the accounting firm operations and technology survey – for firms of all sizes

 

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

the results of the 8th annual accounting firm operations and technology survey mirror a trend on how firms of varying sizes have been operating in the year 2021 amidst the covid-19 pandemic. 308 firm leaders participated in the survey; numbers were drastically higher than those captured in the previous year. the percentage of respondents reporting that they operate without any staff increased to xx.x% from xx.x% last year. it is also evident that there is a significant reduction in the respondents from large and extra-large firms, with those firms comprising xx.x% this year compared to xx.x% last year.

demographics

participants of the survey were asked a chain of demographic questions related to their services offered, their designations and decision-making responsibilities, and if other stakeholders impacted them. also, they had to give us numbers in terms of employee counts, annual revenue, etc. but, most importantly, we focused on the impacts of the coronavirus on each of them, individually and the firms at large. we’re hopeful this is the last year we have to survey covid-19 issues.

key findings

89.6% of the survey participants are full-time partners or staff members at a public accounting firm, which generates most of its revenue from some combination of tax, auditing, client accounting, non-cpa firm consulting, and advisory services. the remainder work in a large firm’s internal tax/audit department or other industry roles.

service offerings

tax preparation still holds its top rank amidst all the other services offered, consecutively for the third year, taking up xx.x% of the share. the second most common service has been accounting and bookkeeping (xx.x%), followed by tax planning (xx.x%) and business consulting (xx.x%).

the number of solo practitioners increased to xx.x% from xx.x% in 2020. some xx.x% of the respondents reported in the category of 2 to 3 partners, reflecting an xx.x% increase from last year. all other categories recorded a drop compared to the previous year.

abiut xx.x% of solo practitioners make all decisions entirely without a firm administrator, while small businesses recorded that xx.x% of decisions were made by solo practitioners, andxx.x% of decisions were made by the firm partners. a combination of partners’ and administrators’ involvement in decision-making was evident, with medium, large, and extra-large firms recording xx.x%, xx.x%, andxx.x%, respectively.

revenue figures were improving at firms billing under $5 million. a total of xx.x% reported revenues of less than $5 million compared to xx.x% last year. revenues over the $5 million mark dropped in half from xx.x% in 2020 to xx.x% in 2021.

practice management

participants were asked about their work patterns and practices, especially how they could adapt themselves during the pandemic and strike a balance between work and family as most of them had to work from home. the questions gave insight into how much time they spent from home or other remote locations, how much time was effective and efficient about technical issues and extra costs, and other key challenges in managing the firm. they were also asked about the entry of new clients that generated revenue and the challenges that came with it through communication, delivery of services, mergers & acquisitions, and many more.

key findings

as a general norm, accountants are mostly enclaved in their favorite spots in their offices. however, the trend now seems like accountants are getting out of their comfort zone. this year’s survey shows that people had to shift to work from home to counter the impacts of covid-19.

top challenges of managing a firm

the most cumbersome issue of firms today is the recruiting and retention process, consecutively regarded as the biggest challenge for the third year, recorded at xx.x%. it had been nearly the same in the previous years as well, xx.x% in 2020 and xx.x% in 2019. the next most common concern was managing workflow amidst the pandemic, xx.x% (up from xx.x% and xx.x% in 2020 and 2019, respectively), followed by understanding technology issues, xx.x% (versus xx.x% and xx.x% in 2020 and 2019, respectively).

over time, it is seen that there is a drastic improvement in the methods used to deliver tax returns to clients. clients are now being offered various tools such as portals to track or schedule their data and even publish them instantly, along with digital signatures and digital payments.

there is a pronounced decrease in the number of firms considering expansions via merger as the economic conditions do not seem as promising this year. a total of xx.x% of firms were considering a merger or acquisition either within a year (xx.x%) or in more than a year (xx.x%). however, it seems like only xx.x% will consider this option in 2021, xx.x% in the next year, and xx.x% in a span of more than a year.

as a new issue in managing a firm, participants were asked about the effects of covid-19 on their work-life balance and how it affected them financially/emotionally by working from home and other key challenges. solo practitioners cited no effect on them or relatively minimal effect, while those working from home for the first time and those restricted from travel were xx.x%. those businesses with vastly affected incomes were around xx.x%.

pandemic management

participants were asked about the most significant challenges faced during the pandemic in terms of collaboration, communication, hiring, hr, and workflow and if they would like this method to continue in the future. also, we questioned office space utilization.

