Outsourcing tax preparation – a growth model for small firms

Joseph P. Manzelli Jr. CPA.CITPCoordinator of Outsourced Workflow

Doubletree Suites Phoenix, AZJuly 17, 2013

Agenda

• Background– Joe Manzelli– XCM Solutions & Xpitax LLC

• The Tax Process – How can it be Optimized• Workflow what is it?• Outsourcing as a Tool• Demo of XCM software

History of XCM / Xpitax

• Founded in 2001 as an outsourcing company by accountants for accountants

• Pioneer in the outsourcing model (tax & bookkeeping)

• Unique in Industry– Own Dedicated Facility in India– Only Patent Holder in the Outsourced Space– XCM – Automated Workflow Process

History (cont’d)

• Growth to 25 US Employees & 125 employees in India

• 500+ accounting firms & 28,000 XCM users• Prepare 15,000 to 18,000 returns for firms

– Over 28,000 in 2007 (Section 7216 came along)

• Doing More With Less– Economy– Fee Pressures– Increased Regulation– Condensed Tax Season– Rapidly Changing Technology

Our Industry Today

• Efficiency• Redundancy• Transparency• Accountability• Consistency• Timely Communication

Common Pains

Tax Process

• Collect source documents• Scan? Copy?• Prepare – data entry• Questions – missing information• Review• Collate & send• E*file

American Institute of CPAs

Manual Process

American Institute of CPAs

Scan tax return and source documents

Store in DMS

Refined Process

American Institute of CPAs

Prepare Return

Electronic List of Missing

Information

Optimized Process

What is workflow?Process standardization & automationKnowledge managementAccountabilityIndividual work managementResource managementTeam collaborationCompliance & QCEase-of-use/ScalabilityImplementation & trainingSystem, integrationCost

Process Automation

Pre-defined statuses that can be turned on and offCustom statusesLinear and horizontal processesWorkflow mappingQuality control alertsManage re-occurring activitiesManage bulk processesAutomatic project creation/Roll forward

Knowledge Management

Robust reporting – standard & customException and bottle neck reportsProject-related files and detailsEasily searchable and actionable dataQuestions, review points, instructionsAutomated archiving and purgingAnnual comparisons

Accountability

Staff developmentStatus details on a particular projectView all WIP, or specific workloadFirm-defined user rights

Individual Work Management

Virtual desktopAbility to organize, assign difficulty and prioritySupport scheduling/work assignmentAssign individual or group roles, skills and expertiseTime summary support

Resource Management

Move responsibility within teamCross-team collaborationSupport question/review cycleReal-time workload balancingIntegrated schedulingBudgeting support

Compliance and Quality Control

Full tracking capabilitiesFull due date management capabilitiesCustomizable sign-offsQuality control checks and exception alertsExtension trackingE-File process managementCustomizable checklistsSupport for data retention policies

Ease-of-Use/Scalability

Intuitive interfaceLogical designSmall learning curveAdaptable to current process and anticipated future needsFlexible and scalable – roll out to additional users, processes, departments, officesBalance between built and build

Implementation & Training

Complexity of infrastructure deployment and administrationCustomary implementation timeIT involvementTraining – basic and intermediaryOngoing training and best use opportunitiesFlexible training optionsDedicated support resourcesFeature upgrades/enhancementsVendor reputation

System Considerations

Vendor’s reputationEasy maintenanceRemote user support & mobile accessMulti-office supportFirm-wide systemDocument storage integrationPractice management integration

Cost

Base product pricingLength of contractAvailability and price of optional capabilitiesAdministrative costsTraining costsPotential impact on head count/overtimePotential impact on user productivity and departmental efficiency

Available Products

• OfficeToolsPro• SharePoint• Thomson FirmFlow• CCH Workstream• XCM Workflow

Outsourcing - Driving Factors

Benefits of Outsourcing

• Staffing Resource– Year round access to unlimited resources

• Improve Quality and Consistency• Standardize & Automate the Process• Grow Practice Without Increasing Overhead• Improve Client Service – Increase Turnaround Time• Improve Quality of Life• Increased Profitability

Xpitax Teams

• Tax & Bookkeeping Compliance Officers (US Based)

• India Dedicated Team- Supervisor: 5-7 years, C.A.- Preparers : 1-2 year graduate

Outsourced Process Basics

Benefits – Enhanced Client Service

Outsourcing = Time for New Opportunities

Consulting Niche Building Specialization Higher Value Services

Benefit – Client Loyalty

Number of Services 10 Year Retention Rate

1 12%

2 24%

3 63%

4 81%

5 98%

Source: Allan Koltin Presentation

What to Outsource

Data Intensive Tasks Individual returns Corporate Returns, Partnership and Fiduciary Returns Bookkeeping Services Write-Up Services Accounts Payable/Receivable Financial Analysis Reports Workpaper & Financial Statement Conversions and Rollovers

