Is Creating A Paperless Accounting Office Worth It?

According to the 2010 National MAP Survey produced by the AICPA Private Companies Practice Section and the Texas Society of CPAs, 52% of all CPA firms surveyed operate in a paperless work environment, but many of these are larger firms. This leads me to conclude that the percentage of firms who have paperless processes is quite a bit smaller for us small timers with five employees or less.

Although I couldn’t find a specific statistic for small firms, it certainly is less than 50% – and most likely a lot less for sole practitioners. Why is this? Why aren’t we moving in bigger numbers along with the rest of the world?

I am an excellent person to tackle this question … because the I’m one of those accountants who still has not made the jump to paperless! After doing some soul searching, along with research, I decided the reasons many of us are still clinging to paper can be distilled down to four concerns and, as it turns out, three of these are without merit.

Reason #1: It Costs too Much

The only big cost is the scanner, but all of us really should have one in order to send documents via email – and in reality, clients expect electronic documents and files.

Scanner costs have come down and can be purchased for as low as $129 from most retailers, and a good one that runs quickly can be had for less than $750. Most major software packages, QuickBooks® and Lacerte® to name two, allow your scanned documents to be tied to data files. While there often is an annual license fee associated with this service charged by the software company, the fee is usually less than $300 per year – and the QuickBooks Attached Documents service is free to ProAdvisors!® Compare that to the dollars paid for paper, copier toner, storage – and ultimately shredding for all those copies once they get too old – and you’ll find scanning is far cheaper than handling and managing paper.

Reason #2: It Doesn’t Seem Safe

Safe from what I ask you? Theft, perhaps? Once someone breaks in your office, it will be much easier and quicker to find and steal paper files than it would be to hack through passwords to get to documents stored on a computer or your server. If you are worried about your computer crashing, this, of course, is easily remedied by backing up your files. If you’re not doing that, start! NOW! I know this seems obvious, but I am continually amazed at the number of clients who still do not back up their data on a regular basis. These days, most on-line back-up services cost less than $100 per year. It’s free, of course, to QuickBooks ProAdvisors in 2011.

Reason #3: I Don’t Like Changing the way I do Things

Few would admit this, but it really is the unspoken reason many of us who are “more seasoned” accountants haven’t made the switch yet. This stumbling block may require a trip to your local therapist, but allow me to save you the trouble. Guess what … to change is to grow, both in your practice as in your life. Change is inevitable and a good thing. It’s best to embrace it. Your profits will grow as will your happiness.

This leaves one more reason which I believe is really the crux of the matter for any accountant deciding whether to go paperless.

Reason #4: In the Long Run, It may not Save Time

While the first three reasons can easily be debunked, this reason deserves some attention. When you first go paperless, we all understand there will be time spent setting up your system and getting it up and running. This is particularly true if you want to transfer your prior year’s documents into your new system. I’m not sure I’d do that, but even if you are just going to scan your future year’s documents, it will take at least a few hours, if not days, to buy the scanner, set it up, load and learn any software management system you might purchase, and train everyone.

The key question is: If I expend this upfront time, do I recoup it and more when actually doing my work?

The only way to figure this out is to time it, which I did, for the two biggest tasks we bean counters spend most of our time on, bookkeeping and tax returns. The results are interesting.

Is bookkeeping quicker in a paperless environment? Yes! When bills come in the mail for you or your clients, I found that scanning does take less time then filing, but not much. The real time savings come later when a vender calls and asks about a bill. It takes much longer to get up from a desk and go rifling through files to find the paper copy of a bill than to simply click on it. My clients who use the QuickBooks Attached Documents service save even more time because they can click on a paperclip icon that appears directly on a bill window to see the associated document without searching for it at all.

Is doing individual tax returns quicker in a paperless environment? Not so much! For this I focused on all those incoming source documents. It takes roughly the same number of seconds to copy a piece of paper as it does to scan one. Once scanned, some documents need to be rotated to appear upright, which takes up even more time. When preparing the return, I found it slower to scroll and/or click through PDFs compared to simply flipping through my copied source documents that are all nicely organized in the client file.

So in the end, I did not see a time savings. I believe this is the reason why many of us haven’t changed and are still living in the world of paper when it comes to tax returns. But we will, change, eventually.

One Day You Will be Paperless

This will happen for one of two reasons. First, today’s youth and young adults are technology savvy and environmentally friendly. To not switch will soon mean to risk looking out of touch and outdated to our clients, which is never good for business. I am not one to do something simply because everyone else is doing it, but it’s sometimes necessary to remain competitive.

Second, I’m hopeful that technology will eventually provide us with a better reason to make the switch. The proof is in the key punching. Technology already exists that can transfer some source document information to software input screens. Once this has been perfected so that it can be used on almost all documents, paperless will officially be the fastest way to process tax returns.

Until then, I recommend at least going paperless for your bookkeeping clients. It is quicker. Try it on your own firms data file first. It will help you prepare for the inevitable move to paperless and will save time. It also happens to be pretty cool. If you don’t believe me, try it. You will not only become more efficient; you will have some fun working in some of the latest technologies.