Cal CPA Feature

Reposting of "Alexa Do My Taxes" by Trevor Gilmore, in May's print edition of CalCPA. Visit CalCPA.com for more information on the organization and their publications.

Alexa, Do My Taxes: Speed Up the Tax Process with RPA

A TechTalk by Trevor Gilmore, CPA/ABV, MST As I wrote in August, we will soon be AI-enabled CPAs. If the pandemic sped up e-commerce adoption by a decade, it also sped up technological adaptation in our profession by at least half that: five years. Something crazy happened as I wrote this. I received our 2020 corporate tax return three weeks before the deadline. What. Is. Going. On? I’m baffled. How many errors are in this thing!? More on that later.  

Disclaimer: BacoTech offered me a free trial to test the software out, so I decided to do our 2020 corporate taxes on their platform.  

BacoTech (BacoTech.com), which recently got its patent approved with the U.S. Patent and Trademark Office, has developed tax software they describe as a “middleware hub” that manages all clients books in a single location. “Middleware” here means the middle space between your client’s ERP accounting software (Xero, QuickBooks Desktop or Online, NetSuite, etc.) and your tax software (ex: Lacerte, Ultra Tax, CCH Axcess, ProSystems Fx).  

A better middle earth, if you will. The best way I can describe the software is a single workflow tool for tax teams that provides a real-time connection to your clients accounting software, with a functional dashboard. Need to set a capitalization policy? Done. Need to review transactions in an account? Simply click. Need to toggle between GAAP and Tax? Easy. Have multiple entities like me? The software consolidates it beautifully. Goodbye, Excel consolidations.  

Speeding up the tax return means speeding up the audit and the valuation. Which means happy stakeholders. Awesome!  

Who is BacoTech?  

Longtime Texan Ford Baker, CPA and his team developed the software. Baker started out in a Big Four firm back in the 1980s, then moved to a smaller CPA firm offering better technology, commissions and work-life balance. The move was just what Baker needed, since he was a raising a young family and had climbed the very long corporate ladder of long hours and toil until reaching comfy senior manager and partner environs.  

By eliminating the need to start with beginning balances and going straight to the source, Ford has adapted a “transactions based” workflow approach to tax preparation that may change the way we approach tax returns. Or audits. Or financial reporting.  

The Goal: Speed Up the Process  

In his words, “Traditional workflow platforms for CPAs are solutions that allow us to start our work when we receive the financial statements or trial balances from clients, typically sometime in February. Returns are due in March and April, so these solutions give us about 60 days to finish every return. This is impossible, so CPAs extend based on guestimates and spend our year cleaning up client issues and questions from the previous year. This traditional workflow is what we call balance-based workflow, and it is the primary reason we are so inefficient. CPAs commonly point to issues like time compression, redundancies or client issues as our reason for inefficiency, but those are merely symptoms.”  

By Touching Everything Once  

A central theme in Ford’s approach is to touch everything once. This is a core tenet of developing scale: the more times someone touches something, the greater the likelihood of errors. How many times have you received an Excel file from a client that ends in v6 or v10? And we’re not talking a car engine. Wouldn’t it be easier if you could have a connection into their financials, displayed in a logic that makes sense to you, and allow you to do your thing?  

The challenge here is that the information inputted from your client must be good. You can reclassify entries in BacoTech’s software, but if there are independence issues, you of course you cannot. You can set up controls, as well, so that the right people control what they should. In some ways, software like this requires even better client competence. Which is where things are headed: corporate finance teams will get smaller with better competence and efficiency through technology.  

Since We’re Dealing with Real-time Information  

In our fast-changing world, being one step ahead is key. Looking at the past often leaves you behind. Years ago, while teaching me at a late hour during busy season how to review a complex real estate fund tax return and audit, my terrific mentor John Strittmatter asked me, “Why can’t the accountant live in the present?” “Hmmm, because they’re overtaxed!” I replied. John replied, in his classic dry wit, “Because they’re always living in the past!” This joke always makes me smile and my heart warm. It’s very true. I think I even questioned “Why doesn’t the audit numbers match the tax and should they!?” 

Being able to react to real-time information is now the norm. We are now advisers to our clients, acting in real time, and not even guessing how Q1 went because we already know how Q1 went. Clients are already asking us what the proposed President Biden tax plan means for them and their business. In the Baco software, you can quickly queue consolidated financials, peek in and see where your client (or accounting staff) coded key accounts such as assets, investments, liabilities and equity—and adjust as needed so that you can proactively guide decisions.  

Thanks to RPA, on the Automation Scale  

On the automation spectrum, which generally runs from robotic process automation (RPA) to artificial intelligence (AI), I’d place BacoTech’s platform on the RPA end. Which is fine; with the everchanging tax code, human judgment might be needed for some more time. But if AI could ever figure out the tax code and understand how, say, IRC Sec. 304 causes concern for related parties, that could be interesting. I’d grab my popcorn and watch.  

Since Clients Have More Options Than Ever  

Outside of the most loyal clients, people have so many options these days to obtain accounting and tax advice. Most of it for free (Google), most of it wrong (Google). But there are plenty of RPA and AI powered upstarts that want business and are hiring defectors from public accounting. Finding your competitive edge in a smart, sustainable way should be the utmost priority to thrive in the long run. Value is an ever-changing ideal; delivering value this year means something else next. It’s up to us to define value; by the time the market has, it’s too late.  

And the Value of Time Increases  

I received my multi-state tax return for our six consolidated entities three weeks before the due date this year. Guess what I am doing on my birth in April? Riding my bike up Mt. Tam, and not following up with my tax team.  

As So Does the Speed of Change  

Our audit and valuation are in draft, as well, five months ahead of schedule. Next year, the return will be done even earlier. I was the slacker this year; next year I promise to be better. I’m a happy guy. What is your favorite time saving tool?