In the US, self-assessment gave birth to vast tax return processing houses such as HR Block. John Stokdyk visited ieTaxguard to discover a similar tax revolution taking shape in a business park on the edge of Peterborough.
Formed from a management buy-out in December 2000, ieTaxguard set out to become a leader in providing tax compliance services both to consumers and other organisations, says sales and business integration director Shaun Crozier.
Specialist tax planning and consultancy, including Capital Gains Tax service.
The first thing Crozier and FD Marie Fisher did after the buy-out was to change the basis on which the company invoiced clients. Rather than invoicing when work was completed, they introduced an advanced payment structure, offering clients the option of a single payment up front, or 10 interest-free payments throughout the year.
"We lost a few clients," admits Crozier. "But the amount lost was small - low double figures, and nothing to affect the business. The effect was we picked up two years' payments in about four months, which gave us a little breathing space."
Crozier then turned to IT systems. One of the first things he did was to replace the previous FDS Taxpoint software system with TaxabilityPro from Digita.
"Taxpoint was more expensive and didn't really suit our requirements when we took over the business. Digita was more technology-focused and more energetic at moving down the roads we were looking at," says Crozier.
A few months later ieTaxguard took on the customer relationship management program SalesLogix (ironically now owned by Digita's big rival, Sage).
"We wanted a central point where any member of staff could come to answer any non technical query or see the latest communications and respond to them. It opened up communications channels to everyone in company," he explains.
Crozier and his team did some work in-house to link Digita and SalesLogix and roll them out via Citrix Terminal Server, which makes it possible for users to access the programs via the Internet. This technology infrastructure allowed ieTaxguard to outsource data entry to a partner company in Mumbai, an arrangement that is now approaching the conclusion of its second full tax season.
How ieTaxguard works
1. Marketing and client acquisition
ieTaxguard takes a different marketing approach to conventional tax and accountancy firms. When it comes to taking on new clients, Crozier explains, "We have focused our effort on working with major corporate clients as a new channel. We have a team who discuss with employee benefit providers how we can package our services for their employees. It is a far more efficient way for us to be working."
The company also uses email marketing, publishes a quarterly magzine and offers clients the incentive of £50 in leisure vouchers for referring new clients.
Prospects are set up in SalesLogix and a letter is sent inviting them to get in touch. It also says that ieTaxguard will contact them in seven days and unless they ask not to receive a call.
Fee quotations are based on a wizard that identifies what services the client is likely to need and their risk level.
"The questions we ask relate to TaxabilityPro's points system and the quote is based on the number of points times our charge-out rate," says Crozier. "If they say yes, we can key in their bank account details and use AUDDIS for paperless direct debit payment, or we can take direct debit or credit card payments."
2. Client relationship management
Once payment is received from new clients, they are issued a welcome pack setting out the firm's terms and conditions and a personalised information checklist relating to the questions they were asked. When it comes back, the checklist is scanned into an electronic file and attached to the client's file, which is then allocated to the tax department.
Basic contact information is passed between the two software systems, and the case is assigned to a tax manager. The manager will work with a tax assistant (usually in Mumbai), who will check whether the data from the client's information pack matches the work plan in SalesLogix. If there is a match, the assistant will input tax-related data to the Digita software.
3. Paperless system
Part of the glue linking the CRM and tax applications is a web interface ieTaxguard created to pick up scanned correspondence files and pass them to SalesLogix. The ieTaxguard post room has two large Konica scanners that can cope with up to 45 pages per minute. Each day the post room team opens all correspondence, sorts it into client bundles and scans it.
The sorters include a client reference within the scanned file name that identifies with which client record the image should be stored and puts it into a post queue for the individual allocated to that case to deal with. Along with the Citrix WinFrame network servers, this paperless system made it possible for the firm to outsource data entry without having to dispatch physical documents to India.
4. Tax return processing and review
All returns are reviewed at least once, but they may be selected for further reviews, based on the risk points totted up within TaxabilityPro. If the client is deemed low risk, the return goes straight to the admin centre for fulfilment, either as a traditional paper review, or as a secure email dispatched from within TaxabilityPro. If the return is a medium risk, it goes to the UK review team. A return above a certain score in Taxability pro will trigger SalesLogix to direct the return to the company's senior UK review team.
With an internal rule that a return will be dispatched within 24 hours of reaching the review queue, it is possible theoretically possible for a new client who supplies all the right information to go into the tax processing system at the beginning of the day and be reviewed and ready for dispatch by the end of the day. Once approved returns have been received from the client, they are queued up for filing by internet after midnight, when the Revenue's server load is at its lowest.
More realistically, the firm doesn't always get the right information first time/every time and may need to wait for the arrival of things like P11D forms. The company's average target is to complete the full data collection-input-review-dispatch process within 30 days.