What to Retain

High-Value, High-Touch Client Service New Business Consulting Strategic Forecasting & Budgeting Business Valuations Tax Planning Corporate Financing Business Succession Estate Planning Wealth Management/Financial Advising

Issues & Obstacles

• Security• Loss of control over return• Taking away jobs• Quality/Training – India background• Perception / Client Reaction

Security - Privacy

• Data never leaves U.S.• Secure buildings in India• Printing / scanning not allowed• Utilize access of accounting firm’s software &

network

Demo of XCM in action

We will utilize a live demo site & see XCM in action.

I can provide screen shots to anyone who desires them. I will have this presentation up on Slideshare. All Information on how to get screen shots or this presentation will be provided at our conclusion.

© 2014 Xpitax Effective November 1, 2013

2014 Xpitax PricingOutsourced Tax Returns – Xpitax has a multi-tiered pricing schedule based upon complexity of returns.

Service Tier 1 Tier 2 Tier 3 Tier 4

Individual $63.001 – 12 pages

$142.0013 – 60 pages

$194.0061 – 125 pages

Add $53.00Each add. 50 pages

Corporate, S-Corp & Partnership $100.001 – 25 accounts

$142.0026 – 50 accounts

$194.0051 – 100 accounts

Add $53.00Each add. 50 accounts

Fiduciary $63.001 – 12 pages

$142.0013 – 60 pages

$194.0061 – 125 pages

Add $53.00Each add. 50 pages

Bookmarking $13.001 – 50 pages

$23.0051 – 100 pages

$32.00101 - 150 pages

Add. $5.00Each add. 50 pages

990 Tax Exempt $184 all returns

1) Prices for individual and fiduciary returns are based upon the total number # of scanned pages submitted with the tax data file (i.e. organizer and original documents). Scanned documents must be actual size of original document.2) Xpitax has a minimum annual service fee of $7,500.4) Xpitax will quote the price of returns which do not fall within any of the pricing categories noted above.5) Schedule D - as a default policy – Xpitax does not input transaction details (input the Summary Data). There is a surcharge for inputting detail as follows: first 10 transactions – no additional cost, 11 to 100 Transactions – surcharge assessed equal to next task tier, each additional 100 Transactions – surcharge assessed equal to next task tier. 6) Business tax returns - we require that firms provide us with an adjusted trial balance. If the M-1 adjustments are not easily identifiable on the Adjusted Trial balance, we also require a schedule detailing specific items that impact taxable income. 7) This Xpitax Pricing schedule is based upon firms providing us with a rolled over tax data file. For those clients that need to be keyed from scratch (i.e. new client to firm, data isn’t currently in your tax software) there will he a surcharge assessed to the next task tier. However we will key the prior year return, so that it can be rolled over, at no charge within the months of May – January.

Domestic Pricing: Pricing for domestic tax returns during the period from January to April 15 th is equal to two time (2x) the offshore pricing noted above.

© 2014 Xpitax Effective November 1, 2013

2014 Xpitax PricingOutsourced Tax Returns – Xpitax has a multi-tiered pricing schedule based upon complexity of returns.

Service Tier 1 Tier 2 Tier 3 Tier 4

Individual $63.001 – 12 pages

$142.0013 – 60 pages

$194.0061 – 125 pages

Add $53.00Each add. 50 pages

Corporate, S-Corp & Partnership $100.001 – 25 accounts

$142.0026 – 50 accounts

$194.0051 – 100 accounts

Add $53.00Each add. 50 accounts

Fiduciary $63.001 – 12 pages

$142.0013 – 60 pages

$194.0061 – 125 pages

Add $53.00Each add. 50 pages

Bookmarking $13.001 – 50 pages

$23.0051 – 100 pages

$32.00101 - 150 pages

Add. $5.00Each add. 50 pages

990 Tax Exempt $184 all returns

XCM and XCM Outsource License Fee•There is no cost for firms submitting returns or other engagements/projects for processing through “XCM Outsource.”•There is a $375.00 per user fee for use of “XCM.” XCM provides custom home pages for each person in your firm and allows use of product for tasks/returns processed internally.

Training and Consulting Services•On-line Tutorial – Free•Web-based Training - $800/annually for up to 5 sessions•Web-based Firm Specific Training - $750/per session•Live On-Site Training - $2,500 per day plus out-of pocket expenses

Questions?

Joe ManzelliJoe.Manzelli@xcmsolutions.com

Twitter - @joemanzwww.slideshare.net/joemanz13

781-519-9317639 Granite Street

Braintree, MA 02184