The Paperless Office Paradox

In an academic research paper titled “Ecological Paradoxes: William Stanley Jevons and the Paperless Office”, Professor Richard York of University of Oregon has presented, what he calls, “The Paperless Office Paradox.” Using the Jevons Paradox, as explained later, Professor York has presented the case that the failure of computers and electronic storage medium to bring about the paperless office is a paradox that is the development of a substitute of a natural resource sometimes results in an increase in the consumption of that (not the substitute) natural resource. This paradox was initially presented by William Stanley Jevons in his famous book "The Coal Question" what later on came to be known as Jevons Paradox. As explained by Professor York, "Jevons observed that as the efficiency of coal use by industry improved, thereby allowing for
the production of more goods per unit of coal, total coal consumption
increased."

I believe it is an interesting paradox and I wonder how it applies CPA offices. A paperless CPA office has been in discussions in professional literature for a long time. However, a visit to a traditional CPA office would sometimes make the Jevons Paradox come alive for us, probably in the form of a CPA Paperless Office Paradox. CPAs now have online tax filing, document management systems, in office networking and yet it is not unusual to come across a CPA office that is overloaded with papers.

I wonder how many of us actually experience the Jevons Paradox in our office on a daily basis.

Majority of UK Accountants are almost “Paperless”

A significant percentage of UK Accounting firms have embraced the paperless world. A recent research by CCH revealed that over three-quarters (79%) of all accountancy firms have implemented some elements of a paperless office system.

The firms that have gone paperless have highlighted what proved to be the major hurdles in their way of taking their firms paperless. According to about one third of them, the senior staff in their offices were the most difficult to convince about the benefits of going paperless.

The accountants have cited a lot of reasons for going paperless including easier access to client files, savings in storage and administrative costs and reduction in human error. I have summarized all of the above reasons for going paperless into one factor and that is a tremendous, I mean tremendous, increase in the profitability of a firm.

I believe the savings translate into more than 25% increase in profitability of the firm. I believe there is no system that would cost you as much as 25% of your profits to implement. In fact, I have claimed in my other articles that a paperless office in a small CPA firm can be implemented for less than a couple of thousand dollars.

I believe our UK counterparts are doing very well in terms of adopting the paperless world in the accounting industry.

Paperless Office for CPAs in 2009?

Very soon we will be finding out about the results of the AICPA survey on the Top Ten Technologies for 2009. While we wait for thos results, it would be interesting to see what were the top 10 technologies for 2008 and if those trends were demonstrated in actual. Let's first look at the top technologies and then we can look at them one by one as they transpired.

2008 Top Technologies and Honorable Mentions

The following are the 2008 Top Technology Initiatives. Those new to the list are noted.

1. Information Security Management - The development and implementation of a comprehensive security framework encompassing people, processes and IT systems that safeguards critical systems and information, protecting them from internal and external threats. Information Security Management is accomplished by analyzing and evaluating risks; selecting appropriate risk treatment options (avoidance, acceptance, transference and reduction); implementing controls (administrative, procedural, personnel and technological); then constantly monitoring overall performance. The resulting system incorporates the preservation of confidentiality (information is not available or disclosed to unauthorized individuals, entities, or processes); integrity (safeguarding the accuracy and completeness of key data) and availability (systems and data are accessible and usable on demand by an authorized entity) of information. Other properties, such as authenticity, accountability, non-repudiation and reliability, are also factors.

2. IT Governance - A structure of relationships and processes that direct and control an organization and help it achieve its goals by adding value while balancing risk versus return over IT and its processes. Components include strategic alignment, value delivery, resource management, risk management and performance measures. Project portfolio management and proper IT balanced scorecard measures, including earned value, are important review factors often overlooked.

3. Business Continuity Management (BCM) and Disaster Recovery Planning (DRP) - BCM is a comprehensive management process that identifies potential threats to an organization and the impact those threats may have on business operations. Disaster Recovery Planning is the development and testing of a plan to restore an organizations' technology infrastructure after a disaster or failure. Resources can include people, technology, data, facilities, customers and suppliers. Threats to these resources may include theft, virus infestation, weather damage, accidents or other malicious destruction. BCM identifies potential threats and the impact of those threats and a disaster recovery plan that is well-defined, documented, communicated and regularly tested helps provide structure and stability in the event of a business interruption or catastrophe, greatly improving the chance of business survival.

4. Privacy Management - The rights and obligations of individuals and organizations with respect to the collection, use, disclosure and retention of personal information. As more information and processes are converted to a digital format, this information must be protected from unauthorized users and unauthorized usage by those with access to the data, including complying with local, state, national and international laws, and the convergence of security and privacy. Identity theft technologies and education are an important part of this initiative.

