Selecting an Electronic Bound Book

In 1968, Congress passed the Gun Control Act that included, amongst other requirements, that “each licensed importer, manufacturer, dealer, and collector maintain records detailing activities specified in the Act.  These activities included importation, production, shipment, receipt, sale or other dispositions. Regulations for the proper record were adopted a short time later.  Collectively these regulations produced the requirements for the Book of Acquisition and Dispositions, commonly known as the A&D Book, or Bound Book. In 2013, and subsequently, in 2016, ATF published Rulings that permitted the electronic storage of such records and the manner in which they must be kept. Since then, the “Bound Book” and its various offerings in an electronic format have proliferated the industry. But know this, not all electronic Bound Books are created equal and without proper care in selection could create instances of non-compliance or FFL inefficiencies. The following are key considerations for FFL owners who are migrating from paper or changing between Bound Book software providers. “ATF Compliant” Software Is One Factor to Consider A quick internet search will generate a list of electronic A&D book providers that claim to be ATF compliant. However, before you click the first link, make sure you understand what compliance means. ATF Ruling 2016-1 defines the requirements for cloud-based record-keeping, not only electronic record keeping as a whole. ATF Ruling 2016-2 defines the requirements for processing ATF Form 4473 electronically. But more broadly speaking, an electronic Bound Book is not compliant “just because” it complies with Rulings 2016-1 and 2016-2. The inner workings of the software, how it presents data in the bound book “report” and other factors will also impact the licensee’s ability to comply. Perhaps more importantly, regulations and rulings change. The ATF’s production of the new 2020 Form 4473 is a great example. In order for you the licensee to remain compliant, your software provider should make enhancements to the application that reflect the latest of regulations or rulings. Consider the following questions in your selection:

• I understand the software is 2016-1compliant, but what about the other features?
• Who reviews your software for ATF compliance when the regulations change?
• How responsive are you to changes in regulation and will there be a charge for changes?

FFL Software Expertise is Different than FFL Compliance Expertise Shopping for an ATF compliant bound book means knowing the details about the combined software and services expertise of your provider. Unfortunately, most software vendors don’t employ ATF compliance or legal experts and merely rely on outside, third-party partners. Such expertise may come with an in-depth knowledge of the regulations, but often lacks relevant experience in implementing an FFL’s Standard Operating Procedures. Consider the following questions in your selection:

• Will I have to speak to someone different for my POS, Bound Book, FFL Regulations, and Legal questions?
• Can you audit my bound book data for compliance with ATF standards?

Don’t Stop at Compliance – Your Provider Should Prove FFL Cost Savings Our research shows that FFLs that manually record entries in a paper-based bound book, invest 4-5 minutes in acquiring and validating firearms. Dispositions to FFLs require the same amount of time. Dispositions to a non-licensee via ATF Form 4473, or those involving NFA firearms, often require additional time. For example, a mid-sized retail FFL acquires and disposes of 2,000 firearms per year. Running at top efficiency, that would require approximately 20,000 minutes between acquisitions and dispositions.  Adding 4 minutes for each 4473 and the total time investment climbs to 24,000 minutes. At $17.00 per labor hour (business’s total investment, not employee’s hourly rate), that equates to $6,800 or $3.40 per firearm. FFLs using technology-enabled processes can reduce the overall processing time by upwards of 40%, equating to a savings of $1.36 per firearm. Consider the following questions in your selection:

• Do I know all the features of the software, and which should I implement?
• Are there changes to my FFL business process that could save more money?

In closing, and likely of greatest importance is understanding how your software provider will support you during an ATF inspection. We’ve heard horror stories where software providers have refused to export data (or provide a simple means for self export) during an inspection.  It’s critical that you understand how the FFL software will function, not only on a day to day basis but during an actual ATF inspection. If you have questions about your existing FFL software, ATF rulings 2016-1, 2016-2 or the ATF’s 2020 e4473 release feel free to call the experts at Orchid Advisors. (insert a CTA / offer to purchase at discount) Other Articles of Interest

• Get an ATF Service Plan
• Orchid eBound™ – Get Your Free Trial Now
• 3 ATF Rulings that Affect Your A&D Record Keeping
• How Do You Record an A&D Book Disposition?

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