Processing of individual tax return forms (Forms 1040) are the mainstay of many CPA firms.  In fact, 2016-17 NSA Income and Fees of Accountants and Tax Preparers in Public Practice Survey Report reports that 57.3% of gross income from those firms surveyed comes from tax-return preparation.  Thus, the management of the process to complete these forms in a timely fashion is a critical component to the increased profitability of the firm.  Although several workflow management systems already exist and are used by firms, studying the efficiencies of processes can help improve Form 1040 realization; that is, net client fees as a percent of total fee revenue.

This paper documents the investigation into an accounting firm’s existing workflow processes for preparing individual tax returns with an emphasis on identifying the predominant wastes as categorized by the principles of lean management.  Lean management is an approach to process-management well-regarded within the manufacturing and healthcare arenas.  Hallmark to lean is the identification of “muda†or waste that burden a process, followed by an evaluation of issues that contribute or cause the muda.  Actions are then taken to address these issues, resulting in greater efficiencies for the process under study.  We hypothesize that this approach can be readily applied to accounting firms and improve the existing workflow processes, thereby improving the profitability of the Forms 1040 preparation system.

In our investigation, specific lean tools are applied to assist in the identification of muda within the firm’s individual income tax return preparation process. An evaluation of the predominant sources of muda are made to understand the factors that contribute to these sources, followed by a recommendation of corrective actions to minimize or eliminate the predominant waste contributors. We also recommend a strategy to sustain the improvement. Lastly, we recommend avenues of further study regarding lean applications within the accounting field.

 

Keywords: Lean, Accounting, Form 1040, Process Improvement

 

References

http://www.cpapracticeadvisor.com/news/12300091/survey-shows-average-fees-for-accounting-tax-firm-services-for-2017

https://www.journalofaccountancy.com/issues/2016/dec/2016-map-survey-cpa-firms.html

https://www.aicpa.org/interestareas/privatecompaniespracticesection/financialadminoperations/nationalmapsurvey.html