spend less time on each tax return and charges just the right amount of time that won't exceed budget thus stealing time to meet the daily/weekly/seasonal charge hour goal. In short, under-work and over-charge

Company/Firm's response

When these behavioural issues starts showing their symptoms the companies start investing in training on integrity and timesheet compliance, whereas the issue can be fixed by setting proper direction and re-aligning the goal towards quality work rather than number of hours. Hiring contractors during the tax seasons would also be a good idea because there won't be much work during the non-tax seasons and companies may not want to hire people on full time basis as the cost of company would go up

The companies also spend lot of resources and time to monitor the budgeted vs actual hours and charge hour goals met or not met weekly report and analysing this data at the mid and end of the year to account for employees' overall performance at the fiscal year end

My thoughts

If we take an example of India where most of the work is outsourced, the people workig on this task did their graduation in Indian Accounting system and learnt Indian taxation. Yes, I agree that company will provide the required training to their employees as part of new hire on boarding, however this training is not enough and real time challenges would be very different and there is learning with every tax return they work on. As each one is doing the work assigned to them and there is no peer learning and nobody has time to help each other, and if they want someone's help except their project manager then they should be ready to share their client's timesheet code so this person can charge the time he is spending to help the other person

I think Agile can help solve these problems, feel free to share your thoughts in the comments section below if you have a different opinion

1) Form scrum teams and break the silo. Encourage team work and have a right mix of people as per the work type (for eg: type of tax return - Individual, Partnership, Corporation etc). In each team there can be 3 to 9 individuals and the team size can be defined as per the nature of work.

2) Let the teams self organize and take the ownership of the work and encourage accountablity through definition of done and check their readiness through definition of ready and proper sprint planning, this also promote intrinsic motivation among employees. The chief CPA can play the role of Product Owner, and project managers can go through the Agile training and can play the role of Scrum Master who helps everyone stay on the same page and reduce ambiguity

3) Shift the focus to quality and timely completion of tax return rather than charge hour goals.

4) Define high standards of customer service by aligning everybody to the sprint goal

5) Have respect for people and culture and encourage pair work. Quality should be declared as everybody's responsibility.

6) At at interval of every 24 hours schedule a sync up/stand up meeting, this helps everyone to remain focused on the sprint goal and identify & report hindrances/impediments for timely resolution

Start with these basic 6 steps and slowly progress towards incorporating lean principles and manage the flow. Structure this around tax technical skills for utmost accuracy

A leader is the one, who knows the way, goes the way and shows the way - John C Maxwell

The big problems are where people don't realise they have one in the first place - Edward W Deming

Note: Jeff Sutherland and Ken Schwaber are the creators of Scrum, scrum has been highly successful with software projects but it is a modular framework that can work well with any industry. I am very much confident that scrum can work well with financial/tax process as well

Thank you so much for reading, until I write my next blog stay tuned, share your thoughts in the comments section below and take care of yourself

Feel free to reach out to me if you have any questions about Agile.