Four Tips to Improve How You Receive K-1s
Four Tips to Improve How You Receive K-1s
If you represent an institutional investor, bank, family office or sovereign wealth organization that receives K-1s, you know just how tedious and time consuming the process can be. Let’s do the math: it takes up to five hours and up to $300 per form to collect, extract, review, and aggregate each K-1 using in-house staff.
The amount of time and money it takes increases with the more K-1s you receive — and this doesn’t even account for the patience, diligence and brain power required to do the work quickly, efficiently and accurately. While there certainly are solutions in the market designed to help you steer through the complexities and reduce time spent on K-1 aggregation, there are some risks and limitations with most options.
At a high level, available technology varies significantly in its application and ability. Not to mention, there are different solutions that best meet different needs. Let’s break down some of the most common technologies out there:
• Traditional OCR (scanning): This application is widely available across many form types. However, they are not capable of helping you make analytical decisions, and can often return fuzzy or incorrect data. This opens you and your organization up to financial and compliance risks.
• Robotics Process Automation: RPA can help alleviate repetitive tasks, but it is limited to pre-defined functions. When items outside of the pre-defined boundaries appear, RPA ultimately fails and creates more hassle for your team.
• Machine Learning and Artificial Intelligence: Solutions powered by ML and AI are trained on specific applications (like K-1s), and can make predictive decisions without human intervention. Generally, they return correct values but mapping placement can vary or sometimes be nonexistent.
ML and AI-powered solutions are objectively the most capable and reliable. But the reality is that they are only as effective as the data they are fed, so having the technology making decisions on your behalf can feel unpredictable and, frankly, uncomfortable.
Here are four tips to improve how you receive K-1s, so you can ensure the technology can best serve you and your needs:
Streamline your process
The math we did earlier in this piece reflects the best, simplest scenario for K-1 recipients. In most cases, the situation isn’t so simple. You may have K-1s coming from 100+ different sources. Not to mention, many K-1s come in late, with data trickling in in phases.
Streamline processes by funneling K-1s into a single workflow via Arch, which is designed to act as a central platform for Tax, Finance, and Treasury.
Intelligently automate your data
Even if your firm decides to outsource accounting, your internal teams still need to do most of the work associated with receiving K-1s, especially collecting all of the data. But you can automate data gathering using Arch and then automate data entry, aggregation, and population using K1x, getting you directly from the source to data review in just minutes per K-1.
Coupled with Arch, and using K-1 Analyzer’s integrations with major tax software, you can create an automated K-1 ecosystem directly from your portals to your tax return.
Elevate your staff and improve satisfaction
All organizations are facing their own unique workforce challenges. Retaining professionals is difficult in every industry and is heavily felt in the accounting industry, leaving their remaining workforce to be more efficient and effective in their work. Conversely, other organizations are struggling to improve their image as an employer and reduce turnover rates.
In both cases, it is wise to focus on employee experience and overall satisfaction rates — especially among accounting teams where resignation rates are steadily climbing. That means empowering your people with tools and systems that help them do their jobs better. Offload the tedious tasks, such as copying form data, to machines. Let humans do bigger, more intensive work that sparks their creativity and problem-solving skills, so they can make a more positive impact on your business.
Expand visibility into hidden risks
K-1 complexity opens your organization to many risks, especially if you’re largely relying on manual processes and inconsistent technology.
By standardizing your entire workflow, from your data formats to your reviews processes, you can ensure you have the proper protocols in place for minimizing and perhaps eliminating risks. K-1 Analyzer provides automated, detailed, and unprecedented insight into your portfolio so that you can make decisions based on the risks uncovered versus requiring the knowledge to identify those risks on your own.
Leave the robotic work to the robots and leave the human work with the humans!
K1x provides solutions designed to unburden organizations (producers, recipients and filers) at all stages of their K-1 journey.
Crafted by CPAs who understand the complexities and risks of the process, K1x’s K-1 Analyzer can free your team from the frustrating and time-consuming process of collecting, aggregating and managing K-1 data.
Learn how K-1 Analyzer can help you:
• Eliminate more than 90% of manual data entry
• Give your accounting team more than 11 hours of time back every week
• Achieving 99.9% accuracy and a 66% cycle time reduction
• Get 100% control and transparency over your own data and process
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