5. Business Process Improvement (BPI), Workflow and Process Exception Alerts - Methods used to enhance business and transaction processing through a continuous cycle of modeling, execution, monitoring and improvement. Workflow involves the operational aspects of a work procedure and process exception alerts notify users when attention or follow up is required. BPI employs real-time monitoring tools that provide exception alerts to automate business processes on triggered events, identify problems or new opportunities in a transaction before a transaction is complete, or better control quality issues by catching problems more quickly. Workflow involves how tasks are structured, who performs them, their relative order, how they are synchronized, how information flows to support the tasks, and how tasks are tracked. Through the use of these tools, an organization can make significant improvements in the way it does business.

6. Identity and Access Management - The hardware, software and processes used to authenticate a user’s identity, i.e., ensure users are who they say they are, then provide users with appropriate access to systems and data based upon pre-established rights and privileges or interaction with automatic provisioning systems. Identity management may utilize one, two, or three factor authentication and may include passwords, tokens, dongles, key fobs, digital certificates (for Web sites and e-mail systems), PKI, biometrics and other emerging technologies. Access management may include single sign-on and the automation of the account provisioning process (add/change/delete).

7. Conforming to Assurance and Compliance Standards - The creation of formalized strategies, systems and training programs to address organizational goals and statutory requirements including, SAS Nos. 104-111 and FIN 48. It includes the implementation of collaboration and compliance tools to assist in the documentation, assessment, testing and reporting on compliance with specific controls or regulations. This initiative also encompasses tools to assist in implementing risk assessment standards, risk management and continuous auditing/continuous monitoring tools, along with computer assisted auditing tools and techniques (CAATTs). Also includes the implementation of configurable controls within existing financial and operational applications.

8. NEW Business Intelligence (BI) - The applications and technologies used for gathering, providing access and visibility to, and analyzing data to help business owners and manager make informed business decisions.The ultimate objective of business intelligence (BI) is to improve the timeliness and quality of information. BI tools include data warehousing and integration applications, report writers and application dashboards.

9. Mobile and Remote Computing - Technologies that enable users to securely connect to key resources anywhere, anytime, regardless of physical location. Supporting technologies include server-based applications, VPNs, remote control software, laptops, PDAs, Smart Phones, VoIP and wireless technologies, such as 3G (EVDO / EDGE), WiFi and WiMax.

10. Document, Forms, Content and Knowledge Management - The process of capturing, indexing, storing, protecting, searching, retrieving, managing and controlling information electronically. This also includes scanning, forms recognition, optical character recognition (OCR), centralized data repositories and management of PDFs and other document formats. Knowledge management then brings structure and control to this information, allowing organizations to harness the intellectual capital contained in the underlying data. This is sometimes referred to as the “paperless” office, even though “less-paper” or digital office may be more accurate terms. Protecting digital data is a key component of any resulting system, enabling secure distribution and/or preventing illegal distribution and access to protected information. Example: A document distribution strategy controlled by a Digital Rights Management (DRM) server that helps prevent an encrypted document from being opened by anyone other than the intended recipient.


Honorable Mention

In addition to the above list, the AICPA is also including a section for Honorable Mention, the technology initiatives that placed #11− #15 in the final tabulation.

11. NEW Customer Relationship Management (CRM) - The processes and software that enable organizations to manage all aspects of interaction with customers, clients and/or vendors, and focus their resources on the highest value relationships. CRM applications typically include contact management, calendaring, practice management, sales history, workflow and campaign marketing. CRM can incorporate sales force automation, call center technologies and Web site integration. CRM systems create a comprehensive view of sales and service information, helping organizations provide improved customer and vendor interaction.

12. Improved Application and Data Integration - Use of existing and evolving technologies, such as Web services, .NET, XML and SOAP, to better integrate data between diverse applications. These processes allow organizations to select, and seamlessly integrate data and functionality between “best of breed” applications. A common example is the ability to update a field in one application that automatically synchronizes the data with other applications. May also include Service-Oriented Architecture (SOA), an application-level architecture that further enables interaction between disparate applications and data.

13. Training and Competency - Methods and curriculum designed to increase the knowledge of individuals. Includes ensuring an organization has the resources available to efficiently and effectively train new hires and current employees on a timely basis on relevant subject matter and ensure that learning has occurred. Delivery methods may include the use of Computer Based Training (CBT), Webcasts, podcasts and distance learning. Curriculum may be technology or non-technology oriented.

14. Web-deployed Applications - Uses the Internet as a platform for deploying applications, and making data available to end users in lieu of installing and maintaining applications and information on local machines. This approach is referred to as “On-Demand” or “Software as a Service” (SaaS). Web-deployed applications may be corporately controlled and hosted, or hosted by 3rd party providers, such as an Application Service Provider (ASP). Web-deployed applications dramatically reduce installation and management costs and traditionally provide better data security, fault tolerance and greater convenience to end users.

