Client accounting services (CAS) is becoming an important revenue category for public accounting firms of all sizes, with larger firms seeing it gain a significant slice of their revenue pie during the past two years, according to a survey from the AICPA Private Companies Practice Section (PCPS) and CPA.com, the Institute’s marketing and technology subsidiary.
The percentage of net client fees provided by CAS, which includes outsourced finance and accounting services and other back-office support for clients, more than doubled for firms in the largest revenue segment tracked by the 2016 National Management of an Accounting Practice (MAP) Survey, initial results of which were released earlier this fall and showed top-line revenue growth among firms of all sizes.
Among firms with revenue of at least $10 million that offer virtual CFO and other client accounting services, CAS accounted for 9% of net client fees, up from 3.9% in the 2014 MAP survey. The CAS category also produced double-digit percentage gains in the next two largest MAP segments—firms with annual revenue of $5 million to $10 million and those with annual revenue of $1.5 million to $5 million.
“It’s safe to say that nearly 10% of revenues in the profession are focused on client accounting,” said Mark Koziel, CPA, CGMA, the AICPA’s executive vice president–Firm Services, who discussed the survey results at the 2016 Digital CPA Conference in Las Vegas. “And depending on the size of the firm, it may be more or slightly less, but overall it’s a strong category on its own. Tax and audit continue to be the number one and number two revenue categories, but client accounting demonstrates growing significance to the profession.”
Among firms that offer CAS, the percentage that the category contributes to the top line ranged from 20% for the smallest firms (those with revenue of less than $200,000) to 8.5% for firms in the second-largest revenue segment.
Koziel credits automation and other technologies with helping to fuel the growth of client accounting services. Tasks that once were costly and time-consuming to handle have become profitable, making the category attractive for firms. In addition, the ease of access to this technology, much of which is delivered via the internet (aka the cloud), has opened up CAS as a practice offering for even the smallest firms.
“What was once just a service we’d do when asked, more firms are dedicating resources to it and finding it to be very profitable,” Koziel said in an email. “For the newest small firms, it’s ease of access to technology to open a practice based on the service.”
The AICPA PCPS/CPA.com National MAP Survey is conducted every two years by the AICPA Private Companies Practice Section and CPA.com, the AICPA’s technology subsidiary. Representatives from 1,537 CPA firms were asked details about their latest fiscal-year financial results. Responses were gathered from May through July this year. The poll’s main sponsor is Aon.
—Jeff Drew (email@example.com) is a JofA senior editor.