5. HMRC Enquiries
Crozier says that ieTaxguard handles around 60 investigations a year, most of which are aspect enquiries that can be handled within an hour from information already supplied by the client - often by supplying an electronic image of the relevant document.
"That usually closes most of them," says Crozier. "If it's a full enquiry, we go to our insurers. One of the products we offer is investigations insurance, which about 40% of our clients take. If they've got insurance and it's more than 1hr work, we draw up a quote for the insurers. If it's less than one hour's work, we take it on the chin."
If a client hasn't got insurance and it's not due to a fault on ieTaxguard's part, it offers to handle the enquiry and quote a fee to the client. "If it's a mistake that is down to us, it's up to us to put it right," Crozier adds.
6. Monitoring systems
With so much automation in place, ieTaxguard's management team has an impressive amount of real-time information at their their fingertips, most of which is compiled using Crystal Reports to interrogate the data in SalesLogix and TaxabilityPro to deliver performance summaries.
The reports include client status summaries for the UK and Mumbai tax departments, sales reports and reports to satisfy money laundering regulations. Each tax manager can run their own progress reports for their teams by individual or by client type, which Crozier says, "helps give them a handle where they are with clients" - an important factor considering that they are rewarded on customer service quality and customer retention.
To demonstrate how the reporting system works, Crozier turned to his PC. On 20 September, his summary report shows 7,997 active cases, with several hundred more outstanding quotes still with clients. With 6750 clients having returned their documents, work had been started on 6,716 returns; 4,706 returns had been sent to clients and 4,099 had been filed with HMRC.
Crozier was satisfied the company was on target to complete the full workload within six weeks (end of October). "The reason we set this target is to reward the business. We use additional holidays as an incentive and give people free holidays when we shut down at Christmas. Last year everyone had three additional days."
7. Time frames
The ieTaxguard tax team starts organising clients for each tax year in March, before the year even begins. An initial mailing goes to existing clients in late March based on data held on TaxabilityPro for the previous tax year. Follow up letters will go out throughout the year depending on what the client does and needs. For example, clients who only need to supply a P11D to complete their return will only be contacted once HMRC has issued the forms. If there is missing information when the client's initial return is keyed in, they will get a follow up letter after two weeks - and then seven days. ieTaxguard has a chasing loop that will, if necessary, end up triggering daily phone calls.
"As the year progresses, we'll do an urgent reminder to people who haven't responded by September/October," Crozier explains. "We need all data in by mid-November, because that's when we need it to complete the return in time. We get paid for completing work, so we've designed a detailed workflow process to make sure we don't drop the ball."
The November reminder letter explains that if ieTaxguard fails to achieve the 31 January deadline because the client failed to issue the right paperwork (or to tell ieTaxguard where to pick data up from), then it won't pick up the fine.
"If it is our fault, we'll pick up the fine, end of story," says Crozier. "We don't pay HMRC much. In the early days with disparate systems, it could mount up to a hunk of money. But this year we've had virtually none."
ieTaxguard's tips for managing self assessment season
- Be prepared to monitor your case loads
- Manage and ease the processing paths through the organisation
- Make sure each separate process is reportable and that you can drill down to view the detailed situation from top level reports
- Integration - ensure your applications communicate with stable mates and third party offerings. "If a software partner says they can't easily share data, walk away," suggests Crozier
- Outsource - be open minded, consider outsourcing compliance-type and low level risk work such as data entry. Saving time and costs will make it worthwhile and release you to do work on more profitble areas such as planning.
Future plans
The reason ieTaxguard is in such a rush to complete the self assessment cycle has to do with the firm's next business development idea. "We want to create space in November, Dececember and January so we can approach other accountants to help them with their case loads." We Accounts will be able to can go through our web interface to provide data for fill in returns for themand also review progress, but we will remain invisible to their client."
As with individual clients, ieTaxguard will offer a graduated menu of fixed-fee services, all driven by the web link that connects the tax and CRM systems. "We see it as a tool for practices to push compliance their work through and out of house so they can focus on tax planning and other opportunities to bill out additional hours."
ieTaxguard obviously has big ambitions, but its ability so far to process large volumes of returns has not gone unnoticed. On several occasions senior Revenue officials such as the head of agent services have dropped in to see how the company works and to discuss ways of improving efficiency. For example, after talking to ieTaxguard, the Revenue said confirmed that for the 2004/05 tax year (deadline 31 January 2006) it would now accept secure emails bearing the tax return's unique submission code as a valid client authorisation, making it possible for ieTaxguard to do a complete return paper-free.
"We constantly review how we do things and the processes we follow," says Crozier. "We're not fearful of change - especially if it's going to improve speed and effiency and improve bottom line.
"We'd sooner work in partnership with people like HMRC and Digita rather than railroad or roadblock. Nothing runs perfectly. Unless you re part of it and in there defining the model, you can become a bit lost if you don't jump on the bandwagon. We try to work really closely with all our partners to move things forward."