technology management

participants were asked technology management questions concerning e-mail and it support, web portals, mobile devices/ tablets/ipad, backup systems, server replacement cycles, hardware purchases & replacements, videoconferencing, scanning methods, and security. they were also asked about computer anti-virus software, firewalls, and system downtime.

e-mail challenges

e-mail communication is an integral part of today’s business world because it is the cheapest and a reliable means of communication among businesses. however, e-mail communications have extended to more than business among employees, which opens doors to many ethical and technological complications and is prone to phishing and other fraud.

overall, xx.x% of all firms host e-mail internally, with the firms that are internally hosting their e-mail tend to be the larger firms (xx.x% of extra-large firms host their e-mail internally). most solo practitioners, xx.x%, small firms at xx.x%, and mid-sized firms at xx.x%, use a hosting company or a service like gmail for business, zoho, or office 365. regardless of where e-mail is hosted, firms should have spam and malware filtering, message archiving, and data loss prevention tools deployed to help them manage their compliance with relevant laws and regulations.

web portals

web portal usage has dropped for the first time in the history of this research study, likely due to a change in the respondent mix, which favors smaller firms. in 2020, xx.x% of respondents indicated that they used a web portal to share files or documents with clients, which has now come down to xx.x% in 2021.

cloud backup seems to be the most common in all types of businesses at around xx.x% when it comes to backup methods in use. usage of backup appliances is also emerging, with a xx.x% share. with the trends being set, usb hard drives and web browsers are slowly diminishing compared to the previous years.

the usage of tablets and ipads to complete work-related tasks has increased from xx.x% in 2020 to xx.x% in 2021, especially among solo practitioners and small businesses. however, larger firms have reduced the option of the same as devices are prone to cyber issues, malware, and threats.

anti-virus

it is evident that norton has been primarily used consecutively for the past three years or so when choosing the best anti-virus program for any company. however, other anti-virus products such as avg and mcafee are entering the market and are common among small to medium businesses. also, questioning the participants regarding the effectiveness of the anti-virus in use, xx.x% said that they did not have a downtime due to a computer virus or malware, which is good.

firewalls

sonicwall and cisco firewalls systems were the topmost options this year 2020. sonicwall xx.x% has taken its place to the top, putting cisco xx.x% in second place this year.

servers and computer hardware

participants 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 number of monitors used in their firm, video conferencing, and scanners.

the most prominent brand name that we see everywhere in firms today is xxxxx, which has increased its lead over tough competitors such as xxxxx and xxxxx. when it comes to scheduled replacement of servers and hardware, participants are more likely to have policies to replace hardware only when needed instead of replacing it according to a pre-established schedule for each type of device.

over the years, this trend of server/hardware replacement has been highly consistent, and smaller firms are still opting not to have a server at all and not invest in scheduled replacements.

multiple monitors usage has dropped

about xx.x% of participants mentioned that they had two or more monitors on their primary desktop, while the percentage was xx.x% in 2020. and xx.x% of participants personally used two monitors, xx.x% used three monitors, and xx.x% had four or more monitors. there seems to be a shift in single monitor usage, increasing from xx.x% to xx.x%, likely due to an increase in the number of solo practitioners in this year’s survey and the availability of less expensive, larger monitors.

zoom becomes a boom in video conferencing

employees are more aware of video conferencing methods and their highly satisfactory communication. so, 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 xx.x% in 2014 to xx.x% in 2021. many of the survey respondents reported using zoom, at xx.x%, followed by xxxxx at xx.x%, xxxxx, and xxxxx at xx.x%. xxxxx had significant year-over-year gains compared to prior years, and xxxxx usage dropped in 2019 and 2020. popular personal platforms like xxxxx have increased only slightly, likely due to firms requiring employees to use the firm’s platform for work meetings.

application software

survey participants were asked application software questions concerning bookkeeping, document management, workflow, 1040 scan and organize solutions, practice management, and billing and audit confirmation.

xxxxx was the choice for 1040 scanning software leading the list at xx.x%, followed closely by xxxxx and xxxxx, with xx.x%. in third and fourth places are xxxxx and xxxxx and xxxxx recorded xx.x% and xx.x%, respectively.

document management software

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. do it yourself – your own system (e.g., windows explorer) topped the list with xx.x%, and then two products scored similar percentages around xx.x% to take the second and third places: xxxxx and xxxxx.

engagement management / audit software

xxxxx recorded xx.x% overall and was also at the top of the choice with medium to extra-large firms. most solo and small firms did not use any of the identified products, or the question was not applicable.

write-up/bookkeeping

precisely xx.x% of practitioners use xxxxx for their write-up or bookkeeping software. outside of xxxxx a few products have a small percentage of the market. xxxxx with xx.x% was the only other product with a significant market share among respondents.

