Managing tax exposure is as much an exercise in records management as it is an exercise in planning and computation. The tax form ultimately submitted to the government is but a Cliff Notes version of the financial story, the voluminous documentation that stands behind it tells. For CPAs and tax professionals with a limited number of clients, managing and retaining this supporting documentation in its original paper-based format is feasible, though hardly optimal. For those with an expanding client roster, the relentless accumulation of paper records can quickly become an outright burden. Valuable office space must be ceded to filing cabinets, finding records become increasingly time-consuming and their loss to theft or fire could have profound implications should IRS agents come calling.

 

Digitizing paper records offer an obvious means of addressing these issues. What isn't so obvious, however, is how best to go about the digitization process. While some outsource the task, the security concerns that accompany exposing financial data to any third-party prevent others from considering this option. More important, the cost and efficiency advantages outsourcing firms offer have narrowed as the tools needed to digitize documents have become less expensive, and far easier to operate. High volume scanners are available for less than $1,000, and automatic image enhancement software allows the operator to fill the document feeder, hit the scan button and walk away.

 

Beyond security and cost issues, there are other compelling reasons to consider bringing scanning operations in-house. The first is the new range of business services this allows you to offer. Why see clients use third-parties to scan and store documents when you can provide these services at competitive rates? And the fact that few but the largest of companies have a disaster recovery plan in place creates an opportunity to archive all of a client's critical records, and retain them safely off site, available should a natural or man-made disaster destroy their working copies.

 

But the real driving force behind your embrace of scanning is the crucial role data capture plays in the enterprise content management (ECM) and customer relationship management (CRM) software that drives an increasing number of businesses. Once the purview of only the Fortune 500, ECM, CRM and other software tools are trickling down to small- and medium-sized businesses, and may soon become a competitive necessity. A company that makes wise decisions now about its scanning and digitization procedures will be well-positioned to take full advantage of the productivity-enhancing attributes ECM, CRM and similar software offers.

 

Advances in information capture techniques are largely the driving force behind this dispersion of "enterprise" software to companies of all sizes. In its earliest incarnations, information capture was little more than a "scan and archive" operation. Documents run through a scanner essentially had a digital photograph taken of them that was then stored in a digital repository. This eliminated filing cabinets, but the gathered information did little to drive a business. Small armies of data entry clerks that only Fortune 500-level companies could afford to employ were needed to harvest information from these documents for use elsewhere in the organization, or to add indexing information to make it easier to search for documents.

 

But as technology advanced, document capture transitioned to data capture. Capture software now can search through a scanned document to automatically find and extract needed data and hand it off to another program (e.g., ECM, ERP) for additional processing, or use it for indexing purposes. By reducing or eliminating the need for data entry personnel, automated capture software has leveled the playing field for smaller companies, giving them access to the same powerful software tools that routinely drive the operations of much larger companies.

 

Another innovation, distributed capture, makes it easier and much less expensive for organizations with multiple offices to transfer records to a central repository or processing operation. Rather than ship physical records from place to place, satellite offices equipped with an inexpensive scanner and client capture software can have workers there scan records and transfer them digitally to a central site. Security is enhanced as only company employees handle records, the minimum overnight lag to receive documents is eliminated and the ever-rising cost of shipping is dispensed with as well.

 

With the cost and complexity of digitizing data falling, and the applications to which this data can be applied rising, CPAs and tax professionals should consider how document imaging can help build their businesses. By choosing capture software that doesn't lock you into a proprietary format, it's easy to grow over time an imaging system that seizes the many opportunities digitized data provides. You can start with a basic scan and archive operation, add sophisticated data capture modules as conditions warrant, and transition to a distributed capture operation as a business expands. You can elect to build your document imaging system yourself, or turn to a professional for assistance. If the latter is your preference, be sure to review the Kofax guide, "Questions to Consider Before Selecting an Automated Capture Software Vendor" (PDF) before you make your final decision.