The majority of CPA firms experienced modest revenue increases in 2013, reflecting either stable or higher profits, according to a new survey by the American Institute of CPAs and the Texas Society of CPAs.
Every CPA firm segment surveyed—from the smallest practices with less than $200,000 in revenue to the largest with more than $10 million—saw growth in net client fees from 2012 to 2013, ranging from 4 to 8 percent, according to the National Management of an Accounting Practice (MAP) Survey. While growth rates for fees have not rebounded to the pre-recession levels in the 2008 survey, there has been steady if uneven improvement during the past four years.
The MAP Survey on practice management topics is conducted every two years by the by the AICPA’s Private Companies Practice Section and the Texas Society of Certified Public Accountants. For 2014, representatives from almost 1,750 CPA firms were asked about their latest fiscal year financial results.
One bellwether of a firm’s profitability is a category known as “net remaining for owner,” measuring revenue minus expenses before partner-related compensation is factored in. The 2014 survey results are largely in line with 2012 in this category, based on percentages of net client fees across seven different segments of firm size. But while the 2012 survey indicated an uptick in owner compensation, this year’s survey suggested a pullback. One explanation could be that owners are building up equity in the business to give themselves options in the future.
“We’re seeing many firms take conservative steps to ensure the sustainability of their organizations,” said AICPA vice president of firm services and global alliances Mark Koziel in a statement. “They’re plowing money back into the firm or reserving it for future use rather than doling out every penny in profit to owners and partners. Succession planning, budgeting for new hires, merger strategy and hedging against uncertainty all play a factor in this kind of decision-making.”
Professional salaries—the largest category of expense for CPA firms—increased 6.9 percent from 2012 for the smallest practices, and stand at just over 16 percent of net client fees. Firms with revenues between $200,000 and $750,000 recognized smaller increases in this category, while professional salaries expense remained flat for firms with revenues of $750,000 and up. This category excludes owners.
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