TAKING THE FIRM PAPERLESS
CASE STUDY – ELDREDGE, FOX & PORRETTI, LLP
The Firm
The Problem
Eldredge, Fox & Porretti (EFP) is a full service accounting and consulting firm located in Rochester, New York with three additional offices in the area. With revenues of approximately $6.5 million, 8 equity partners, 5 non‐equity partners and 80 total staff, the firm is one of the largest local firms in the market. Since its founding in 1979, EFP has steadily expanded its services to meet the growing needs of its clients. In addition to accounting and tax services, the firm also provides litigation support services, business valuations and cost segregation services. The firm has developed concentrations of clients in industries like government and not‐for‐
profit, construction, real estate, healthcare, printing, auto dealerships and franchise businesses. Over the firm’s life, it had accumulated a large number of paper files. These included client documents, tax returns, work papers, etc. Since the firm had grown partly through mergers with other firms, it did not have a common format for keeping client records across its offices. In addition, when people were working on client files, it was getting more and more difficult to find the files if someone else needed access. Robert Porretti, managing partner, states, “The number of e‐mails I saw every day trying to locate client files was getting very frustrating. I came to the conclusion that maintaining paper files was becoming so inefficient that we had to eliminate them.” As the firm grew and added offices, partners began spending time in multiple offices. This led to numerous occasions where the client file a partner needed was in another office and, for all practical purposes, inaccessible. The firm was also facing increased competition on audit fees. According to Porretti, “some firms in the area are giving audits away. If we were going to remain competitive, we had to become as efficient as possible.” With the increasing frustration related to document management and the growing competitive pressures, the partnership decided that the firm needed to go paperless. A move of the Rochester office into new facilities planned for Summer 2002 provided the ideal timing for the conversion. Key Data
Firm:
Eldredge, Fox Porretti, LLP
Location:
Rochester, Webster, Geneva
and Canandaigua, NY
Managing
Partner:
Robert Porretti
Partners:
8 equity & 5 non-equity
Total Staff:
80
Revenue:
$6.5 million
Implemented SIAN: Summer 2002
The Solution - SIAN®
Intelligent Suite
Once the decision to go paperless had been made, the search began for a solution. Porretti put Dennis Morga, a tax partner at the firm, in charge of the project to take the firm paperless. Before accepting the assignment, he asked his partners for full authority to take all actions necessary for a successful implementation. He got tentative partner approval both for the paperless concept and for his approach. “Partner buy‐in is critical,” says Morga. “Firms going paperless need to take the time up front to get everyone on board. Even one partner in opposition can be enough to jeopardize the project.” Final partner approval would be based on the results of a detailed feasibility study and payback analysis. Dennis had read about how Habif, Arogeti & Wynne was helping accounting firms transition to a paperless process and thought they might have the answers he needed. He spent a day in January 2002 with Dan Simms, partner in charge of HA&W’s conversion, to get more information. After seeing how HA&W used SIAN to integrate the audit and tax software, manage all electronic documents, enforce retention schedules and handle all scanning, he became convinced that it offered the solution he was looking for at EFP. All that remained was to prepare the feasibility study. By late February 2002 the study was complete and a preliminary budget had been prepared. The decision to proceed hinged on two key components. First was the projected savings in space, particularly in the new Rochester office, and second was the savings in manpower and greater efficiencies to be gained. In March 2002, the partnership gave the approval to proceed. With partner approval, Morga set about putting together his implementation team. Here, his military background proved invaluable. He established four working groups to manage the implementation; the Policies, Procedures and Training team, the Hardware and Data Storage team, the Information Technology team and the Software team. Morga delegated decision making authority to each of the teams so that no one person was the pivot for all decisions. This allowed the teams to accomplish their tasks much more quickly. A fifth team, the Executive Committee, was established to handle all the top level decisions. The teams immediately establish an implementation timeline. The first task on the timeline was selection of the software. The Software team reviewed information on several document managers and decided that SIAN was the only one that offered the flexibility and functionality that they required. Then they obtained trial versions of all the major paperless trial balance packages. After extensive evaluation, they selected a new trial balance package and decided to stay with their existing tax package, ProSystems fx Tax. Finally, they selected SIAN as their document manager to integrate all the systems. With software selection out of the way, it was time to move on to implementation. The Implementation
It was March 2002 and the firm faced a deadline. They would be moving the Rochester office by August 1 and needed to complete the implementation by then. Immediately after April 15, the IT department began installing the new servers. Then they installed the new trial balance package followed by ProSystems fx Tax. SIAN was installed in June. While this was going on, HA&W conducted training sessions for the staff in how to use both the new trial balance system and the SIAN document manager. The firm established “Power Users” for each of the software packages who would be able to help the other users with any questions or problems. Power Users were initially selected based on their skill level and willingness to volunteer. During the initial installation, the old Rochester office was running on a 10mb network. The slowness caused some concern for the teams, but when they moved to the 100mb network in the new office, the bandwidth problems were solved. By July 31, the hardware and software were in place and the firm was declared paperless, just in time for the move. During implementation planning, the firm made a decision that they would back‐scan all client documents. This is where they encountered their first real trouble. Because the firm had grown through mergers, the