Tax and Advisory Services Expected to Drive Accounting Business Growth Globally
Small and midsize accounting practices are generally optimistic about growth this year, particularly in the area of advisory and tax services, according to a new global survey.
The International Federation of Accountants’ annual survey of small and midsize practices found that tax and business advisory were nearly tied in terms of their pace of expected growth, with about half the respondents expecting at least moderate growth in each area. Their expected growth came out ahead of other services such as audit and assurance, accounting, compilation and other non-assurance-related services.
Business advisory is emerging as an area of increasing importance to the growth of small and midsize practices. In 2013, advisory ranked third out of the four service areas in terms of the pace of projected growth, according to IFAC’s Global SMP Survey, while in 2014, advisory edged out tax (13 percent vs. 11 percent) as the area most likely to drive substantial revenue increases in the coming year.
The results also indicate that advisory is now commonly offered by small and midsize practices, with 93 percent of the poll respondents saying they provide some form of advisory service last year.
Tax planning is the most common type of advisory service by a wide margin, suggesting that tax services—whether in the realm of compliance or advisory—are driving revenues overall.
“The findings from the 2014 survey are critical to increasing, and acting on, our understanding of this critical sector,” said IFAC SMP Committee chair Giancarlo Attolini in a statement.
More than 60 IFAC member organizations and regional bodies participated in the survey, allowing the committee to collect a broader sample of responses than in previous years. However, IFAC also acknowledged that some regions, countries and larger SMPs were not well represented in the survey results, so caution should be exercised when attempting to generalize the survey results to specific countries, regions or SMPs of all sizes.
IFAC’s survey also found that the regulatory environment and competition topped the list of environmental factors most likely to have an impact on small and midsize practices over the next five years. Business intelligence and data analysis software, along with customer relationship management and document management systems, are the two types of technology most likely to affect SMPs in the next five years.
While only 27 percent of small and midsize practices are currently part of an accounting network, association or alliance, another quarter are considering joining one.
The survey also included a number of questions about the clients of SMPs, which are typically small and midsize entities. An 87 percent majority of the respondents reported that at least some of their SME business clients who were seeking financing experienced difficulty in 2014, but for most respondents, a relatively small portion (less than 25 percent of total clients) experienced difficulty.
Over half (54 percent) of the survey respondents reported that at least one of their SME clients experienced some type of financial crime, but the volume of crimes overall was low, with most respondents indicating that less than 5 percent of their total clients experienced a crime.
Many SMPs are part of the globalization trend, with 44 percent of the total respondents saying at least 5 percent of their clients operate internationally, while 69 percent of the largest SMPs (those with 21 or more partners and staff) said at least 5 percent of their clients are international.
For the complete survey results, click here.