INSIDE Public Accounting Releases The 2015 National Benchmarking Report

SOLID REVENUE GROWTH, STEADY PROFITS, STAFF SHORTAGES MARK LAST FISCAL YEAR FOR NATION’S PUBLIC ACCOUNTING FIRMS

The nation’s accounting firms are showing solid growth in revenues with growing emphasis on non-traditional services, according to the just released INSIDE Public Accounting’s (IPA) National Benchmarking Report.

Merger activity is still strong, with one in five firms reporting at least one acquisition in the last fiscal year. Mergers have added an average of 2% to net revenue growth for all firms that participated in IPA’s Annual Survey and Analysis of Firms. The report provides detailed information in 80+ pages of tables presented in nine different revenue bands so firms can easily compare with other similar-sized firms. All but the smallest revenue band experienced an average of 4.5% to 7.9% top-line organic growth in net revenue, the report says, and some individual firms saw increases much larger than that, with rare examples of organic growth above 20%.

This 25th annual report, the largest of its kind, is based on survey results from more than 500 accounting firms – including the top 200 firms and 327 other firms - ranging in size from $1 million to over $1 billion across the country, providing a clear picture on the health of the
profession.

“Growth may be in the single digits for firms outside the Big 4, but every year accounting firms are continuing to gain ground lost during the recession,” says IPA Publisher Mike Platt. “Net income is up, partners are making more money, and profits margins showed a slight uptick.” Firms are shifting their focus by extending their reach into less traditional service areas, the report says. Over the last few years, the largest firms are seeing revenue from accounting and auditing decrease as a share of the overall revenue, with a steadily increasing share coming from other non-traditional sources like consulting, litigation support, and wealth management.

The data also reveals the challenges that remain. Kelly Platt, IPA Publisher says, “Turnover among experienced staff is forcing partners to take on work they would normally delegate. In addition, billing rates aren’t increasing as fast as staff salaries, which translates into pressure for
more production.”

The IPA National Benchmarking Report is used by managing partners, firm administrators and leaders, marketers, attorneys, and business development directors to compare their firm’s performance against others, and to uncover trends, ideas and techniques to improve operations.

Some highlights:

- Bottom-line growth in net income was up – from 4% to 10% on average across all revenue bands.
- Profit margins are holding steady – with a slight uptick this year to 30.2% for all participating firms – despite a continued rise in personnel costs as a percentage of revenue, which continue to increase annually for most revenue bands.
- IPA is beginning to see more firms stop tracking traditional work hours, opting instead to focus on charge hour budgets. This is in line with the changing nature of the workplace, as the majority of firms adopt flextime schedules (85%) and telecommuting (66%) options for staff.
- Professional staff turnover rates in the largest firms (above $75 million) averaged 17.0% last year, with one in six of them experiencing turnover rates above 20%.
- Average percentage of female ownership among the 500+ firms that participated in this year’s survey is at 16.9%, up from 15.6% last year. Among the IPA 100 firms, that number is 15.0%, up from 14.0% last year.
- Average net income per equity partner for all participating firms rose 3.5% to $472,329, but this metric is greatly affected by firm size.

The report also covers partner compensation, administrative salaries, fees by niche, partner workloads, marketing costs, training requirements, realization, retirement plans and dozens of other metrics – both by revenue band and region of the country.

For additional insight into the results of the 2015 IPA National Benchmarking Report, access a complimentary copy of the full executive summary of the report.