The 10 Habits of Highly Profitable Tax Preparers

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1 The 10 Habits of Highly Profitable Tax Preparers April 15 has come and gone, and an estimated 1.2 million professional tax preparers have their first quiet mornings in nearly four months. Tax season is over for the year, and it s time for some well-deserved relaxation. But is it really? Successful tax preparers know that this isn t quite the end of tax season. They know that, in fact, there is no such thing as a single tax season each year. Once April 15 has passed, there are still seven states (Delaware, Hawaii, Iowa, Louisiana, Maine, Massachusetts, and Virginia) whose income tax filing dates do not coincide with the federal deadline. There are still Non-Profit filings due in June. In October, there is another crush of business as the people who filed for an extension to their taxes must file. And in between, quarterly filings as appropriate. Some people perceive tax preparation to be a seasonal profession, but in truth the season never ends, says Byron McClure, whose ten years as a senior sales representative for Drake Software has enabled him to become a trusted business resource for thousands of tax professionals. We like to think of tax season in terms of the December through April time frame. But the reality is that successful firms are either gearing up for tax season, in the middle of the season, or taking the steps necessary to be ready for tax season next year. Tax preparation is less a season than a business cycle. And because it is a continuing cycle, what a tax preparation firm accomplishes in the weeks that follow the April 15 federal filing deadline are a strong indicator of how successful the firm will be in the following year. Drake Enterprises started developing tax preparation software in 1977, McClure notes. In 1985, we were one of the first companies to electronically file tax returns. In 2004, we won the IRS Modernized e-file Pioneer Award for our efforts. Today, more than 30,000 tax professionals nationwide use Drake Software to process more than 9 million federal and state-accepted returns. In our years serving the tax preparation industry, we have learned to recognize the 10 habits of highly profitable tax preparers, and how they come into play in the weeks following April 15. The first four months of the year can be hard for preparers. Long hours, seven-day weeks, staffing issues, client problems to deal with, and the press of deadlines. Some of the stress is inevitable tax law changes at the last minute, for example. But other stressors can be lessened or even eliminated by taking action now. Here s our list of the 10 things that will bring the least stress and highest profits next year. Page 1

2 1 Reflect on the Season Just Passed. Make a note of things that went right, things that went wrong, and where the workflow hit bottlenecks. Consider staffing issues, with particular emphasis on how well the support staff was able to reduce the workload for the professionals and how part-time employees held up under the crush of business. And pay particular attention to how well the tax preparation software held up during the year. We use the feedback from tax season to help tweak areas where the software could do more, and to correct any obvious problems that we could not address during the season itself, so this feedback becomes critical for our programmers, says Byron McClure. It is part of our commitment to you as a business partner we deliver the very best tax preparation tools, but we do it based on your feedback to us. 2 Renew Your Professional Network. If you belong to a state or national tax preparer s organization, now is the time to re-connect. Attend the meetings, engage with other professionals, and gather data about how others fared in the season just passed. This is an excellent place to glean marketing and competitive information, and to learn about changes in the industry that have occurred or may occur in the coming months. Pay special attention to changes at the IRS and in the Congress that may affect how you will perform your job in the years ahead. There is currently a major discussion underway about requirements for tax preparers that includes continuing education, certification, and potentially licensing, McClure notes. Tax professionals need to be engaged in these discussion and providing their input. The best and most productive ways to be engaged is through your professional association and through your tax software solution provider. 3 Make an Appointment to Review and Renew Your Software. Renewing early brings benefits both to the software solutions provider and to the tax professional. For the software vendor, it gives an early indication of the resources that will be available to improve and enhance the software for the coming year. For the professional, renewing early means a discount on the price and an opportunity to make stronger input to the software development team. This is where the analysis in Habit #1 comes into play. Early renewal isn t just about the money, though you will save money, McClure says. You get unlimited access to the software during the year. More importantly, you have time to work with your vendor, conduct training, and resolve any issues before they impact the bottom line. We have seen time and again that those who put off renewing until the last minute are worrying about software in December, when they need to be focused on workflow and firm performance. Page 2

