bonus: 6 charts, including most and least effective ways to control costs.
accounting firm operations and technology survey
our survey respondents were asked practice management questions that explored how much time is spent working from remote locations, the top challenges of managing the firm, channels to bring the most new clients to the firm, time spent managing tasks, and methods for controlling costs.
they were also asked about initiatives that generate revenue, their biggest technology challenges, security in the cloud, communications with clients, mergers and acquisitions, wireless networking and plans for the firm’s website.
key findings
accountants are not working from everywhere, although most are getting out of the office from time
to time.
while we have not seen a trend among survey respondents toward working out of the office a majority of the time, we have noted that over the survey’s six-year history, respondents have slowly become more mobile. this year’s survey showed that only 6.9 percent of respondents
reported not working outside their offices, as compared to 15.2 percent in 2014.
top challenges of managing a firm: recruiting and technology.
when examining the top challenges of managing a firm, the list has evolved significantly over the life of the survey. the top concern of practitioners in 2014 was attracting new clients, with 55 percent of respondents sharing that concern; while new clients remain a concern in 2019, ranking as the fourth most common concern for 2019 (22.7 percent), recruiting and retention has consistently been the top concern for the last two years, with 28.8 percent of firms in 2019 and 32.3 percent of firms in 2018. increasing profitability and cybersecurity/data privacy tied for the second most common concern in 2019, with each being selected by 25.3 percent of respondents.
firms of different sizes obviously have different concerns, and the table below lists the top 10 concerns for each of the five firm size segments, plus the totals for all firms.
the top concerns for solo practitioners are two technology issues selected by 32 percent of respondents – cybersecurity and data privacy and selecting the right technology options. small firms with one to 10 non-partner staff members were most worried about attracting new clients and improving their cost-cutting, with 27.3 percent of respondents selecting each option. medium and large-sized firms, with 11 to 50 non-partner staff and 51 to 100 staff, were overwhelmingly concerned about recruiting and retention (40.6 percent and 50 percent, respectively), which was the top concern for both groups by double-digit percentages. extra-large firms, with 101 or more non-partner staff members, were most concerned about cybersecurity/data privacy (37.5 percent), followed by driving and implementing change (31.3 percent).
firms remain most reliant on referrals from several sources.
referrals – new clients who are referred to a firm from someone they trust – remain the top channel or source of new clients for firms. a higher percentage of firms report that they are receiving referrals from other sources, such as referrals from other professionals, professional partnership referrals, or social networking channels over each of the last three years. as reported earlier, for solo practitioners, attracting new clients is their top concern, and they appear to struggle to get the work in, get the work done and get the invoices out. we believe based on anecdotal evidence we have seen across many firms over the last few years that the more competitive nature of the marketplace for professional services is making firms target selling skills as a core competency for partners, directors and managers.
the method of how accounting professionals deliver tax returns to clients is changing.
over time, we have seen a significant shift in how tax returns are delivered to clients – away from paper-based methods and toward digital-based communication methods. portal products have become more robust, with most now offering tools for requesting and tracking schedule/data requests from clients, instant publishing from applications, integrated electronic signature, and integration into document management systems. some tools are now even offering the ability to integrate invoice payment into the finalization of an engagement.
as shown in the chart above, the percentage of tax returns delivered electronically reached a plurality for the first time in 2018, with 50.2 percent of returns delivered electronically. the trend continued in 2019, with 54.9 percent of returns being delivered electronically. we are encouraged by the increased use of tools such as doc-it portal and citrix files (formerly sharefile) microsoft outlook add-in, which help users convert insecure e-mail attachments to secure portal deliveries from within an e-mail message. we are also concerned that some of the less technologically sophisticated firms are actually using unencrypted e-mail to send unencrypted confidential files to clients, which is an unacceptable practice in 2019. we believe that it’s critical for all firms to review proper digital document handling procedures and information security awareness training at least annually with their team.
firms of all sizes agree on the most and least effective ways to control costs.
respondents in firms of all sizes share a similar belief that examining the firm for technology, process or workflow inefficiencies are the most effective ways to control costs. furthermore, respondents working in firms of all sizes also agree delaying or eliminating technology upgrades is the least effective way to control costs.
size of firm impacts their view on the most and least effective ways to control costs.
the most and least effective ways to generate revenue are not uniformly agreed to by firms of all sizes. solo practitioners and small firms, both limited by a small number of employees who are more likely than medium and large-size firms to be wearing many hats within the firm, believe adding more services to their already full plate is an effective way to generate revenue.
the most effective ways to generate revenue on an overall basis were upsell existing clients (21.6 percent), raise fees (17.4 percent) and firm acquisitions (16.3 percent). the most ineffective ways to generate revenue overall were social media (16.9 percent) and payroll services (15 percent). other items of note in each of the five firm size categories were as follows:
workflow and efficiency technology challenges improve, but are still the top technology challenge.
workflow and efficiency was the top technological challenge for the second year in a row, although this year it was only cited by 20.6 percent of respondents as their top technology challenge (down from 24.9 percent in 2018). another category related to firm processes, getting your clients onboard working with the firm in a digital way, was cited by 16.7 percent of respondents as their top challenge, although this was largely driven by large numbers of solo practitioners and small firms that we believe have largely not adopted functional workflow management tools and client portals.
security dropped to the second biggest technology challenge practitioners are concerned about as they manage their practice, with 19.3 percent of all firms selecting this option (down from 24.9 percent in 2018). this was the number one concern of medium, large and extra-large firms, and has been a constant topic we have heard when working with firm it managers and partners over the last four years.
technology challenges, by size of firm:
expansion via merger is being considered by a majority of firms with more than 50 employees.
there is a notable increase in the number of firms considering expansion via merger – a total of 47.3 percent of firms are considering a merger or acquisition either in the next year (25.8 percent) or in more than a year (21.5 percent). firms most likely to be making acquisitions at some point in the future tended to be larger, and included 47.8 percent of medium firms, 80 percent of large firms and 62.5 percent of extra-large firms.