Client advisory services (CAS) practices saw a 20% growth rate in terms of net client fees per professional during fiscal year 2019 and the first few months of 2020, according to the second Client Advisory Services Benchmark Survey from CPA.com and the AICPA Private Companies Practice Section (PCPS). That outpaces the 12% growth CAS practices reported in 2018, which is when the inaugural benchmark survey was conducted.
Respondents reported having higher net client fees, higher fees per professional, and higher CAS net client fees per client than they did in 2018.
These results "validate what we've been seeing in terms of the growth and profitability of CAS as a practice area," said Phil Quimby, product marketing manager for CAS at CPA.com.
The survey defined CAS to include outsourced accounting services and virtual CFO and controller services, as well as handling business processes, such as bill paying and payroll, for clients.
"CAS has become an increasingly strategic component of CPA firms' offerings, and this was never more clear than during the pandemic," said Erik Asgeirsson, president and CEO of CPA.com. "Looking forward, we see new opportunities in business forecasting, business funding, and other categories that will drive growth and provide greater value for clients."
Quimby attributes CAS's growth over the two-year survey period to broader adoption of cloud technology, which makes CAS possible, as well as elevated visibility of the benefits of CAS. "Increased awareness of and focus on CAS has also resulted in better CAS-specific KPIs and metrics," he said.
Full survey results can be downloaded for free at cpa.com/cas-benchmark-survey (see also the chart "Top-Line CAS Survey Results" below).
The survey was conducted online from August to December 2020 and includes data from fiscal year 2019 as well as the early part of 2020 for 111 CAS practices. Respondents' practices varied in size from under $250,000 to more than $4 million in net client fees in fiscal year 2019. Eighty-one percent of respondents said their CAS practices were part of a CPA firm.
Results from the survey were reported in median values. Practice growth rates were measured in terms of net client fees per professional. This metric was chosen, Quimby said, because it "better reflects CAS success across practices of varying sizes. Other common metrics, such as utilization or margin percentage, may not reflect the unique pricing and staffing structures employed by CAS practices."
Quimby noted that the survey provides one of the most comprehensive sets of CAS practice performance data to date. "Now, after the inaugural survey, we have a second set of data to help us measure and benchmark the performance of CAS practices," he said. "We have insight into what metrics drive performance and can share that information with firms to help them manage their CAS practices."
The survey also showed signs that the CAS landscape is maturing. Fifty-five percent of respondents said they used the term "CAS," as opposed to 45% in 2018. Seventy percent of the CAS services firms offered "true" CAS: outsourced accounting and advisory services, as opposed to bookkeeping and compliance alone. Forty-three percent of respondents' CAS staff are devoted to CAS alone and do not work in other areas of the business, rather than 22% in 2018.
PRICING METHODS
CAS firms' pricing practices saw a considerable shift over the past two years, with fixed-fee and value pricing becoming more widespread and hourly billing less common. Twenty-five percent of respondents said they used time and materials pricing, compared with 53% in 2018 (see the chart "CAS Practice Pricing Methods" below).
Firms are recognizing the advantages of fixed-fee pricing, in which clients typically pay a set monthly fee for an agreed-upon level of service, Quimby said. Under this model, firms are paid consistently and in advance, which can be better for their cash flow than an hourly billing model.
In 2020, the CAS Benchmark Survey included questions about the impact of the COVID-19 pandemic on CAS practices. Slightly over half of respondents (55%) said their CAS practices' revenues went up during the pandemic, while 29% said it did not affect their revenue. One reason why CAS practices may have remained profitable during the early months of the pandemic, Quimby said, was that they provided critical advisory services, including helping clients with securing forgivable loans through the Paycheck Protection Program.
A PEEK AT TOP PERFORMERS
CPA.com also identified the survey's top performers — the 25% of respondents with the highest net client fees per professional — and examined their attributes against all respondents' (see the chart "Top Performers vs. All Respondents" below). Top-performing firms, they found, were more likely to follow certain practices, such as having dedicated CAS staff and having employees pursue more training.
Top-performing practices also have more clients than respondents overall did (115 median clients versus 68) but are not necessarily larger firms. They are "a mix of large and small to midsized firms," Quimby said, with a median of 10 full-time CAS employees, compared with a median of nine for all respondents. That suggests, he said, they are operating well. "As you become more efficient, you create the ability to serve more clients," he said. "You free up capacity."
CPA.com will field the CAS Benchmarking Survey again in 2022. CAS practices are encouraged to participate. "If firms didn't participate this time around, we'd love to see them take part next year and give themselves the ability to benchmark themselves against other firms," Quimby said.
About the author
Courtney L. Vien is a JofA senior editor. To comment on this article or to suggest an idea for another article, contact her at Courtney.Vien@aicpa-cima.com or 919-402-4125.
AICPA RESOURCES
Articles
"7 Tips for Starting a Client Advisory Services Practice," JofA, Aug. 2021
"Professional Liability Spotlight: Minding the Expectation Gap in a CAS Engagement," JofA, Aug. 2018
"Remove Roadblocks to CAS Practice Growth," JofA, July 28, 2020
"Client Accounting Services Driving Revenue Growth," JofA, Feb. 2017
Podcast episode
"What to Know Before Offering Client Accounting Services," JofA, April 21, 2020
Online resource
White papers
Accelerate Into Advisory (member login or registration required)
Setting the Stage for CAS Success (member login or registration required)
Private Companies Practice Section and Succession Planning Resource Center
The Private Companies Practice Section (PCPS) is a voluntary firm membership section for CPAs that provides member firms with targeted practice management tools and resources, including the Succession Planning Resource Center, as well as a strong, collective voice within the CPA profession. Visit the PCPS Firm Practice Center.
LEARNING RESOURCES
Client Accounting Advisory Services Certificate
CPE SELF-STUDY: The Client Accounting Advisory Services certificate helps firms demonstrate their expertise in the fundamental client accounting service deliverables.
Developing Your Alternative Workforce (GIG) Strategy
CPE SELF-STUDY: Gain a competitive edge over companies that continue to manage their gig workers on a transactional basis. Learn how to take a long-term view of the alternative workforce and how to set out a road map for success.
CPA.com Virtual Client Advisory Services (CAS) Roadmap Workshop
CONFERENCE: The CAS Roadmap Workshop helps firms develop a plan to build a CAS practice or expand an existing client accounting service line, using a proven and tested practice development approach to help your firm achieve success in client advisory and accounting services. Offered once a month.
CONFERENCE: Dec. 5—8, Nashville, Tenn. Digital CPA is for practitioners curious about technology and its impact on the accounting landscape. Together we're challenging business models, transforming practice areas, and driving innovation across the profession.
For more information or to make a purchase, go to aicpa.org/cpe-learning or call the Institute at 888-777-7077.
