Many CPA firms recorded revenue and profit growth over the past year and are taking steps to add innovation to their practice management, according to a recent survey by the American Institute of CPAs and its marketing and technology subsidiary CPA.com.
Conducted every two years, the 2016 National Management of an Accounting Practice Survey studies trends in seven defined CPA firm segments, from small practices with less than $200,000 in annual revenue to large firms with $10 million or more.
Among the findings of the MAP survey, the profession's largest benchmarking poll on practice management topics:
- From 2014 to 2016, the median growth rate for revenue (net clent fees) rose in every firm segment except the $5 million to $10 mllion revenue category. In absolute terms, median revenue still rose in that segment over the past two years.
- Revenue growth rates ranged from a median 4.9 percent for the $500,000 to $750,000 firm revenue segment to a median 10.5 percent for the less than $200,000 firm revenue segment.
- In terms of profits, median profits (net remaining per owner, which measures revenue minus expenses before partner-related compensation is factored in) grew 11.2 percent from 2014 to 2016 for firms with revenue of $500,000 to $750,000 and revenue of $750,000 to $1.5 million, or 13.3 percent. Small firms only grew median profits 2.9 percent and large firms grew them 4.2 percent. Median profits fell -3.7 percent for firms in the $200,000 to $500,000 segment, -0.9 percent for the $1.5 million to $5 million segment, and -4 percent in the $5 million to $10 million segment.
“The main takeaway of this year’s MAP survey is that the business of public accounting is strong,” said Mark Koziel, the AICPA’s executive vice president for firm services, in a statement. “Many trends, however, are highly specific to firm size and specialty, which is why the survey serves as an important benchmarking tool for firm leaders.”
The survey, conducted by the AICPA's Private Companies Practice Section and CPA.com from May through July this year, asked representatives from 1,537 CPA firms for details about their latest fiscal year financial results.
The survey also found the cost of employees continues to grow as a percentage of firm profits, in part due to the growing competition for talent. Firms also showed a strong preference for accounting graduates with 150 credit hours.
Practice innovation is also up, according to the results, with firms, while overwhelmingly continuing the hourly billing model, experimenting more with value or fixed pricing. This was especially true for small to midsized practices.
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