CPA Trendlines Almanac: Key Data Points for the Tax, Accounting and Finance Profession 2024

Cornerstone Data Points

Market Size and Scope

• There are approximately 87,261 accounting firms (including non-CPA firms) in the United States.
• By most estimates, the United States has approximately 46,000 CPA firms.
• Another perspective puts the number at about 52,200 CPA firms operating in about 55,000 locations.
• Most of these firms (over 90 percent) are small practices with fewer than 20 employees, while a small proportion consists of larger firms with 100 or more employees.
• Most accounting firms (about 85%) are small businesses with less than 10 employees.
• Around 52,200 CPA firms are operating in about 55,000 locations.
• An additional 34,900 establishments are solo practitioners with no employees, generating about $2.2 billion in annual revenue.
• There are now 16 public accounting firms in the U.S. that surpassed $1 billion in annual revenue, forming the “billion-dollar club”.
• The “Big Four” accounting firms (Deloitte, PwC, EY, and KPMG) dominate the industry, with Deloitte being the largest at $32.66 billion in U.S. revenue.
• The number of accounting firms has declined slightly, with a 0.4% decrease from 2022 to 2023.
• Despite the decrease in firm numbers, overall revenue for accounting services in the U.S. has reached record highs of around $133 billion annually.
• The USA has approximately 664,532 active Certified Public Accountants (CPAs).
• CPAs are licensed by their State Board of Accountancy, with all states requiring passage of the Uniform CPA Examination
• There are approximately 45,500 small CPA firms in the U.S. This is based on the information that there are around 46,000 total CPA firms, and the 500th largest firm has about 20 people.
• The average CPA practice has $2.6 million in annual revenue.
• Approximately 34,900 solo accountants (owner-operated with no employees) operate in the U.S..
• CPA firms in the U.S. generate about $133 billion in annual revenue.
• The average CPA practice has 11 employees.
• About 85% of CPA firms have less than 10 employees.
• Solo accountants generate $2.2 billion in annual revenue.

Main Services Driving Revenue for Small Accounting Firms

• Tax Preparation and Planning (40-50%): Personal, business, and payroll tax returns are a significant portion of revenue.
• Bookkeeping/Accounting Services (15-25%): Ongoing accounting services, including payroll processing, bookkeeping, and financial statement preparation.
• Advisory/Consulting Services (10-15%): Financial planning, business consulting, and advisory services on growth and strategic planning are growing in importance for revenue diversification.
• Audit/Assurance Services (10-20%): Though less prevalent for smaller firms, audit and assurance services still represent a meaningful revenue stream for some firms, especially for those serving nonprofits, small public companies, or local governments.

Impact of Firm Age on Revenue for CPA Firms

• Established Firms (10+ years): Tend to have higher revenue due to a larger client base, deeper market penetration, more referrals, and established processes. They also have more opportunities for diversified service offerings.
• Newer Firms (0-5 years): Typically experience lower initial revenue as they build clientele and market presence. However, newer firms often show higher growth rates as they establish their brand and adopt new technologies.
• Growth Plateau in Mid-Age Firms (5-10 years): These firms often face challenges in scaling and diversifying services, impacting revenue growth if they do not invest in technology, staffing, or expanded service offerings.
• Average Client Count for Small Accounting Firms
• The average client count for small accounting firms (1-5 employees) ranges between 50 and 100 clients annually, with sole practitioners often handling 30 to 50 clients. This varies depending on service specialization (e.g., tax-only firms vs. full-service firms) and the firm’s efficiency in client management.
• Larger small firms (5-20 employees) typically manage 150-300 clients, and the number grows as the firm scales.

Effects of Remote, Hybrid, and On-Site Working Styles on Firm Revenue

• Remote Working: Firms adopting remote work policies often see reduced overhead costs and can attract talent from wider geographic areas, potentially leading to improved profitability. However, client interaction and collaboration challenges may impact efficiency if not managed effectively.
• Hybrid Working: A hybrid model (a mix of remote and on-site work) is often seen as the most beneficial for CPA firms. It allows the flexibility of remote work while maintaining in-person collaboration for certain tasks. Studies have shown that hybrid models can increase employee satisfaction and productivity, potentially boosting firm revenue.
• On-Site Working: While on-site working facilitates face-to-face client meetings and team collaboration, it comes with higher office costs and may limit talent acquisition to local regions. Firms operating exclusively on-site may face challenges adapting to market demands for flexible work arrangements, which could impact retention and recruitment, indirectly affecting revenue.

Pricing Strategy for QuickBooks Cleanup Services

• Hourly Rates: Many small firms charge an hourly rate for QuickBooks cleanup, typically between $50 and $150 per hour, depending on the complexity of the cleanup and the accountant’s experience.
• Flat Fees/Packages: Some firms offer flat-fee packages based on the extent of the work needed. Depending on the size of the business, number of transactions, and condition of the books, flat fees can range from $500 to $2,500 or more.
• Value-Based Pricing: A few firms may adopt value-based pricing based on the perceived value delivered to the client (e.g., correcting errors that would otherwise cost the client significant tax penalties).
• Bundled Services: QuickBooks cleanup is sometimes bundled with ongoing bookkeeping or advisory services, incentivizing clients to engage the firm for multiple needs.

Posted on January 1, 2024