management

what goes into a client project?

woman drawing flowchart on a blackboard20 project types. 6 components for each. let’s make this simple.

by frank stitely
the relentless cpa

we have resolved to manage our projects effectively. just what are we managing? what is a project?

more: tammy’s tale of tax season tardiness | how effective project management makes your life easier | 2 lessons clients taught me | no consultant can solve your biggest problem | the great marketing hoax | what the value-pricers get wrong | 3 rules for asking great tax-return questions
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we could define a project in the manner supreme justice potter stewart defined pornography. “i know it when i see it.” but that will work as poorly for us as it worked for justice potter.

let’s start out simply. a project has three characteristics:

  1. it’s an end result for which we will be held accountable.
  2. we care to know its status.
  3. it’s long enough in duration to be worth tracking.

first, a project is an end result for which we will be held accountable. let’s look at some of the services cpa and accounting firms provide. are we held accountable for preparation of income tax returns? yes. for financial statement preparation? certainly. clients hold us accountable for the completion of these services.

but what about responding to cp2000 letters? what about writing those worthless, idiotic letters to mortgage companies? certainly, clients hold us accountable for these as well. so these qualify so far as projects.

let’s next evaluate each of our potential project candidates to see if we care about the status of each. to do that, we have to discuss the concept of project status. we’ll do that in painful, excruciating detail in the next chapter, but let’s preface that discussion a little.

there are four basic project statuses:

  1. not started
  2. we are working on it
  3. the client is working on it
  4. done

we’ll develop this concept further in the next chapter and we’ll define many other potential subdivisions of these statuses, but this gets us started.

do we care about the status of a tax return? surely. do we care about the status of financial statements? absolutely. do we care about the status of cp2000 responses? yes. ditto for the ?!?!?@!? letters to mortgage companies. we don’t give a damn about the mortgage companies themselves, but we care about our clients getting mortgages.

so far we have eliminated exactly zero of our potential project candidates. let’s evaluate our last criterion for defining projects. are our potential project candidates long enough in duration to be worth tracking?

the typical tax return takes at least an hour and maybe several hours to complete. we can agree that’s long enough in duration to be considered a project. what about financial statements? certainly. they take significant time as well.

however, what about cp2000 letter responses? completion time varies from a few seconds to check a box on a notice to a couple of hours of research to identify issues, draft a response, and instruct the client on sending the response to the irs. there’s no right answer to this, and there will be no test later. i will also not report your answer to your state cpa society.

in our firm, cp2000 responses are deemed projects on a case-by-case basis. if i am handling a notice right now and i don’t expect it to take more than 15 minutes, i don’t create a project. if a notice looks like it will require significant time and i’m assigning it to staff, i will create a project. you be the judge. justice potter’s concept is that you’ll know a project when you see it. if you don’t like how you handle cp2000 responses, change.

what about the ridiculous, no-good, useless, idiotic letters to mortgage companies? we don’t consider these to be projects. we consider them to be abominations. seriously, we draft these almost immediately because the mortgage broker with planning skills has yet to be born. almost all of these are done within a couple of days of a real estate closing, so they can’t wait. we don’t create projects for these.

here’s the basic rule. if creating a project in your system is a significant portion of the total time to be spent on a project, don’t create the project. don’t spend 10 minutes creating a project for a 15-minute project.

now that we’ve identified potential types of projects, let’s refine the concept further. is an s corporation tax return a different type of project than an individual income tax return? is the s corporation return different from a c corporation return? what about partnerships?

here you decide as well. if you care about the status of s corporation tax returns versus individual tax returns, consider them different project types. why might you care to separate them? first, they have different deadlines. second, you might have different processes for s corporations versus individuals. third, you might assign different staff to s corporations than to individuals. lastly, you may want to know how many s corp returns you prepare relative to individual returns. all of these are great reasons to track s corporation returns separately from individual tax returns. but your state won’t suspend your cpa license if you don’t.

to stimulate your imagination on how you might define project types, here are ours:

  1. individual income tax returns
  2. s corporation income tax returns
  3. c corporation income tax returns
  4. partnership income tax returns
  5. non-profit income tax returns
  6. compilations
  7. reviews (we don’t perform audits)
  8. individual income tax projections
  9. business income tax projections
  10. business valuations
  11. amended individual income tax returns
  12. amended s corporation income tax returns
  13. amended c corporation income tax returns
  14. amended partnership income tax returns
  15. payroll tax returns
  16. estate tax returns
  17. fiduciary income tax returns
  18. employee benefit returns
  19. personal property tax returns (a big deal in our area)
  20. the ever-popular “other”

these are obviously correct and beyond debate. seriously, you may not need 20 different types. you may have others such as sales tax returns or monthly write-up. those two types of projects are interesting, because they recur every month. we’ll discuss recurring projects in a later chapter.

now, let’s discuss the basic components of a project. there are six basic components to a project:

  1. project type (such as individual income tax return)
  2. client name (jack jones)
  3. project name (2016 individual income tax return)
  4. deadline (04/17/17)
  5. status (we are working on it)
  6. person in charge (frank stitely)

you can optionally track many more. we track a few more such as:

  1. responsible partner (because not all of our partners are that responsible)
  2. preparer
  3. reviewer
  4. date assigned
  5. estimated date of completion
  6. delivery method (e-file or mail)

if you are new to project management, stick to the six basic components. we have formally managed projects for 15 years. we didn’t start out with all of these. you can always add more later.

now it’s time to do some real work. create a spreadsheet with the six components as column headings. you can do this on a sheet of paper, but we’ll laugh at you, and we can do some more with the spreadsheet later.

now, pick up each of the client files in your office. for each file, create a row in the spreadsheet and complete each column for each client file. i create dropdown lists for three of the columns:

  1. project type
  2. status
  3. person in charge

we want to standardize responses in these columns, and the number of choices for each is fixed. for instance, we have a set number of project types. we don’t want anyone adding to our agreed-upon list of types. if we, as owners, decide to add a new type, we can add it to the list.

also notice that our column headings in the spreadsheet give us the ability to sort by column. for instance, we can sort by our status column to see all of the returns where we are working on projects instead of clients working on projects. congratulations! you have just taken your first steps toward effective project management. in fact, you have created a rudimentary project management system.

this level of functionality might be enough for your firm. we used, or tried to use, a shared spreadsheet project management system years ago. it sort of worked until we started overwriting each other’s changes to the spreadsheet. at that moment, we knew we needed a more effective and tailored solution for project management. fifteen years ago, choices were limited in the project management software area. today, they are still limited, but you do have choices.

in the next chapter, we’ll get serious about defining project statuses. limiting ourselves to just four statuses probably won’t work for us. we’ll also define the dreaded term “workflow” and how it relates to project statuses.

you now know more about basic project management than 99.9 percent of the adult united states population. you also understand project management at a fundamental level beyond the understanding of most people holding the pmp (project management professional) certification.

the pmp certification is popular in the federal contracting world. my wife is a cybersecurity engineer who also obtained her pmp certification. she tells me stories of people trying to avoid using available project management systems. in the federal world, people get the pmp certification primarily to defeat those people who are trying to manage projects effectively. if you know your enemy, you can defeat him. in the federal world, “effective” is a four-letter word. in the cpa world, effective is money in your pocket and time back in your life.

let’s tackle project statuses next.