hourly billing on the decline but still holding on.
by 卡塔尔世界杯常规比赛时间 research
by all indications, cpa firms are outperforming the general economy by a very satisfying margin.
but are they charging enough?
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all categories of median net fees show substantial increases from 2021 to 2023 in the latest aicpa national management of an accounting practice survey:
- net client fees leaped up 24 percent.
- net client fees earned since prior year: up 15 percent.
- net client fees per full-time professional: 16 percent
- percent change in net fees from prior: 4.17 in 2021, 9.11 in 2023 – a surge of 119 percent.
- net remaining per partner/owner: $207,604 in 2021; $225,725 in 2023 – a healthy jump of 9 percent.
nothing to complain about there – though that depends on which side of the happy median midpoint your firm is on.
among firms making under $200,000 in net client fees, the median for 2022 was $108,000, a substantive up-bump of almost 9 percent from 2021. that left a median of $49,679 per partner/owner.
the larger the firm, the more remained for each partner or owner.
- in the $200,000-$500,000 bracket, net fees amounted to $338,388, with $134,046 per partner – quite a difference from the under-$200,000 cohort.
- the $500,000-$750,000 bracket took in substantially more fees – $615,565 median – but per-partner net wasn’t proportionately higher at $206,009.
- likewise for the $750,000-$1.5 million group, who raised a median of $1,098,000 in fees but only a bit more for the partners, just $220,414.
- the largest firms, those raking in more than $10 million in net fees, were netting a median of $17,614,200, with partners pulling down a nice little median of $599,034 each.
could billing rates go higher?
billing rates rose an impressive 16 percent between 2020 and 2022, from a median hourly rate of $137 to $159. some of that increase went into higher salaries, which rose by 6.1 percent for all professionals (excluding owners) at all firms. salary expenses as a percentage of net client fees were just over 32 percent for 2021 and 2022.
despite the increase in prices, it seems billing rates could be even higher.
the survey found that for all firms of all sizes, the median realization rate notched up to 99 percent from 97 percent in 2022.
realization is calculated by dividing net client fees by gross client fees. the rise indicates that billing rates are lower than they should be, perhaps reflecting a reluctance to increase rates.
the rocky balboa of pricing
before cpa firms start nudging their hourly rates up, it may be time to consider value pricing. artificial intelligence apps have already begun to automate many time-consuming tasks, performing hours of work in seconds. if billing rates remain as they are – that is, hourly – net fees could plummet proportionately.
the survey says that “hourly billing is like the rocky balboa of pricing methodologies. it may be in the lead role past its prime, but it’s not going down without a fight.”
hourly billings accounted for 85 percent of billings in 2015 but only 65 percent in 2022. that’s a significant drop but by no means indicating the imminent demise of hourly billing.
but then again, ai wasn’t much more than an idea in 2022. maybe by 2025 it will be able to tell us a better way to bill.