survey: firm size matters in tax software choice

plus: more trends and insights from annual operations and technology survey.

by randy johnston and brian tankersley
the accounting firm operations and technology survey

the tax, practice management, and time & billing software a firm chooses depends heavily on the size of the firm, according to the new accounting firm operations and technology survey.

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dell far and away leads the hardware wars, and fujitsu remains the top name in scanners but canon is gaining ground. vmware tops virtual server use and older operating systems are being ushered out the door and windows 10 adoption stands at 93.1 percent.

operating systems

survey respondents were asked questions concerning network operating and desktop operating systems.

key findings

the rapid retirement of older desktop and network operating systems continues. it’s closing time for windows 7, windows server 2008 r2 and office 2010, with microsoft’s support for the latest versions of windows 7 and server 2008 r2 ending january 14, 2020, and office 2010 support on october 13, 2020. some cpa firm software publishers have already discontinued support for office 2010 and will discontinue support for other legacy operating systems in the coming months. one cpa firm publisher discontinued support for microsoft sql server 2012 in late 2019, forcing many firms onto more modern platforms.

windows server 2016 is the most popular platform for networks in firms, with 25.5% of firms reporting that they are using this operating system, followed closely by windows server 2019, with 14.7% of firms using that operating system.

desktop users of windows 7 are dropping off rapidly

windows 7 usage has dropped off precipitously, from 40.9% of users in 2017 to 2.0% in 2020. over the same period, windows 10 adoption has gone from 44.0% in 2017 to 73.2% in 2019 and is now at 93.1% for 2020.

although there are a few stray windows vista and windows xp users, constituting approximately 2.0% of the respondents, firms seem to have done an excellent job of staying on operating system platforms that are supported by the software publishers. 2.0% of firms are using mac os.

computer hardware

survey respondents were asked questions concerning their primary brand and replacement schedule for critical servers, whether they used virtual server(s), their primary brand, and replacement schedule for desktop pcs and notebook/laptop computers. they were also asked to report on the numbers of monitors being used in their firm, videoconferencing and scanners.

key findings

dell is the dominant hardware manufacturer used on servers, desktops and laptops. the company has a commanding lead over rivals hp and lenovo in all categories of personal computers; indeed, dell’s share of the cpa market is more than hp and lenovo combined in each class for each of the last three years. many firms are still noncommittal on hardware replacement cycles. when asked how often the firm replaces each hardware type (servers, desktops and laptops), the overall top response for each question was “as needed/varies.” this response shows that the respondent either was not sure of the firm’s policies or the firm had not committed to a specific replacement cycle.

• the most popular committal answer for server replacement was “every five years” at 3%, followed by “every four years” at 11.8%.
• the most popular committal answer for desktop computer replacement was “every three years” 3%, followed by “every four years” at 26.5%.
• the most popular committal answer for laptop replacement was “every three years,” 5%, followed by “every four years” 20.6%.

these replacement trends are consistent over the last three years, and we noted that smaller firms were more likely not to have a server or not to have committed replacement plans for each class of hardware.

vmware is the top virtual server platform, with 16.7% of firms using this tool; citrix xenserver was next, with 12.7% of respondents, and microsoft hyper-v was last, at 4.9%.

multiple monitors are expected and required in almost every firm

92.2% of respondents reported that they had two or more monitors on their primary desktop. 46.1% of participants personally use two monitors, 38.2% used three monitors and 7.8% have four or more monitors.

84.3% of respondents said that 76% to 100% of their firm’s users rely on two or more displays.

most firms are using videoconferencing

over the six years of the survey, the percentage of respondents who reported that they were not aware of the firm’s videoconferencing platform dropped from 54.5% in 2014 to 34.3% in 2020. the most popular platforms were zoom at 23.5%, microsoft teams at 12.7%, and gotomeeting and cisco webex at 8.8%. zoom had significant year-over-year gains as compared to prior years, and gotomeeting usage dropped in both 2018 and 2019. popular personal platforms like google hangouts were at 1.0%.

scanners are part of firm processes now

we have noted that firms are trying to work with their clients’ files digitally instead of scanning. while scanners are used less often in firms with established paperless workflows, this is likely because of firms requesting schedules in electronic format rather than a decrease in what they file electronically.

fujitsu was the dominant scanner manufacturer, with 50.0% of firms reporting that they used this brand, and canon was the next most popular brand, with 22.5%. fujitsu has had an increasing share for the last two years, and canon’s share increased from 18.1% to 22.5% this year. we believe that canon’s bundling of kofax vrs image enhancement software and fujitsu’s move away from kofax vrs to an in-house developed product has made canon’s offerings more attractive to practitioners. fujitsu also gets a boost from its consumer-grade scansnap models, which are inexpensive and require the use of proprietary software. at the same time, the entire canon line is compatible with key hardware standards such as twain and isis.

application software

survey respondents were asked application software questions concerning word processing and internet browsers, compliance, contact, communication and practice management software. they were also asked to report on collaborative and paperless technologies, including bookkeeping, document management, workflow, 1040 scan and organize solutions, and audit confirmation.

key findings

firms of all sizes are moving to microsoft office 365.

office 365 is the dominant way for firms to subscribe to microsoft office applications, up to 50.5% in 2020, from 43.5% in 2019.

word 2016 is down to 14.9% from 25.0% in 2019. firms are eliminating their reliance on word 2010 because of the end of support for this product in early 2020. the use of word 2013 is at 5.9% in 2020, which is down 50% over the last two years. google docs is at 2.0% in the current year, down from 2.8% in the prior year.

