two factors determine firm profitability

magnifying glass showing bar charts

you’d think accountants could agree on a common definition. nope.

by marc rosenberg
the rosenberg practice management library

if you asked the president of a fortune 500 company or the owner of a restaurant to define profitability, they would be able to give a quick, definitive answer. not so with cpas.

surely, you’ve heard the story, perhaps apocryphal, of the company that was interviewing for a new cpa firm. only one question was asked of each candidate: “how much is two plus two?” the firm that won the bid gave the answer, “how much would you like it to be?”

more: don’t make firm profitability a goal | core values: why your firm needs them | voting on ownership basis? three better methods | fifteen big questions for your next strategy session
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the same can be true of cpa firm profitability. how do we measure it? you would think that the uncontested champions of measuring financial data, cpas, would have this down to a science. but such is not the case.
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cornerstone report: cpa billing rates, tax return fees, and client accountng pricing at cpa firms | 2024

卡塔尔世界杯常规比赛时间 research cornerstone reports deliver instant situational awareness on the day’s hottest topics. come back often because, as a moving target, it changes often.

by 卡塔尔世界杯常规比赛时间 research
getting started
the billing rates, fees, and pricing strategies at cpa firms are influenced by various factors, including the type of service, the cpa’s experience, geographic location, and the client’s financial complexity. as the demand for specialized financial services grows and technology evolves, cpa firms adapt their pricing models to meet client needs and ensure sustainable business growth.
by understanding these factors and trends, clients can better navigate the cost of cpa services and make informed decisions about their financial needs.
you can refer to the full articles on 卡塔尔世界杯常规比赛时间 research for more detailed insights and data.
deep dive
1. average billing rates for cpas
the average billing rates for cpas can vary significantly depending on the type of services provided, geographic location, and level of expertise of the cpa. here are some general insights gathered from various sources:
• remote books online: on average, cpa hourly rates range from $150 to $400, with audit services commanding higher rates.
• bench: cpas typically charge between $150 and $400 per hour. however, rates can exceed $400 per hour for more specialized or high-demand services.
• reddit: in some cases, cpas charge around $400 per hour for consultations, especially for complex tax discussions.
• synder: the cost of tax preparation by a cpa depends on the cpa’s experience and reputation. experienced cpas with a strong reputation often charge higher fees.
• 卡塔尔世界杯常规比赛时间 research: new surveys and reports show that billing rates have been steadily increasing, particularly for specialized services and regions with a high cost of living. for instance, a study showed that cpa billing rates rose 6.5 percent over six months, reflecting an ongoing trend of rising fees (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research).
2. factors influencing cpa fees
several factors influence the fees charged by cpas:
• experience and reputation: more experienced cpas or those with specialized skills tend to charge higher fees.
• service type: different services have different pricing structures. for instance, audit services are more expensive than tax preparation.
• geographic location: cpas in urban areas or regions with a high cost of living generally charge more.
• client’s financial complexity: clients with more complex financial situations often incur higher fees due to the increased workload.
3. cpa services and pricing models
cpas offer a wide range of services, each with its pricing model:
• tax preparation and planning: typically charged hourly or a flat fee per return. rates can vary from $150 to $400 per hour.
• audit services: these services usually command higher fees due to their complexity and the level of detail required. rates can range from $200 to $500 per hour.
• financial statement compilation and review: according to elt cpa, the cost of financial statement compilation can vary, with prices often rolled together with other accounting services.
• consultation services: quick consultations, especially for tax-related advice, can be quite expensive, with rates up to $400 per hour, as mentioned on reddit.
• 卡塔尔世界杯常规比赛时间 research: new articles highlight the growing trend of value-based and subscription pricing models, where clients are charged based on the perceived value of the service or a regular fee for continuous support (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research).
4. pricing strategies for cpa services
cpa firms employ various pricing strategies to cater to their clients:
• hourly billing: the most common method is where clients are billed based on the time spent on their work. this model is straightforward to understand but can be less predictable for clients.
• flat fees: these are used for standard services like tax preparation, where a fixed price is charged irrespective of the time spent. this provides clients with a clear understanding of costs upfront.
• value-based pricing: this strategy involves charging based on the perceived value of the service to the client rather than the time spent. it is commonly used for high-value services. articles from 卡塔尔世界杯常规比赛时间 research discuss how value pricing can enhance client relationships and firm profitability (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research).
• subscription billing: according to quickfee, some cpa firms use subscription billing for ongoing services, where clients pay a regular fee for continuous support. this model ensures consistent revenue for the firm and predictable costs for the client (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research).
mentions of key industry experts:
• both ron baker and ed kless advocate for value pricing and argue that traditional hourly billing is outdated and less effective. they emphasize the importance of pricing based on the value delivered to the client rather than the time spent. their insights into value pricing have influenced many firms to rethink their pricing strategies (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research).
• jody grunden: known for implementing value pricing in his firm, grunden shares practical tips on transitioning from hourly billing to value pricing, highlighting the benefits of increased client satisfaction and better financial outcomes for firms.
5. regional variations in cpa fees
• california: the vintti blog and ziprecruiter highlight that cpas in california tend to earn higher salaries, reflecting higher billing rates in the region. salaries can range significantly, with experienced cpas earning six-figure incomes.
• national trends: the investopedia article notes that the average salary for cpas varies across the united states, with higher earnings typically in metropolitan areas.
• 卡塔尔世界杯常规比赛时间 research: reports indicate regional differences in billing rates, with the highest rates found in major metropolitan areas and regions with a high concentration of financial services (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research).
6. trends in cpa firm pricing
• increasing rates: there is a trend of increasing hourly rates for cpas, driven by higher demand for specialized services and the growing complexity of financial regulations.
• technological integration: cpa firms increasingly incorporate technology into their services, leading to more efficient operations and potentially different pricing models, such as subscription or flat-rate fees for tech-enabled services.
• 卡塔尔世界杯常规比赛时间 research: articles suggest a shift towards more flexible and client-friendly pricing models, including bundling of services and the use of advanced software for better financial analysis and reporting (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research) (卡塔尔世界杯常规比赛时间 research).

