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Top Issues for Small Accounting Firms

Top Issues for Small Accounting Firms

While all accounting firms have some issues in common, there are some significant differences between small firms – those with 1-5 practitioners – and mid-to-large firms.  The larger firms tend, reacting to the economic downturn of 2009 and the tepid recovery thereafter, cited new business development and client retention as their top priorities.  Smaller firms also saw these as priority issues, but their top concern was the growing complexity of regulation and potential legislation.

That’s according to the biennial review of top accounting issues conducted by the AICPA PCPS Top Issues for 2013 Report (see http://www.aicpa.org/InterestAreas/PrivateCompaniesPracticeSection/StrategyPlanning/FirmStrategyandPlanning/DownloadableDocuments/2013-Top-Issues-Commentary.pdf).  The survey report is segmented by firm size, making it easier to identify issues by the size of the practice.

For solo practitioners, the top five issues are:

  • Keeping up with changes and complexity of tax laws
  • Succession planning
  • Finding qualified staff
  • Bringing in new clients
  • Seasonality/workload compression

For firms with 2-5 professional, these are the issues of note:

  • Keeping up with changes and complexity of tax laws
  • Succession planning
  • Finding qualified staff
  • Bringing in new clients
  • Seasonality/workload compression

Small firms have always been focused on new business development, but the economic downturn of 2009 pushed this issue to the forefront for all accounting firms.  By 2013, these4 smaller firms were turning their attention back toward regulatory issues, though with a wary eye still on maintaining their client base.  In particular, many practitioners citied the difficulties involved in managing the accounting requirements of the Affordable Care Act.

Personnel issues continue to be at the top of the list as well – both attracting new professionals to the firm as partners reach retirement age and dealing with a robust merger & acquisitions market.  As the post WWII boom in business and accounting begins to slow, succession management for both the firm and its clients become more critical services.

The study suggests three industry trends of note:

  • The finding are consistent from year to year.  The issues do not change, but move up and down the priority lists from year to year.
  • Firms have shaken off many of the worst effects of the recession. In 2009 and 2011, client retention was among the top five issues for all firms. By 2013, it was only among the top five for two firm segments. Similarly, fee pressure/pricing, which showed up on two top-five lists in 2011, was not on any top five this year. Client collections, which was among the top ten issues for all but the largest firms in 2011, did not make any top ten list this time.
  • Practitioners are back in the business of growth. Demand is strong once again at CPA firms, as evidenced by:
  • An emphasis on bringing in new clients
  • Mounting concern about staffing issues, an issue that had moved from center stage in the recession years
  • Juggling busy seasonal pressures and deciphering tax law complexity remain significant hurdles for the smallest firms. The particularly challenging 2013 tax season may have influenced these results, but tax law concerns have been a persistent top issue for these practices.  That is not expected to change over the next few years.
  • The time to think about succession is now. It is a particularly critical concern as Baby Boomers head into retirement and as firms face concerns about finding and retaining staff who are qualified not only to perform services but also to take on leadership roles. This task is complicated by the differing attitudes and expectations of the next generation, professionals who may not want to work the lengthy hours that current firm leaders put in. Firms that have not begun concentrating on their transition to new ownership or leadership would be well advised to do so.
  • Partner unity and accountability are in the forefront in both smaller and larger firms. During the downturn, firms were forced to scrutinize their policies and procedures and to ask all owners to work together to maintain a thriving practice. Even if CPA firms are experiencing improved demand today, practitioners seem to be using the lessons they learned during the recession to set new standards for partners and to create a better sense of consistency within their firms.

As for the future, the report notes that it is not the issues that change from year to year, but rather the priority each is assigned in response to changing industry and market conditions.  For example, although sole owners are the only group that did not place succession in their top five, this issue does figure in their top ten, and it’s clearly something all sole owners should be addressing, no matter what their long-term goals may be.

 

Source:  AICPA survey at http://www.aicpa.org/InterestAreas/PrivateCompaniesPracticeSection/StrategyPlanning/FirmStrategyandPlanning/DownloadableDocuments/2013-Top-Issues-Commentary.pdf

 

 

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