Fees and income still growing at firms despite coronavirus
Accounting firms are still managing to see increases in their fees and income per partner this year, despite the economic downturn from the COVID-19 pandemic, according to the latest edition of the annual Rosenberg Survey.
The 2020 survey, now in its 22nd year, reports on the performance of 338 accounting firms, most of which range from $2 million to $20 million in annual fees. However, much of data comes from last year, prior to the outbreak of the pandemic in the U.S. The survey measures nearly 100 metrics for CPA firms, such as partner buy-in, partner buy-out, compensation systems, M&A and other areas affecting the performance of CPA firms. The Growth Partnership, a St. Louis-based advisory firm, collects and compiles the data for the Rosenberg Survey.
The data in the survey mostly comes from prior to the pandemic, with 285 of the 338 firms in the survey reporting on a Dec. 31, 2019 year end. The Growth Partnership solicits information from various consultants to the accounting industry and writes the report in August. Some of those consultants made observations and comments during the current economic and pandemic time frame.
Accounting firms needed to adapt quickly as the pandemic spread across the U.S. this year, sending many of their partners and staff to work remotely from home rather than risk going into the office. Despite the challenges, the survey found that net fees per partner grew from $1.6 million to $1.7 million, and net fees per person increased from $183,000 to $191,000 in firms with revenue greater than $2 million.
The income per partner for the 270 firms that participated in both the 2019 and 2020 surveys grew 6.9 percent, a significant increase in profitability. Last year the same analysis found only a 5.6 percent increase.
The survey also found that it helps to have a formal marketing plan in place at an accounting firm. Net income per partner was $22,000 higher in firms that have a formal written marketing plan. However, leverage and rates continue to be the biggest driving forces behind profitability.
Other firms have separately reported growth this past year, despite the pandemic. BDO USA reported Wednesday an 11.3 percent year-over-year increase in revenue to $1.8 billion for the fiscal year ending April 30. BDO saw growth across all its business lines, led by its advisory practice, which experienced an increase in revenue of 29.4 percent, with tax (8.8 percent) and assurance (6 percent) also advancing. That overlapped just by a few months with the spread of the pandemic, however.
Last month, PricewaterhouseCoopers reported that its global revenues grew 3 percent (in terms of local currency, or 1.4 percent in terms of U.S. dollars) for the fiscal year ending June 30, reaching $43 billion (see story). But PwC also reported that it saw a slowdown in the final three months of the fiscal year as the pandemic took hold, with revenues growing nearly 7 percent until the end of March. On Thursday, Ernst & Young reported that global revenue grew 4.1 percent for the fiscal year ending June 2020 (see story).