7 steps to your future firm

The 2023 National Management of an Accounting Practice (MAP) Executive Summary (PDF) includes extensive information on accounting firm performance. But data is only useful to the profession unless it elicits change. 

One way CPA firm leaders can incorporate key MAP Survey takeaways is to include them in the vision cast for the firm. Seismic shifts in technology and market dynamics are creating a whole new world for accounting firms. To survive and thrive amid all the change, firms will need to evolve their operations and offerings.  

The below seven actions, drawn from survey results, can help firms modernize their business models. Leaders can choose just one or two areas to focus on to realize how interwoven the areas truly are. For example, moving away from hourly billing to value billing can not only improve margins but also have a huge impact helping right-size the client base. That, in turn, can have a huge impact on a firm's culture, affecting not only retention but also the perception of the profession as a whole.  

1. Focus on fees. Survey results reveal net client fees and rates per position have increased, but there is room for firms to bring in more revenue. Firms can use the for benchmarking, as well as the PCPS Revenue Modeling Toolkit (for AICPA PCPS members) to determine where to make positive changes. 
    

2. Evaluate compensation. The survey shows starting salaries still need to improve to be competitive with other career opportunities. They have increased about 12% for all firms and top performers, compared to only 4% in the 2021 survey, which spanned three years instead of two. Despite this growth, salaries are still lagging behind other professions. Firms can benchmark their salaries with others of similar size and use tools like the AICPA’s reward, compensation and incentive resources to determine ways to make positive changes. 
    

3. Address billable hours across the board. Average chargeable hours are decreasing — and at a higher rate with new professionals. This is a step in the right direction, but firms may want to make sure they are setting the same expectations for more experienced staff. Integrating new technologies into the practice can also help reduce billable time.  

4. Shift from hourly billing to value billing. While results show an increase in value pricing versus hourly billing, hourly billing still prevails. Over time, as automation and other technological advancements come into play, practitioners will need less time to deliver the same services to clients. Because less time means fewer billable hours, firms will need to price services based on the value to clients. 
    

5. Investigate new lines of business. Innovative firms can explore ways to enhance service offerings, which can lead to updated billing practices, improved or more evenly spread cash flow, and reduced busy season hours — win-wins for staff, partners and clients. 
    

6. Explore alternative solutions to the talent shortage. With capacity at a premium due to the CPA talent crunch, firms are looking for other ways to get work done and reduce the workload on staff. Options include outsourcing, offshoring, right-sizing client bases, and the use of non-CPAs in client-facing roles. For help, check out the VSCPA Capacity Resource Center, where you’ll find the VSCPA Recruitment and Retention guides, as well as articles and other resources. 
    

7. Utilize "focused" operation staff positions to improve your bottom line. Top-performing firms have increased operations staff, whether it be more administrative positions or new positions in areas including recruiting, learning and development, and project management, to name a few. Staff solely dedicated to recruiting, retention, and project management may actually help the bottom line, despite the overhead burden. There seems to be a push to focus on prioritizing the firm's needs as a whole over individual partner, manager or office preferences. Look into the areas your firm most needs to focus but doesn't have the "time" and develop a plan to integrate non-employees to create efficiencies that drive your bottom line.  

The VSCPA is helping members and firms rise to the challenges of the rapidly changing business environment. We’re preparing you, your team and your business for the future with research and toolkits like  our Capacity Resource Center, business planning and data collection with VSCPA Strategic Insights services, and our new Community+ membership opportunity for organizations. 

These tips are excerpted from the 2023 National MAP Survey Executive Summary (PDF), compiled by AICPA & CIMA, the AICPA Private Companies Practice Section, CPA.com, and AON.