Small and Midsize Accounting Practices Scale Back Growth Plans

Small and midsize accounting practices in different parts of the world are tempering their expectations for growth, according to a new survey.

The survey, by the International Federation of Accountants, found that accountants working in small- and medium-sized practices are generally optimistic about performance in 2016. A majority predict revenues will stay the same or increase across all service lines. However, optimism is not at the same level as a year ago, and growth projections across service lines have dropped since 2014.

The latest IFAC Global SMP Survey found that while the performance expectations of small and midsize practices has declined from a year ago, their challenges are somewhat less acute than last year. As in 2014, the most pressing challenges in 2015 were attracting new clients (47 percent high or very high challenge), keeping up with new regulations and standards (44 percent), differentiating from the competition (43 percent), and pressure to lower fees (41 percent).

The survey was conducted last October and November in 22 languages. The 6,725 respondents to the survey came from 169 countries and have more than 800,000 small and midsize enterprise clients around the world.

“Collectively, this is a large and important sector whose views are important to hear,” said IFAC CEO Fayez Choudhury. “The health of the SME sector is a barometer of the vitality of a nation’s economy and of global trade and commerce at large. Listening to SMEs through their accountants—who know them well—is a critical exercise that allows IFAC and its member organizations to better support them, which in turn supports stability and growth more broadly.”

A significant majority of the small and midsize practices that responded to the survey provide some form of advisory services, with tax planning (52 percent), corporate advisory (45 percent), and management accounting (41 percent) being the most common.

They face a number of challenges, with economic uncertainty consistently topping the list. Similar to the 2014 results, the top challenges facing small and midsize business clients were economic uncertainty (61 percent high or very high challenge) and rising costs (58 percent).

Looking ahead, competition and regulatory developments will continue to be dominant factors in the business environment for small and midsize practices.

Consistent with 2014, the regulatory environment (52 percent high or very high impact) and competition (46 percent) topped the list of environmental factors most likely to impact small and midsize practices over the next five years, followed by technology developments (43 percent).

“For the second consecutive year, SMPs have predicted that technology and regulatory developments will have the biggest impact on them in the future; they will need to be nimble and adapt in order to remain competitive,” said IFAC SMP Committee chair Giancarlo Attolini. “While changes in technology are inevitable, we need to continue contributing to the development of international standards that are stable, relevant, and can be applied in a manner proportionate to the size of the entity or practice. And, as a profession, we need to help SMPs and SMEs adapt and prepare for changes by continuing to listen, develop guidance, and encourage knowledge sharing so they are well positioned to thrive in the future.”

IFAC cautioned that some regions, countries and larger SMPs were not well represented in the survey results, and thus caution should be exercised when attempting to generalize survey results to specific countries, specific regions or SMPs of all sizes. The full report is available here and a summary is here. For more information, visit www.ifac.org/SMP.

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