Under pressure by an increasingly competitive and uncertain business environment, CPA firms are pressing the brakes on new price increases, according to new data obtained by CPA Trendlines
After raising billing rates an average pace of 1.6 percent last year, up from 1.2 percent increases the year before, the latest indicators show an anemic six-tenths of one percent year-over-year increase for April, the latest month available. The month's fractional increase represents stark slowdowns from March's 1.5 percent increase, 1.6 percent in February, and 1.9 percent in January.
A new CPA Trendlines analysis shows:
CPA firms facing headwinds in attempts to increase billing rates.
A steep slow-down in audit fees.
Trouble in tax prep.
Bright signs in bookkeeping and secondary services.
Non-CPA firms pushing through robust price increases across all service lines.
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.
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.
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.
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 →
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.
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.
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.
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.
Good for talent; tough for employers: Retirements, turnover, and outsourcing.
By Rick Telberg
"Change is coming to the tax profession potentially as a 'perfect storm' in 2017," according to some leading executive recruiters, explaining the upcoming tax reform is still unknown but will likely result in tax professionals needing to quickly change and adapt to new rules and regulations.
"Additionally," they say, "U.S. corporate tax departments will potentially explore outsourcing arrangements. Citing the arrangement between PwC and GE, they ask, "Is this a one-off situation or a transformational trend?" In the PwC/GE deal, GE hived off its tax department to PwC, which then assumed the GE tax department's activities as an outsourcing engagement.
Nothing says American like entrepreneurship. No nation offers such fertile soil for the seeds of business. And small businesses are the underlying energy of the American economy. Fed by inspiration, elbow grease, and gumption, they account for a disproportionate amount of the nation’s jobs, mobility, and innovation. When small businesses thrive, everybody thrives.
Three new reports on entrepreneurship from the U.S. Small Business Administration offer insights that may be of interest to CPA practices. Each report looks at one of three groups that are in the news every day: Millennials, seniors, and immigrants.
It may surprise many that the educated, tech-savvy millennials are increasingly less likely to start their own businesses.