3 4 Make use of the Resources Available to You. There is a wealth of information and guidance to help tax professionals be more efficient, effective, and profitable. Many of these are offered at no cost or at minimal cost, and include continuing education, marketing support, and assistance with workflow and practice management. These are available through tax software vendors, professional organizations, and the Internal Revenue Service. This is the time to take stock of the resources, brush up on any changes, and hone the skills of your chosen profession. An excellent example is our new portal for the Affordable Care Act at com, says Drake s Byron McClure. It provides calculators, FAQs, information, and guidance for tax professionals and their business clients that will help to reduce the stress of implementing the ACA tax provisions beginning next year. The ACA promises to be a significant change for tax professionals, and will require a strong working knowledge of the law and its provisions. Our portal is the place to start. 5 Revisit the Firm s Marketing Plan. This is actually a three-step process, the first step of which is to make note of who your clients are and why they chose to use your firm over others. In today s marketplace, individuals and businesses have a number of tax prep providers available to them both national and local. Understanding why the clients chose your practice over the others will provide clues about how best to market to other potential clients in the same group. Tax preparation is the ultimate niche business, says McClure. You need to understand why your clients chose you, and then market to that reason. It may be a certain ethnic population, a neighborhood, an age group, or people of a certain mindset. Whatever it is, you need to gear the marketing plan to own that niche...to dominate it so thoroughly that you build a thriving practice that stays with you year after year. 6 Step 2, Revisit the Marketing Plan. In past decades, marketing of a tax preparation firm followed the lead of law firms, accounting firms, business consultants, and other professional services it was conducted through reputation and word of mouth. In today s American society, that strategy may work well for established firms but will not help new and growing firms much. Today s professional tax preparer needs to be adept at using social media such as Facebook, says Byron McClure. They need to utilize relationship marketing, , and other communication technologies. There is a new generation of tax professionals emerging today who are very adept at these technologies and are comfortable with them. These young professionals will fuel the growth of the industry in the years ahead, serving a new generation of clients. Page 3

4 7 Step 3, Share the Marketing Plan. So many times, the marketing plan exists only in the mind of the firm s owner and is never shared with other professionals or with the support staff. By sharing the plan, the entire firm can be engaged in promoting its services. Waiting until the last minute to implement advertising and other marketing programs means won t have time to take root before tax season sets in. We promote Drake Software and its family of professionals throughout the year, but make our strongest push after Labor Day, adds Drake Software s McClure. Sure, people may not be thinking about their taxes then. But the message needs time to become integrated into their lives and their businesses, and that is what you want. When they start thinking about taxes on January 1, your name should already be at the top of their minds. 8 Expand Your Software Toolset. The days when tax preparation firms needed only tax prep software and a storefront are long gone. Today, a new generation of professionals is making use of new tools to enhance their client services, their practice management, and their communications. These include software for: workflow, document management, firm management, and additional value-added servies. When you meet with your sales representative for your tax software, says Byron McClure, ask about other software and services they may have that may be of value. Many of our clients, even those who have used our tax software for years, are surprised at the array of tools and services we can make available to help them become more successful. And nothing pleases us more than to find ways to make our clients more successful. That s part of what being a family of professionals is all about. 9 Analyze the Hardware. There are a variety of hardware systems that affect the success of a tax practice, from computers and printers to scanners, office chairs and telephones. In the post-season, there is time to make adjustments and money to invest in better hardware. Consider upgrading computers to provide faster processing and transmission. Consider upgrading the office printers, if the printing of workpapers and finished forms proved a bottleneck to operations in the current year. Analyze how to make more effective use of monitors using larger monitors or dual monitors to improve workflow. The single greatest enhancement we have seen tax preparers make, McClure says, is to invest in a better scanner. The scanner is the heart of the input process and the key to effective document management. At a minimum, the firm should have a sheet-fed scanner that can handle 30 pages of input per minute, duplex, and have a daily work capacity of at least 1,000 pages per day. Page 4

5 10 Move to the Cloud. If the firm is not already using cloud computing for document storage, archiving, and for software management, this is the time to make the transition. Cloud computing affords cost savings, better communications with clients, greater security, an opportunity to outsource hardware needs, software needs, and system backups for disaster preparedness. The tax preparation industry is moving to the cloud, concludes Drake Software s Byron McClure. It is a transition that is every bit as significant as the move to personal computers in the 1970s, when Phil Drake helped to pioneer our industry. This is another opportunity for tax preparation professionals to streamline their workflow, and it is an opportunity to use business partners like me to help make the transition. It is one of the ways in which we can show that Drake Software is about more than software. It is about success, and working together to build a stronger and more effective tax preparation industry. Page 5