why you need progress billing

smiling woman wearing glasses, looking at computer screen

seven steps to setting it up and four benefits.

by august j. aquila
price it right: how to value accounting services

there are many things that are critical for a successful client service engagement. in my mind, there are two that should be at the top of your list.

more: sixteen marketing activities to try | make your practice better | eleven marketing strategies for smaller firms | five questions for developing your marketing plan | you only have four strategies | the damage that traditional fee methods do
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number one is providing the client with a progress report or reports. number two is making sure that you progress bill and provide a change order if the scope of the engagement changes. doing both ensures that you will have a happy client and get paid promptly for your services.
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james graham: drop the billable hour and you’ll bill more

firm poised to double in size with cfo services.

subscribe to 卡塔尔世界杯常规比赛时间 podcasts anywhere: apple, google, spotify, iheart, deezer, amazon music and audible, player fm, audacy, gaana (india), and boomplay (africa).

the disruptors
with liz farr

james graham’s firm, richtr financial studio, gave up the billable hour 10 or 15 years ago, and graham points to that choice as making the biggest difference in his firm.

more podcasts and videos: karen reyburn: fix your marketing and fix your business | giles pearson: fix the staffing crisis by swapping experience for education | jina etienne: practice fearless inclusionbill penczak: stop forcing smart people to do stupid worksandra wiley: staffing problem? check your culture | scott scarano: first, grow people. then firm growth can follow | jody padar: build a practice that works for you, not vice-versa | ira rosenbloom: with m&a, nobody wants a fixer-upper | peter margaritis: the power skills every accountant needs | joe montgomery: find the sweet spot of the right clients, right services and right pricesmarie green: your bad apples are ruining youmegan genest tarnow: hire for curiosity rather than complianceclayton oates: one way to keep clients for life |

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he said it’s because “it really changes the nature of your relationship with the client” when the client is no longer looking at the clock with “that dollar per hour in the moment, always hanging over any interaction.” by removing the focus on time, “it allows everyone to move forward better because the focus is on running the business.”

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surge pricing: what works for uber could work for cpa firms

limited supply puts you in the driver’s seat.

by bill penczak

the serenity prayer states, “grant me the serenity to accept the things i cannot change, the courage to change the things i can, and the wisdom to know the difference.” keep that in mind for a moment.

more: four considerations for effective client culling | partner accountability: the only two things that really matter | chase birky: overcoming paralysis by analysis | o.d. lanier: stepping into advisory | are you too generous with your write-offs?
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when preparing tax returns and financial statement audits, one of the biggest challenges cpa firms face is either late or incomplete client information.