15. NEW Information Portals - Web sites that enable organizations to provide clients, customers, vendors, employees and other stakeholders with access to timely and relevant personalized information via self-service applications. Examples of information portals include Windows SharePoint, corporate intranets, and third-party hosted sites.

Copyright © 2007 by the American Institute of Certified Public Accountants, Inc., New York, New York.

More CPA Firms than ever have gone paperless now

In 2007, more than half (54 percent) of firms were using e-mail as the primary method of communicating with clients, which was up from 37 percent in 2005.


State of the Paperless CPA Firm - 26 Apr 2007

The Ebook that can change your life

10 Steps to a Paperless CPA Office

My ebook that can change your life as a CPA.

Check it out at www.officewithoutpapers.com

The Next Revolution in the Accounting Industry

Every industry goes through its natural phases of transformation. As time goes, new technology becomes available, and new processes are developed. Internal and external factors contribute to the transformation process of all industries. Accounting industry is not an exception.

Only a few years ago very few accountants used software to prepare tax returns for their clients. Some even considered it a pride that they were smart enough to prepare tax returns without using software. Within a few short years, almost every accountant in the country uses some kind of tax preparation software to prepare tax returns. Now it is not a question of whether an accountant uses software to prepare tax returns, but of which software the accountant is using. Times have changed significantly in the accounting industry. Observant accountants may notice how fast things changed in their industry.

Unlike only a few years ago, it is almost unimaginable how any accounting practice could function and survive without computers and accounting software. There is probably not a single accounting practice in the country that operates without computers and software for tax and accounting. Only a few years ago, a large number of accountants did not consider computers or software as something that would be able to enter their industry. They thought nothing would replace their ability to prepare a tax return. They thought nothing could replace their ability to balance a trial balance and prepare financial statements out of it. Their denial has turned into widespread acceptance within a short time.

Accountants are now in a new phase of denial. This time they deny that it is ever possible for an accounting practice to operate without papers. They deny that it is ever going to be possible for accountants to operate without papers, period. There has been a lot of talk about paperless offices coming for years. Numerous articles have described how the world will change with paperless business operations. However, the predictions have not come true at the speed people were expecting. The topic lost its attraction over time. Thus, the denial of accountants that there could ever be a paperless office for them is justified.

The fact is that the paperless office is sneaking up on us. The technology that is required to convert business operations into paperless operations has become remarkably affordable. Small CPA practices can now go paperless with an investment of as little as $2,000, on their own. Times have changed significantly in this area but unfortunately, accountants are not noticing this trend.

The technology is available, affordable and quick. Yet there are thousands of accountants in the country, who are not even aware of this change coming in their industry. Just like it is unimaginable that an accounting practice could operate without computers and software today, within a few short years, it will be unimaginable that an accounting practice operates WITH PAPER.

The nature of this change is such that it could be devastating for many accounting practices. When accounting and tax software came about the process of adopting the change was not that difficult. You could go forward with a new way to operate very easily. You would purchase the software, train yourself and start using it, going forward.

Going paperless, however, is a culture change of a great magnitude. It brings about major changes in the way the offices work. It requires a major change in work flow processes. The conversion process also requires good planning and implementation. Conversion is not difficult but it does require special planning and attention. There is a significant revolution brewing in the accounting industry, unnoticed by many, which could damage and kill many small accounting practices, while make fortunes for others. It is the paperless revolution that could bury a few accountants under their own papers.

CPAs working from everywhere - but office

With finance and accounting professionals increasingly working outside a normal office — and outside normal office hours — a new discipline and set of professional working standards appear to be taking shape.

Bye-Bye Big Office: CPAs Tell How to Do It

Paperless

Accounting Software 411 : The Next Level of Paperless: Combining Workflow Tools With Document Management: "Taken separately, workflow processes and document management systems can certainly improve efficiencies for accounting firms. However, marrying workflow tools to document management systems allows accounting firms to compound those benefits by shortening approval times, improving the ability to track problems and standardizing processes and procedures. In addition, the value of combining workflow with document management and creating consistency enables firms to more easily train and retain new hires, increase productivity and minimize concerns that quick turnover can create in the work process. "

Paperless - Scanner Review

Here is a nice review of some scanners for your paperless office.


You Scan Do It!

Paperless

Yet in 2006, the ability to electronically store and retrieve data is finally living up to its name, and is driving a revolution in document management that is central to the operation of nearly every size of business.

Paperless Office is here in 2006


WebCPA Tools and Resources for the Electronic Accountant - An Investcorp and SourceMedia Publication