client records were not consistent. The Canandaigua office records were all on letter size paper neatly clipped in folders. Scanning these files went rather quickly. The Rochester office, where the bulk of the records were, was another story. Their files were a mix of letter and legal and were paper clipped or stapled, making for a significantly harder task. The project that the team had budgeted would take 3 months took more than double that. In looking back, Morga said, “I’m not sure we needed to back‐scan all the client files. If I had it to do over again, I would probably scan one year’s data plus the client’s permanent file.” Pat Sadler, Director of Information Technology offered a slightly different point of view. “Yes, the back scanning was difficult,” she said. “But, it demonstrated the firm’s commitment to going paperless and forced everyone to use the system. There was no option to go back to the old system.” In the end, the implementation was completed on time and the firm used SIAN during the 2003 busy season. While it was a major change in the way the firm worked, the staff liked the new system after having had a chance to use it under actual conditions. The Benefits
Now that the firm has used SIAN through a complete busy season, it is beginning to realize he benefits of a paperless office. “We saw significant improvement in efficiencies on some of the audit jobs this year,” said Joe Kehm, audit principal. Morga said, “The efficiencies we realized this year were somewhat offset by the learning curve associated with the new system. We spent a great deal of time in converting to our new trial balance software and in learning to use SIAN. The consensus here is that the efficiencies we saw this year will be much more significant next year.” In Porretti’s view, about half the jobs went better with the new system and half took longer because of the learning curve. “I saw some real benefits on some engagements,” he said. “On one large job, the time went way down. Most of the staff feel year 2 will be the break through year.” One major change that Porretti noticed is that there are no longer e‐mails asking for lost files. All client files are now 100% available through the system. No matter what office partners or staff members are in, they have full access to all the documents they need to work on a job. Policies and procedures have also been improved. “Where before we had different procedures in each office and many were unwritten, now we are more standardized and documented,” said Kehm. Laura Favo, scheduling coordinator noticed a big change. “Under the old system, when I scheduled a job, I had to pull together all the client files and get them to the person working on the job. Sometimes this took several days. Now, I just schedule the staff and they go out to the system and get all the documents they need,” she said. In addition to the gains in efficiency are the cost savings. Morga is projecting a 20% to 40% reduction in staff costs relative to revenue over the next couple of years. “This will allow us to grow our revenue without adding staff, thus increasing realization,” he says. Morga also projects a 10% to 15% reduction in supply costs. Favo notes that the costs for supplies during the 2003 tax season were significantly lower than the previous year. Advice for Firms Considering
Going Paperless
The partners at Eldredge, Fox & Porretti are convinced that going paperless will provide significant benefits to the firm in the coming years. “Getting partner buy‐in at the beginning is crucial,” says Morga. “Having even one partner not supporting the move can cause significant problems during implementation and can undermine eventual acceptance,” he continued. “Pay close attention to the organization and structure of your implementation team,” Morga advises. “I think the fact that we chose the right people and delegated responsibility helped the implementation go smoothly. Because no one person was responsible for all decisions, bottlenecks were minimized.” “Our biggest mistake was in conducting our training too early,” said Sadler. “There was too much time between when we trained our staff and when they could begin using the system with actual data. I would advise firms to conduct general training after the installation is complete.” Sadler also advises firms to test the system with actual client data before going live. “We found a number of things that we needed to change in our procedures,” she said. “The fact that we had to make the changes in a live environment made it more difficult.” Kehm agrees with that advice. “When we went live, our trial balance program and SIAN were not fully integrated. As a result, we couldn’t initially store the files in SIAN. Testing would have allowed us to correct this before going live,” he said. Firms should also make a realistic assessment of how many documents they want to back‐scan into the system. According to Porretti, “We back‐
scanned all client documents. If I had it to do over again, I would probably only back‐scan a year and put the rest in off site storage. The number of times we access the two‐year‐old documents probably doesn’t justify the scanning cost,” he said. Favo suggested that firms keep a log of how often they refer to documents older than the immediate past year. If the amount of references is low, back‐
scanning may not make sense. Developing Power Users for each software package worked really well for EFP. The Power Users were able to help individual staff with specific problems and get solutions in a very timely manner; especially important during tax season. The firm has set up e‐mail boxes for questions. Power Users check these boxes frequently and post answers on a regular basis. Kehm advises firms to set realistic expectations. “This will help keep people on board if there are any difficulties during implementation,” he said. He also recommends that, since partners set the tone, they should make a special effort to be at all required training sessions. Favo recommends having several administrative people involved from the start of the process. “The administrative staff will be using the system every day. They are the ones who will quickly recognize any problems and can work with the implementation team to find effective solutions,” she said. In the end, the partners expressed a firm conviction that their decision was the right one. Porretti said, “I believe our firm will definitely benefit from going paperless. Our costs will be lower and we will be able to provide a higher level of service to our clients. We definitely made the right decision.” For more information, contact
Ravi Durairaj at 404-898-7544
[email protected]
or go to www.haw-it.com.
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