But can they cut any further?
Despite little or no growth, profits at some 80% of U.S. CPA firms are coming through the recession relatively unscathed thanks largely to early and aggressive cost-cutting, according to the 2010 National Management of Accounting Practice benchmarking survey conducted by the AICPA and the Texas Society of CPAs
“CPA firms really sharpened their pencils and carefully managed their expenses,” said James C. Metzler, AICPA vice president – small firm interests. “So while revenues were flat, CPA firms still came out ahead on profits.”
Eighty percent of the CPA firms surveyed reported either a decline in revenue, no growth or modest growth over the two years from May 2008 through June 2010, indicating “flat is the new up,” Metzler said.
“Firms are making partners more accountable for the revenue and the bottom line. It’s showing up in the survey statistics. We are seeing leaner, meaner accounting firms,” Metzler said.
“The next challenge for CPA firms will be how to maintain or increase that profitability,” noted Metzler. “Firms have managed expenses so closely the past two years that bottom line growth will have to come from new lines of service such as cloud computing and higher-value consulting and advice.”
3 Responses to “‘Leaner, Meaner’ CPA Firms Beat the Recession”
Doug Aus
Accounting firms should be concerned with more than just maximizing the bottom line; they should be concerned with their social impact, too. This is where the higher-value consulting and advice should be directed towards. Social imapcts that can and should be measured include income inequality and environmental effects. The recent WikiLeaks revelations of its possession of information from a Bank of America executive’s hard drive will explicitly show the amount of corruption in corporate America will enrage many people in this country, especially small business owners.
August Aquila
I agree with Jim’s comments about the last two years, but I think 2011-2012 are going to be different. Business is starting to pick up and firms will start hiring in the second half of 2011. Audit fees will also rise, hopefully no more deep discounting just to keep people busy.
Michael 'MC' Carter
Interestingly, Australian accounting firms have experienced similar conditions over the past 3 years, even though the country’s mining base and proximity to China and India helped us skirt the GFC in many respects. For 3 years running ‘Growth’ has been cited by firms as their number one challenge, as surveyed in one of the leading industry benchmarking studies. I agree with you James that new service lines need to be a focus for revenue growth. We are also finding that existing services that firms have long been capable of providing (but have been less than effective in marketing and selling) offer some ‘low hanging fruit’ growth opportunities for firms once they bridge their common skill gap around marketing and communication of value (or, day I say it, ‘selling’). It always impresses me how much value the typical firm is capable of providing to their clients, but very few firms fulfill this potential.