How Savvy CPAs Use Benchmarking to Make Smarter Business Decisions

Green "opportunity" highway sign with sunrise backgroundBenchmarks for firms large and small provide roadmaps for strategic success.

By Rick Telberg
Accounting Firm Operations and Technology Survey

Every day in the United States, more than half of all accounting firm owners are thinking about a merger, an acquisition or both. M&A is now as routine to the day-to-day operations of running a tax and accounting practice as turning on the lights in the morning and taking out the garbage at night.

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Fortunately, a new survey provides a one-of-a-kind roadmap for growth-minded professionals seeking the hard-boiled data essential to making smarter strategic decisions. With thousands of key metrics for firms of every size, you can compare your firm against similar firms. Better yet: You can compare where your firm is today, to where it will be tomorrow.
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How Savvy CPAs Use Benchmarking to Make Smarter Business Decisions

Composite image of hand writing with marker

Drilling into firm technology and operations provides a roadmap for strategic success

By Rick Telberg

Every day in the United States, more than half of all accounting firm owners are thinking about a merger, an acquisition or both. M&A is now as routine to the day-to-day operations of running a tax and accounting practice as turning on the lights in the morning and taking out the garbage at night.

Fortunately, the new Accounting Firm Operations and Technology Survey by the research team of Randy Johnston and Leslie Garrett provides a one-of-a-kind roadmap for growth-minded professionals seeking the hard-boiled data essential to making smarter strategic decisions. With thousands of key metrics for firms of every size, you can compare your firm against similar firms. Better yet: You can compare where your firm is today to where you want it to be tomorrow.

Beyond displaying a snapshot of the status quo, the survey offers the real-world data points that can build solid strategic plans – for organic growth, for merging up, down or sideways, or for retirement and succession. Consider the typical small, local firm of two or three partners with maybe seven staffers: Tax prep and bookkeeping provide the core revenue streams. Most aren’t big enough yet to need a firm administrator. The owners make the technology decisions. They have one office. And they’re grossing $1 million to $5 million a year.

Now suppose our “typical” three-partner firm is considering what to do next. Should they:

  • Wind down the business as partners retire and clients drift off?
  • Bring in a new partner?
  • Merge into a larger firm?
  • Acquire a smaller firm?
  • Accelerate organic growth?

What would that look like? The Accounting Firm Operations and Technology Survey shows us very clearly what each of those scenarios might entail. For instance, the small multi-owner firm needs to know that firms just one class-size larger – the firms with up to 50 people and four to five partners – are more likely to:

  • offer a few more specialized services,
  • operate a second office,
  • have a full-time firm administrator and
  • an IT manager who leads the technology decision-making.

So, for that smaller firm looking to grow, the survey shows how to best prepare for the next step in becoming a “mid-size” firm.

Consider this 10-point list of considerations small firms should undertake as they consider growth:

  • Workflow – Mid-size firms are more likely than small firms to have already solved their workflow issues and are focusing on attracting new clients and the best talent.
  • Management – Partners at mid-size firms are spending less time on client matters and more time managing their practices than smaller firms.
  • Service offerings – Most small firms have added all the services they can, limiting their revenue growth. But mid-size firms are continuously building out their offerings to accelerate revenue growth.
  • Outlook, Excel and Word – Small firms are more likely to be subscribed to Office 365, while mid-size firms have purchased the Microsoft desktop package.
  • Document management – Small firms that today use FileCabinet CS for their document manage system may need to switch to the favored application at mid-size firms: CCH Document.
  • Tax preparation – The leading tax prep app at small firms in the survey is UltraTax CS, but mid-size firms favor CCH Prosystem FX.
  • Time and billing – For practice management time-and-billing software, small firms like Thomson’s Practice CS. Mid-size firms prefer CCH Practice Management.
  • Payroll – Small firms lean toward QuickBooks for running payrolls. Mid-size firms are more likely to use an outside agency, like ADP or Paychex.
  • Internet browser – Small firms like Google Chrome. Mid-size firms go with Internet Explorer.
  • M&A – Mid-size firms are twice as likely as small firms to be planning expansion through a merger within the next 12 months.

With Johnston’s and Garrett’s survey in hand, firms of any size can both foresee their futures, as well as gain the tools to make it happen. It’s a roadmap with many roads. Choose wisely.

Global Talent Wars Hit Home for Local Firms

In the war for talent, "local" CPA firms face new threats from distant, bigger rivals – worldwide

By Rick Telberg
CPA Trendlines

The traditional business model of the so-called "local" CPA firm is being challenged anew by the emergence of a single, unified coast-to-coast talent market that's undermining the pay differences between big-city and small-town firms.

That's bad news for traditional firms trying to control staffing costs. But great news for a new generation of top talent.