while google docs may be a viable alternative in the long run, in the short term, we believe that microsoft office will be the dominant platform in the future. we also think that zoho will become a more competitive solution soon.

four vendors lead the 1040 scanning software category overall

overall, a majority of the 1040 scanning software – used for the automation of administrative tasks associated with tax work – is provided by the top four products, cch prosystem fx scan, sureprep 1040scan, efilecabinet and thomson reuters source document processing.

three vendors lead the document management software category overall

the use of document management software has grown in popularity; practitioners are becoming increasingly aware of the need for professional software to help manage the challenge of working efficiently with digital documents. cch prosystem fx document and file cabinet cs (thomson reuters) tied for the top spot at 10.9%. cch prosystem fx engagement at 6.9% was next, followed by efilecabinet at 5.9%. all other solutions had 5% or fewer respondents.

xcm is the dominant workflow tool serving the profession

xcm the most popular workflow tool, with 28.7% of respondents, followed by practice cs projects (thomson reuters) at 8.9% and jetpack workflow with 5.0%. xcm had 46.4% of medium-sized firms, 62.5% of large firms and 64.3% of extra-large firms.

preference for tax, practice management, and time & billing software dependent on the size of the firm

cch prosystem fx tax dominates the profession as the tax software of choice for medium, large and extra-large firms. on the other hand, solo practitioners prefer drake tax, ultratax cs and intuit lacerte. small firms prefer ultratax cs drake tax and lacerte. the two major cch tax applications (prosystem fx tax and axcess tax) combined had 53.6% of medium-sized firms, 50.0% of large firms and 78.6% of extra-large firms.

the popularity of practice management and time & billing software is heavily dependent on the size of the firm. quickbooks, any version and in-house developed at 15.4%, are the most popular solutions for solo practitioners. cch practice cs at 35.7% and practice cs (thomson reuters) at 25.0% are the leaders in medium-sized firms. cch practice management at 75.0% and practice cs (thomson reuters) at 12.5% are the leading providers in the large markets. for extra-large firms, it is cch practice management at 42.9% and cch axcess practice at 7.1%.

write-up/bookkeeping

65.3% of practitioners use quickbooks for write-up or bookkeeping software. outside of quickbooks, there are a few products that have a small percentage of the market. accounting cs has 7.9%, with the remaining vendors owning 2 percent or less of the market share.

payroll software

payroll is led by adp at 20.8%, followed by quickbooks with 15.8%, then accounting cs payroll (thomson reuters) at 9.9%, paychex at 7.9%, intuit online payroll at 5.9% and sage (any version) at 4.0%. cs payroll (thomson reuters) increased its market share by 4% in 2020 compared to 2019. adp increased its market share by 7%, while quickbooks desktop payroll dropped 7%.

processing w2s and 1099s for clients

44.6% of firms use their payroll software for processing w2s and 1099s for clients. 36.6% use standalone programs, while 19.8% use an online filing platform.

crm programs

22.8% of firms use their practice management system for contact management. 10.9% use practice cs (thomson reuters), 9.9% use exchange/outlook, 5.0% use office tools and 4.0% use salesforce. practice cs (thomson reuters) increased its market share by 4% year over year.

research solutions

when it comes to the research solutions firms use, the top five are checkpoint (thomson reuters) at 53.5%, internet searches on other sources 36.6%, internet searches on government sources 35.6%, cch intelliconnect 23.8% and bloomberg bna 17.8%.

except for cch intelliconnect, the top five experienced minor growth year over year.

business intelligence tools

not many firms are using business intelligence tools in their practice. the leader is microsoft power bi at 10.9%, which is an increase from 6.9% in 2019. profitcents followed them at 9.9% and xcm analytics at 8.9%. it was evident from the low numbers that firms do not see value in using these tools.

internet browsers

there is only one game in town when it comes to internet browsers, and that is google chrome at 72.3%, a jump of 10% year over year. next is internet explorer (ie) at 7.9%, then firefox at 6.9%, and bringing up the rear is microsoft edge at 4.0%. we note that using ie is risky because it is discontinued.

client accounting systems

it is all about intuit with quickbooks leading in the top five places. quickbooks accountant and quickbooks tied for the top spot at 38.6%. quickbooks online accountant followed them at 37.6% and quickbooks online at 30.7%. in the fifth spot was quickbooks enterprise at 26.7%. xero followed at 11.9%.

firm accounting systems

here again, intuit is the leader holding the top four spots. quickbooks pro/premier leads at 19.8%, followed by quickbooks accountant at 17.8%, quickbooks online accountant at 16.8% and quickbooks enterprise at 26.7%. the size of the firm drives which version of quickbooks they use. solo practitioners favor quickbooks accountant and quickbooks online accountant at 38.5%. small firms prefer quickbooks pro/premier at 23.7% as do medium firms at 25.0%. large firms move to sage 50 at 37.5%, while extra-large firms prefer quickbooks pro/premier and dynamics gp at 14.3%.

electronic confirmation software

only 49.5% use electronic confirmation software. the leader is confirmation.com/capital confirmation at 19.8%, followed by auditconfirmation at 17.8%.

outsourced tax preparation services

these services are not popular with accounting firms, with only 16.8% of the respondents indicating that they use an outsourced tax prep service. cch wolters kluwer and xpitax tied for the top spot at 5.9%, followed by thomson reuters at 3.0% and sureprep at 2.0%.

posted on november 29, 2020