How to “Cloud Accounting” for Tax: Practice Management Opportunities for Improvement


In the last article we discussed the “how” of assessing process and tools (read it here). In this article I am going to explore areas of improvement for tax firms. I have worked with many firms on their journeys to cloud adoption and seen a trend of areas that are ripe for innovation. Let’s dive into Practice Management topics today.

Practice Management Areas for Potential Improvement

Project Management and Workflow

Here are some questions to determine a less than ideal process:

  • Are you using Excel or Google Sheets to track tax returns and deadlines?
  • Do you have a system that you can assign tasks in a project for completing tax returns?

It seems easy to track tax returns on a list, until you miss one or a deadline. Having a system in place to ensure you are servicing every client, and managing a team appropriately, is vital.

Some of my favorite tools to facilitate this process, include:

Canopy – Canopy has a great workflow product catered to tax firms. They have recurring projects for returns, planning, and other tax related activities. You can customize the templates as well. Assigning tasks is a breeze!

Karbon – Karbon is an accounting industry favourite. It’s not catered directly to tax firms, but it does allow a robust project and practice management solution. Karbon has a robust feature set allowing you to utilize.

Xero Practice Management – XPM is a great tool if your firm utilizes Xero for bookkeeping. XPM allows automated workflows and integrates with zapier to build your own automation. With it you can create project templates with custom fields. The reporting is extremely flexible to understand how your practice is going from a financial perspective (which tends to be important to us tax accountants).

Engagement Letters

Here are some questions to determine a less than ideal process:

  • Are you still sending engagement letters in the mail?
  • Do you use Word to create the engagement letters?
  • Are you using any kind of electronic signatures for engagement letters?

The proposal to engagement letter process can be complicated for firms. Many firms send a proposal, get approval, and then send an engagement letter later. Some firms send an engagement letter with prices right off the bat. It’s hard to determine what the best way to do things is. There are many different tools to streamline that process.

Some of my favorite tools to facilitate this process, include:

Better Proposals – BP allows you to create beautiful custom templates for proposals, with dynamic choices, and integrates an engagement letter directly in there. They allow for e-sign upon review and approval.

Practice Ignition – PI is a tool catered directly to the accounting industry. It has built-in templates that are built for accounting and tax services. They handle proposals, engagement letters, signatures, and even payments directly through their platform. Their integrations to accounting systems are robust and they are continually expanding their integrations to practice management platforms. They also have the best KPIs dashboard to measure your sales performance.

File Sharing

Here are some questions to determine a less than ideal process:

  • Are you sending only paper copies of tax returns to your clients? 
  • Do you have any kind of client portal? 
  • Are the majority of documents sent through unsecure email?

As hackers get more sophisticated and phishing becomes consistent on the daily, security on file sharing is important. We all know you should not email tax returns, but people seem to do it constantly. Giving clients a place to send and receive secure information is vital to the future of tax practices.

Some of my favorite tools to facilitate this process, include:

Canopy – From their website, “Canopy’s file management functionality includes a downloadable desktop assistant that enables you to print and scan files directly to Canopy from your computer. Connect your preferred scanner to scan paper documents directly to a client’s folder in Canopy, otherwise you can designate Canopy as a printing location for files found on your computer. Set up folder templates in Canopy to make sure each client’s file storage is uniform and easily navigable for you and your team. Canopy’s drag and drop file upload process makes it easy to keep all client files organized. Your client is also an integral part of maintaining good file organization. With the client portal, your client can upload their own documents and send them to you without having to schedule any in-person appointments.”

Microsoft SharePoint – SharePoint is included in Microsoft 365 subscriptions so it tends to be a cost effective solution for firms. You can set up a file structure for your team and share specific folders with clients for upload. You can also utilize Microsoft Power Automate to facilitate automation in your file workflows.

Google Drive – Similarly, Google Drive is included with the Google suite when you use that for your email. Google Drive is best for collaborative work with clients. It also has the best in class search capability if you’re trying to find a document.

Tax Program Specific File Cabinets – All of the major tax program sell a proprietary file cabinet tool. These are well integrated into those tax softwares and should be considered for tax only firms as an integrated solution. One word of warning – they tend to be pricey, so when you are evaluating, make sure to keep in mind the efficiency gains from an “all-in-one” solution.

SmartVault – While I have not personally played with this solution, it has been an industry favourite for a long time. It has all the capabilities you would need as a client portal integrating into the systems and tools that tax firms use.

Liscio – Liscio is a newer player in the space handling client portals, streamlined communication with clients, document management, and a few other items. Their technology is newer, so it’s prettier (I am a big fan of beautiful interfaces as it helps clients and team members with adoption).

Tax Signature Forms Collection

Here are some questions to determine a less than ideal process:

  • Do you mail forms to clients to sign and fax/mail back to you? 
  • Does your firm utilize any electronic signatures? 

Digital signatures are becoming more and more important. The IRS accepts e-file signature forms that are signed utilizing a tool that follows the knowledge-based authentication (KBA) criteria.

Canopy – Canopy has a built-in e-file signature form workflow. It’s slick.

Tax Program Specific – Each tax program includes their own KBA e-file signature form product.

Liscio – As a new player in the this space, they have added the ability to get these signatures in the same way you would request documents from clients.

Time and Billing

Here are some questions to determine a less than ideal process:

  • Are your invoices created manually for each tax return?
  • Are you using a time tracking system if you bill by the hour?

Let’s move away from manual invoices and find an integrated solution. Many of the practice management software also allow you to create bills at project milestones or based on hours entered. I recommend utilizing one that integrates with your core GL system and allows for direct billing on projects.

Canopy – This software is truly an all-on-one practice management solution for tax practices. If I only did tax, I would use it in a heartbeat. Their time and billing module is slick and you can even accept payments straight through it.

Tax Program Specific – If you go with a full suite of software from a tax software provider, be sure to check out their time and billing modules. They tend to be geared towards hourly billers, so if that describes your firm, it could be a great solution for you.

I generally do not recommend that firms utilize a standalone time and billing platform, however, there are cases where it makes the most sense. You just need to make sure it is going to integrate into your other practice management tools efficiently.

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Liz Mason is a serial entrepreneur, a giant nerd, and an involved accounting vanguard. She is the Founder of High Rock Accounting, Rebel Rock Accounting, TheDepartment.Tax, and a few other related brands. Liz speaks on a national stage, guests stars on podcasts, and writes frequently. To further her passion for the advancement of the accounting profession, Liz currently serves as a Xero National Ambassador and as the Content Strategist for Tax Practice News. Liz started her career in tax at Grant Thornton (at 20) and automated a portion of her job landing her in the national tax practice. She spent a decade in large public accounting firms working on highly technical tax consulting before branching off on her own. Liz utilizes her creativity and passion at her company to uproot traditional practices and replace them with innovative concepts. She finds joy in efficient technology and her core belief is that everyone and everything can continuously improve (she says "be better" too often). When Liz isn't planning world domination in accounting, she is a die-hard skier, down for any adventure, plays the ukulele, reads everything, and has a good sense of humor. If you're looking for her, you can find her traveling the world and enjoying new food and cultures with her young son. Follow Liz and High Rock Accounting on Twitter at @LizzyNorMa and @HighRockCPAs.