MORE on TALENT MANAGEMENT:  SURVEY RESULTS: Firms Face Staff Turnover Tsunami |  Global Tax Talent Shortage Mounting into ‘Perfect Storm’  |  Accountants without Borders: Tight Talent Pool Drives Salary Increases Nationwide  |  Are You an Ostrich or a Giraffe?  |  Your Firm’s Biggest Assets Walk out the Door Every Day  |  So Much to Do and So Little Time: Achieving Success in the C-Suite  |  

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The study shows that salaries are increasing faster than inflation throughout the American market, and they aren’t always limited by the local cost of living. The average salary for a tax professional in New York City, for example, has risen to $77,660 this year, up from $75,400 last year. Importantly, the numbers ($77,660 this year, up from $75,400) are the same in Des Moines, Iowa, where the cost of living is substantially lower – along with the pricing sensitivity of Des Moines clients. This augurs new pressures on billing rates and profitability across the nation.

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Five Ways to Protect Clients from ‘The Sleazy Six’ Tax Season Scams

Click to join the CPA Trendlines Tax Season survey. Get the real-time trends, and benchmarks.
Click to the CPA Trendlines Tax Season survey. Get the real-time trends, and benchmarks.

Let clients know you're on their side. 

Tax Season 2017: What's Working. What's Not
Join the conversation. Get the answers.

By Rick Telberg
CPA Trendlines Research

Internal Revenue Service workers may be chronically understaffed, but they're not stupid. They’ve been in the tax collection business since the Civil War, and the IRS has been harvesting income tax since 1913. It has processed billions of tax returns, and it knows the tricks that taxpayers often try. It also knows the tricks that wanna-be cheats use to exploit the tax system, effectively robbing the honest people who pay what they owe.

For the last three years, the IRS has given a name to the most common schemes to swindle either taxpayers or the nation’s treasury. It calls them “The Dirty Dozen.” This year, half the dozen are scams by third parties that attempt to rip off taxpayers. The other half are taxpayer attempts to effectively rip off their government.

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Sleazy tax tactics don’t do a practicing accountant any good. The slime taints the tax pro, and the pro may be put in the very uncomfortable position of having to defend the taxpayer before an IRS agent. This is not the light tax preparers look for at the end of the busy season tunnel. They’re thinking “Bahamas,” not “IRS office.”

Clients who know about the Dirty Half-Dozen will be disinclined to try a trick the IRS is expecting. Sharing the list will go far to ward off problems. READ MORE →

ANALYSIS: Local Firms Worldwide Are Losing the Wars for Talent and for Clients

Getting new clients tops the list of chief concerns for local firms worldwide. But the staffing shortage surges into second place. via IFAC

The eight moves smart firms are making today to win tomorrow's battles.

By Rick Telberg
CPA Trendlines Research

Does the tax and accounting profession have a role to play in global peace, harmony, and understanding?

You may think so, based on a new CPA Trendlines analysis of a global survey of small, local, and mid-size accounting firms.

The study paints a picture of a global community of local firms with shared aspirations, expectations, challenges, and opportunities – despite (or perhaps because of) rising nationalism, protectionism, and conflicting political regimes.

MORE on TALENT MANAGMENT: Global Tax Talent Shortage Mounting into ‘Perfect Storm’  |  Accountants without Borders: Tight Talent Pool Drives Salary Increases Nationwide  |  How to Create a Talent Management Strategy |  SURVEY FINDINGS: Talent Wars, M&A Frenzy Continue  |  Why Job Descriptions Matter  |  How to Develop Home-Grown Future Leaders  |  New Staffing Strategies for the Next-Generation Accounting Firm

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In fact, the research finds that the talent shortage plaguing Unites States firms is now turning into a global problem. That is, by no means, a good thing. But it is another item all firms across the globe can share in common. And it is another chink in the armor of the so-called traditional business model of the owner-operator accounting firm because most of the issues flow from two overriding factors: Rampant under-pricing or owner greed (or both) that fails to build up capital reserves for re-investment in the business, and the lack of access to other sources of funding.

It's enough to make us wonder if solutions to global problems are beyond the ability for individual nations to solve alone. Instead, multi-national worldwide strategies may be required. Maybe that's part of the reason the American Institute of Certified Public Accountants is rebranding itself as the Association of International Certified Professional Accountants (still, just the "AICPA" to most).

But today, owning, operating or working in a perfectly "average" firm is not necessarily a sign of success. Instead, "average" seems doomed to obsolescence in irrelevancy – and on a global scale never before seen in the profession.

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SURVEY RESULTS: Firms Face Staff Turnover Tsunami

How to beat the staffing crisis: Join the survey. Get the answers.

By Rick Telberg
CPA Trendlines Research

The accounting industry may be on the verge of a seismic shift. The results of a new CPA Trendlines survey of job satisfaction and personnel retention indicates a mounting tsunami of personnel migration in the near future, possibly on the heels of the busy season.

MORE on STAFF RETENTION: Effective Stay Interviews for CPA Firms  |  The 16 Biggest #FAILs in Delegation  |  Work-Life Balance: According to Whom?  |  Two Ways Your Strategic Plan Can Reduce Turnover  |  Top Firms Muscle Up with  Specialized Talent

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The survey, conducted in conjunction with practice management consultant Kristen Rampe suggests that barely half—just 52 percent—of respondents intend to definitely stay with their firms for the next six to 12 months. They describe their jobs as perfect for them right now.

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