Your fourth step to improving efficiency

Implement an Electronic Document Management and Knowledge Management System

In an earlier post, we described an accounting firm as a collection of processes. In an accounting firm many of the inputs and outputs of these processes are documents. Various documents are received from clients as inputs, they are then processed using various documents within the firm like procedures, workpapers, and checklists and then more documents are produced as outputs in things like tax returns, sets of accounts, letters, reports and invoices.

You might be surprised to learn that a typical accounting firm produces approximately 10,000 documents and emails per year and receives in excess of 50,000 documents and emails per year for every Partner in the firm.

That’s a lot of documents to store, manage, secure and—if later needed—retrieve. An efficient firm requires a strategy that streamlines the management and control of these many thousands of documents.

Paper-based systems struggle to cope with the sheer volume and more and more firms are turning to software for a solution. There has been much talk in the profession over recent years of The Paperless Office or the more realistic Less Paper Office. Aside from the obvious savings on storage, printing and stationery supplies, a key benefit in using an electronic document management system is in the fast retrieval of client information. A classic example of this is when you receive a call from a client with a question about their affairs. To answer their question you require some information from their file. With a traditional paper based system you have to put the client on hold or give them a call back.

If you’re lucky the client’s file will be in the filing room, but often you and others have to spend time tracking it down. Then when you finally locate the file a round of telephone tag or email tag often commences with your client. With a good electronic document management system you can quickly search for the document, bring it up on screen and resolve the questions while the client is still on the phone. So not only does this save time and maximise efficiency, you also increase client satisfaction.

Some firms are using Windows Explorer and Microsoft Office, but these are not document management systems. Nor are most intranets or cloud-based document storage solutions. Any system that bases its storage and retrieval of documents simply on saving to and later browsing through a folder (directory) storage system is nothing more than a large ‘virtual’ electronic filing cabinet. The documents are there, but they can be slow to find, are easily misfiled and are not sufficiently managed and controlled.

In the context of an accounting firm, an Electronic Document Management System (EDMS) facilitates electronic filing of received and created documents, whether in electronic format (e.g. Word documents, Excel files, emails and/or their attachments or files received on disk such as clients’ MYOB files), or printed documents (e.g. ATO and ASIC correspondence) scanned into the system. And EDMS makes it far easier to control and retrieve these documents.

Document Management has been a hot topic in the profession for the quite a few years. In contrast Knowledge Management* is a subject that is not so widely discussed, but is of equal importance in creating an efficient firm. As a professional services firm you are in the business of delivering knowledge rich advice to your clients. Much of that knowledge resides in the heads of your staff. This often prevents it being shared efficiently and can be lost altogether each time a staff member leaves.

An efficient firm needs a Knowledge Management strategy that maximises the availability of knowledge, creating efficient workflow processes, enabling the work to be delegated down. Without an effective strategy for Knowledge Management ‘knowledge bottlenecks’ will exist within the firm where knowledge remains in the heads of partners/directors and your staff.

The only way others can access that knowledge is by asking. This leads to increased ‘upward delegation’ as staff are unable to complete work without help. Knowledge rich, often senior, staff become overloaded with work, costs on assignments are increased, margins are eroded and assignments are held up from being completed. In extreme examples assignments are delegated upwards only to be put on the already mounting pile of files and not being seen again for weeks.

An Electronic Knowledge Management System will maximise knowledge capture, knowledge sharing and knowledge re-use across the firm. This is one of the major benefits that Business Fitness clients achieve by implementing HowNow Knowledge Manager. It facilitates the process of transforming the knowledge that resides in the heads of your staff, eliminating knowledge bottlenecks and turning it into intellectual assets that have enduring value for the firm.

In knowledge management terminology, the undocumented knowledge in the heads of your staff is called implicit knowledge. One of your goals in building an efficient and systemised accounting practice is to document as much of your and your staff’s implicit knowledge as possible. This transforms it into explicit knowledge in the form of procedures, checklists and other standard documentation. Complex knowledge and tasks are simplified with detailed step by step procedures and checklists linked to the relevant reference material. This enables better dispersion of knowledge to less experienced staff members.

There’s a third type of knowledge called tacit knowledge. This is the sort of knowledge or know-how that can only be transferred from person to person through experience and on-the-job training. It cannot be gleaned from documentation, even if that documentation is video or multimedia interactive training. It’s the ‘learn by doing’ scenario. It’s important to acknowledge the tacit nature of some types of knowledge so that you’re not under the misguided impression that absolutely everything an accounting firm does can be documented into procedures and templates. The good news though is that most of it can be.

Here’s what the relationship between explicit, implicit and tacit knowledge looks like:

Capturing knowledge is only one of the first steps in the knowledge management process. Once you have a large proportion of your organisation’s knowledge documented then you need to organise, manage and share those documents within the firm.

That’s where an Electronic Knowledge Management (KM) System such as HowNow Knowledge Manager comes in, to make it easy to centrally store and manage the firm’s documented knowledge—such as procedures, checklists, template workpapers, forms, standard letters and other templates—so that all staff have ‘one place to look’ and are all working off the same standardised and approved versions of these documents in producing their work.

It’s not difficult to see how such a knowledge management system can bring about significant efficiency gains in an accounting firm. By capturing as much implicit knowledge as possible and converting it into documented explicit knowledge, the firm minimises the adverse effects of knowledge bottlenecks and the inevitable loss of staff members. By effectively sharing and managing these documents and giving staff a quick and easy search mechanism, the firm maximises knowledge re-use and allows staff to avoid unnecessary reinvention of the wheel when doing work for clients.