payroll software

xxxxx reached the top spot this year with xx.x%, up from xx.x%. xxxxx remained at similar levels from last year at xx.x%, and xxxxx’s share dropped to xx.x% in 2021, down from xx.x% last year.

processing w2s and 1099s for clients

apparently, xx.x% of firms use their payroll software for processing w2s and 1099s for clients. and xx.x% use standalone programs, while xx.x% use an online filing platform.

workflow tool serving the profession

xxxxxrecorded 9.1% this year to reach the top of the choices, pushing last year’s top choice xxxxx to third place with xx.x%. in second place was xxxxx with xx.x%. as workflow software is a relatively new addition to the application stacks of most firms, most of the respondents (xx.x%) said they did not use this category of software, or they were unsure, including xx.x% of solo practitioners and xx.x% of small firms.

tax software

xxxxx dominates the profession as the tax software of choice for medium, large, and extra-large firms. on the other hand, solo practitioners prefer xxxxx, xxxxx, and xxxxx. small firms prefer xxxxx, xxxxx, and xxxxx. the top platform for small, medium and large firms is xxxxx. …

practice management or time billing

the popularity of practice management and time & billing software is heavily dependent on the firm’s size. xxxxx at xx.x%, was the most popular solution for solo practitioners and large firms. xxxxx, at xx.x%, and xxxxx at xx.x% were second and third place overall. xxxxx, and xxxxx were dominant with medium to extra-large firms.xxxxx and in-house development were popular with solo practitioners.

client accounting systems

xxxxx is the clear leader in client accounting, with xxxxx leading in the top five places. xxxxx, xx.x%, is in first place, followed by xxxxx, 36.2%, xxxxx, xx.x%, xxxxx and xxxxx.

firm accounting systems

like last year, xxxxx is the leader, with different product versions holding the top four spots again this year. xxxxx is the top choice at 31.4%, followed by xxxxx, xx.x%, xxxxx, at xx.x%, and xxxxxat xx.x%. the size of the firm usually drives which version is used. solo practitioners and small firms favor xxxxx, at xx.x% and xx.x%, respectively. medium and large firms prefer xxxxx, at xx.x% and xx.x%, respectively. extra-large firms are choosing xxxxx, at xx.x%.

research solutions

when it comes to the research solutions firms use, the top five are …

remote access / internet / telecommunications

survey respondents were asked to report on technologies and methodologies for a remote connection back to the office. they were also asked to report on the software used to show the real-time availability of employees and products or services they use or are considering, such as software as a service (saas) and application hosting.

larger firms use xxxxx to connect back to the office. however, most small firms and solo practitioners found them unnecessary for obvious reasons.

the percentage of firms that report they are not likely to implement cloud-based versions of their firm’s tax and accounting applications in the next two years reported xx.x% in 2021, up from xx.x% in 2020.

technology spending, decision making, annoyances and trends

survey respondents were asked to report on their budgeting practices, whether they have remained the same or changed year over year, and what factors impact their propensity to recommend a vendor’s product or service. they were asked to report on how the primary technology purchasing decision-maker views technology and to prefer to learn about technology. finally, they were asked to report their biggest technology issue or annoyance.

most firms do not use technology spending budgets – only xx.x% of firms report they have a technology purchasing budget, down from xx.x% in 2020 and xx.x% in 2019. furthermore, despite the challenges of operating large firms, only xx.x% of extra-large firms and xx.x% of large firms have a purchasing budget. this low adoption rate could be due to the increasing use of cloud solutions/hosting and hardware leasing, where the firm does not purchase the technology but instead pays to use it.

preferred ways to learn about technology for your firm – the top choices were it provider recommendations (xx.x%), from my peers (xx.x%), and accounting industry websites (xx.x%).

• solo practitioners prefer accounting industry websites, followed by webinars, and technology seminars.
• small firms prefer in-person industry events and learning from peers.
• medium-sized firms rely on it provider recommendations, followed by learning from peers and in-person industry events.
• large firms prefer technology seminars, followed by a four-way tie between it provider recommendations, accounting industry websites, in-person industry events, and consultant recommendations.
• extra-large firms prefer to learn from their peers, followed by a five-way tie between technology seminars, in-person industry events, consultant recommendations, webinars, and vendor demos.

the top three technology challenges or annoyances in firms

overall, the top three tech challenges were keeping up with change/new software at xx.x%, security and risk management at xx.x%, and costs to purchase at xx.x%.