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four considerations for effective client culling

2023: the year “cull” was no longer a four-letter word for cpa firms.

by bill penczak

it finally happened.

for at least the past dozen years, i’ve heard cpa firm partners’ bold talk about culling their clients in order to ease staffing issues, focus on larger, more profitable engagements, or rid the firm of the pita clients, which has nothing to do with animal rights and more about protecting their people from those who are a pain ____  _____  _____ (complete the next three words on your own, and you can skip wordle for today).

more: partner accountability: the only two things that really matter | how to boost profits by (omg) sharing the upside | dustin verity: keep an open mind and constantly learn | secret to success? a growth and abundance mindset | the six essential kpis for managing partners | your marketing sucks: six reasons why | nine smooth moves to build client satisfaction
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a recent study was published that indicated only 1 percent of cpa firms could adequately staff their engagements. and while more firms are migrating to offshore models to get work done, more are actually culling clients, but without a measured process for doing so.  

here are some suggestions for successful extrication of clients who are wearing down the profitability and the morale of firms: 

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keep clients from “balance due” shock

with just a little advanced marketing, you can get paid year-round and have more satisfied clients.

by frank stitely
the relentless cpa

when i talk with prospective clients in any medium, i lead with tax planning. i don’t care if i’m meeting them, calling them or emailing them. i lead with tax planning. the number one complaint clients have about cpas and tax preparers is a lack of planning. they get tax returns and nothing else.

more: stop clients from performing “favors” | who needs fall tax planning? clients … and you | get clients to bring tax docs early…yes, early | why time tracking still matters | make fewer mistakes, increase revenue and capacity | six ways to create a millennial-friendly firm
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the fun part is seeing the reaction when i mention planning. i tell them that they can know the results while there’s still time to change the results. tax season is no longer stressful because they know the answers in advance about refunds and balances due.
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who needs fall tax planning? clients … and you

avoid balance-due whining sessions and earn additional revenue.

by frank stitely
the relentless cpa

you’ve surely had this conversation a million times during multiple tax seasons, most often in april. you give a client a tax return with a $20,000 balance due.

client: i didn’t expect to owe that much.
you: how much did you expect to owe?
client: about $5,000.

more: it’s ok to say no to clients (even the large ones) | control your time: avoid ambush meetings and callstrain your clients before they train you | don’t let clients dictate tax workflow | how small firms can win the talent wars | do you know your turnaround time?
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here’s where my conversations may differ from yours a bit.

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it’s okay to say no to clients (even the large ones)

working with “smaller” clients can often be more rewarding – and profitable – than “big” clients.

by frank stitely
the relentless cpa

there’s a reason you aren’t actively training clients to allow you to work efficiently. you’re afraid that you’ll lose clients.

i guarantee that you will.

more: control your time: avoid ambush meetings and calls | get clients to bring tax docs early … yes, earlywhy time tracking still matters | make fewer mistakes, increase revenue and capacity | six ways to create a millennial-friendly firm | do you know your turnaround time?
goprocpa.comexclusively for pro members. log in here or 2022世界杯足球排名 today.

clients have trained you to be inefficient. they’ll resist retraining. some of them will leave and infect someone else’s practice.

the reason you fear losing clients is that you fear you can’t replace them.

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stop sending the wrong message to audit teams

audit is becoming further commodified. 

by alan anderson
transforming audit for the future

instant download:
the new manifesto for accountants.

the value of what we provide to clients has declined until it has become a commodity. that, in turn, drives our fees down.

the lack of innovation means that our clients can’t tell the difference between the audit we do and one done by the firm down the street. none of them provide relevant information or any value to our clients.

more: three fundamental questions to ask in audit | how auditors can beat ai | the big issues in audit: frustration, inconsistency and technologyfive ways to increase audit efficiency | early adopters gain an edge in audittalent retention: five tips for an audit adjustmentsix benefits of an internal audit | the ten financial controls that’ll make you a hero | five cash reports you can’t live without | when an audit is a great thing
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if our clients don’t see the value, then the audit is only being done to meet a regulatory or banking requirement, and in that case, the cheapest option that meets that basic requirement is the one they choose.

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five rules for a marketing orientation

smiling businesswoman offering a handshakewhy the alternatives don’t work anymore.

by august j. aquila
price it right: how to value accounting services

let’s look at the different focuses or orientations that firms can take toward managing and running their practices and see which ones the traditional pricing methods encourage.

more: the damage that traditional fee methods do | four ways to prepare for new business development | ten keys to marketing success
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any organization, whether an accounting firm or not, usually tends to have one of four focuses. they are either selling-oriented, product-oriented, production-oriented or marketing-oriented.
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the damage that traditional fee methods do

a road sign depicting falling dollarsthe rule of three and cost-plus overlook some key considerations.

by august j. aquila
price it right: how to value accounting services

the time has come for the accounting professional to rethink the paradigm on which pricing has been based. let’s discuss the traditional methods of price setting and how they can have a negative impact on a firm.

more: four ways to prepare for new business development | ten keys to marketing success
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somewhere along the line accountants began to believe that an hour of their work had a set value to their clients. as we shall see, this false assumption has led to the current state of affairs and has caused accountants to:
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