The Top 10 Concerns of CPA Firms
The AICPA has sent out its biennial survey of firms and their top concerns. It is always fascinating to see what is on the minds of our fellow CPA firms, and we look forward to the results. In 2011, the AICPA polled 577 CPA firms divided among five size classes: Sole practitioners; Firms with 2-5 professionals; Firms with 6-10 professionals; Firms with 11-20 professionals; and Firms with 21 or more professionals. They give the results of the surveys from each of the classifications separately. We were interested in the composite picture so we performed our own scoring across these different classifications and here are the results of the top 10 concerns of CPA firms in 2011:
Peisner Johnson & Company, LLP, is a registered CPA firm. We are different than just about any other CPA firm we know of in that we focus our practice entirely on state and local taxes. But in reviewing these top 10 concerns, we find that we share much in common with most other CPA firms.
Bringing in New Clients Most Important
Interestingly, bringing in new clients ranked as the No. 1 concern in three of the five firm size classes and no lower than third among any of the firm groups, ranking No. 2 among firms with 21 or more employees and No. 3 among sole practitioners, with whom client retention took the No. 2 spot. Also, interesting is the relative score of these two issues vs. the score of the others. It shows how commonly firms across all classifications ranked these as top issues.
This is an issue for our firm as well. Our motto is that we fix state tax problems. As such, we tend to work ourselves out of a job. That’s a good thing, but how do we continue to identify more opportunities? Actually, it’s easy, because so many states are starving for revenue, they tend to be super aggressive in going after out-of-state companies. As they do so, opportunities constantly arise for us to help.
CPAs who do not offer state and local tax consulting as part of their suite of services may be missing huge opportunities to bring in new clients.
Retention of Existing Clients
Also according to the AICPA: "Like bringing in new clients, retention of current clients ranked no lower than third among any of the firm classes. Client retention ranked No. 2 among the three smallest classes and third among the two largest classes."
So how do CPAs lose clients? Much of what we do is project-oriented, so many times our clients are short-term in nature. But a large and growing amount of our practice involves recurring revenues from sales and use tax compliance. Retaining these clients is critically important to our survival as a firm. We feel the pressure of competition all of the time.
We are just like any other CPA firm in that respect. We must be ever vigilant and constantly striving to deliver month in and month out. We must maintain close ties to our clients and ensure that they are delighted with our services.
Who is immune from competition? Bringing in new clients is the number one concern of CPA firms everywhere. Where will they get those new clients? Will they all be brand new companies who never used a CPA firm before? Of course not. So they’ll be coming after your clients, if they can. Maybe the competing firm will use the approach that they offer state and local tax consulting and you don’t?
According to a recent survey by Accounting Today state and local tax has "catapulted" to second on the list of the 30 different fastest-growing niche services offered by CPA firms. In fact, 75 percent of firms reported an increase in state and local tax business. State and local tax consulting can open the doors to new business for CPA firms who perform the full range of accounting and attest services. Other firms are increasing their reach into this area presenting a real competitive threat.
We understand how important it is to retain clients and we help CPAs do just that. We do not compete with other CPA firms. We do none of the traditional services. We don’t do federal income taxes -- we don’t even do state income tax compliance. As such, we become your perfect partner
Keeping Up With Accounting and Attest Standards
This is an issue across the board but especially with the smaller firms trying to stay on top of all the standards they are supposed to meet.
Fee Pressure and Pricing of Services
How many times do we perform a service and the client says or even thinks that the fee should be higher? There is constant pressure on us to deliver value relative to the fee charged. There is perceived value in the preparation of tax forms but there is pressure there as well. We must always be delivering more and more value.
In our compliance practice, we are constantly improving our practices to deliver more for less. Increase value, decrease cost and even with increased pricing pressure, retain and increase profit. That’s how we stay in that business faced with constant competition from other CPA firms but even more from non CPA firms in the sales tax return business.
As we price our compliance and recurring business at a very competitive level and retain and grow our existing client base, opportunities arise for more value-added services. We help clients address a wide range of state tax issues. Maybe they get audited by a state (very common) or have a question about a particular transaction, a merger or acquisition, or something else. This is a great time for us to help you serve your own clients.
Developing a Succession Plan
How will we transition our practice to the next generation? How will services evolve over time? Is the next generation ready to embrace the future? Will they be able to purchase what we have built?
Partner Accountability and Unity
Are we as partners all on the same page? Are we pulling in the same direction? How do we measure each partner’s unique contribution to the firm?
Keeping up with Changes and Complexity in the Tax Laws
It’s no surprise that this is a Top 10 issue. We might have ranked it even higher. The federal law is mind-numbingly complex and constantly changing. We have not been in the business of federal taxes for more than 20 years. We have long since lost any ability to consult on anything related to federal income taxes. But the federal law is administered by only one body -- the IRS. State taxes consist of income or franchise and sales and use taxes administered by many many different jurisdictions. It’s been almost more than we can do to stay on top of constant changes in state and local tax law. In fact, it’s impossible to stay on top of everything. Thankfully, we subscribe to all the best resources available to help us.
Seasonality and Workload Compression
Busy season is a huge issue for every CPA firm out there. We sympathize with you on this. It’s been many years now since we’ve had the press of 100 hour weeks in March, April and September and October. Our "busy season" comes every month though when sales tax returns are due on or near the 20th of the month. Especially busy times for us come at the end of a quarter or at the end of the year when additional sales tax returns come due. But it’s only one week per month on average. Spreading out the work over a longer period of time is one thing CPAs are always looking to do. State and local tax work other than the sales tax returns, knows no particular "busy" season. State auditors are busy 24/7/365. Well, maybe not that busy -- they do take 15-20 holidays a year plus vacation and usually gone for the day by 4:30PM, but you get the picture.
Finding and Retaining Qualified Staff
Retaining qualified staff ranked as the third most important issue among firms with six to 10 professionals, while finding qualified staff ranked No. 5 among firms with 11 to 20 professionals, with retaining staff the No. 6 concern. By the time you throw in the larger firms, this issue drops in relative importance. But it’s still in the top 10.
What makes your qualified staff stay around? Compensation is a large part of it. But assuming you pay a competitive salary and benefits, what makes the difference? What about overall job satisfaction? Do your staff feel like they are constantly improving, that they are improving their skills and therefore their value not only to the firm, but in the marketplace.
We have the same concerns. We have found that giving our staff a wide range of client assignments and giving them constant training by our top partners, has led to a measurable increase in job satisfaction. They don’t pay us to work here, but they don’t seem to be itching to leave either.
Do all your clients pay within a week of getting your invoice? Are they asking you to bill them before you can even get the invoices out the door? Neither do all of our clients. But a few of them are that way. What a pleasure. If you’re providing value that is measurable to them, the likelihood that they will pay quickly is greatly enhanced. We really like the time and billing software that we use. It’s called Harvest. It’s all in the cloud and perfect for our needs.
Participate in Our Survey
We created our own informal version of the survey so you can share your concerns! Take the survey, or discuss your main concerns in the comments.
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