Challenges And
Solutions For CPA Firms:
The 2011 PCPS CPA Firm Top Issues Commentary
Table of Contents
Looking Closely at the Lists............................................................................ 2
What Does It Mean for Firms?........................................................................ 5
Resources to Help Firms Address Top Issues................................................. 7
PCPS CPA Firm Top Issues Survey Comparison Between Years................... 13
While firms of all sizes face diverse challenges, growth and client
retention clearly are on every firm’s agenda, according to the 2011
PCPS CPA Firm Top Issues Survey. Those two issues were among
the top three challenges identified by all firm sizes. At the same
time, firms of each size also appear to have their own unique
concerns. Keeping up with tax laws and their growing complexity,
for example, remains a significant issue for sole owners.
When the survey was last taken — in 2009, in the immediate aftermath of the economic
meltdown — client retention was chosen as the top issue across the board. While holding on to
clients clearly remains an important goal for all firms, new issues have moved to the top of the
chart, depending on firm size. The 2011 PCPS CPA Firm Top Issues Survey asks practitioners
to rank the challenges facing their firms. Responses are categorized by firm size, with separate
lists released for sole owners, firms with 2-to-5, 6-to-10, 11-to-20 or 21-or-more professionals.
The survey provides a unique snapshot of the most significant challenges facing practitioners
across the country. PCPS conducts the survey every two years to provide practitioners with
insights into the trends and problems affecting firms like their own and to better serve the
needs of PCPS members.
From the survey’s inception in 1997 through 2007, staffing had been selected as the top concern
for most firms (sole practitioners generally were the exception). That changed for the first time
in 2009, when firms’ priorities shifted to client retention in the midst of the recession. This year’s
results, while similar in many ways to the last survey, also indicate that firms are beginning to
identify new issues in need of their attention. Some are familiar problems for CPAs, while others
seem to indicate continued economic uncertainty and concerns about firms’ future leadership.
1
Looking Closely at the Lists
Here’s a look at the lists and how they compare to results in past
years. The PCPS CPA Firm Top Issues Survey traditionally has
focused on the top five issues for each firm size. To see the top
ten issues for each segment, and the 2009 lists, turn to the
addendum on page 13.
Firms With One Professional
There were some significant changes in the
list for this segment of firms in 2011. Their
top item — handling tax-law changes and
complexity — has returned to the head
of the list, where it stood in every recent
survey except 2009. Among this year’s picks,
retention of clients (No. 2) topped the list in
2009, and bringing in new clients moved from
No. 8 in 2009 to No. 3 this year. Keeping up
with accounting and attest standards retained
its place at No. 4, a clear confirmation that
complexity in any area poses challenges
for the smallest firms. Seasonality/workload
compression moved up to No. 5 this year
from No. 7 in 2009. Firms With 2-to-5 Professionals
While complexity of both tax and
accounting/attest standards are concerns
for this group, growth and new business
jumped to the top of the list this year, up
from No. 9 last time. Seasonality also
weighed somewhat more heavily on this
group, edging up from No. 7 last time.
2
Firms with 1 Professional
Top 5 Issues
1
2
3
4
5
Keeping up with changes
& complexity of tax laws
Retention of current clients
Bringing in new clients
Keeping up with accounting
& attest standards
Seasonality/workload
compression
firms with 2-to-5 professionals
Top 5 Issues
1
2
3
4
5
Bringing in new clients
Retention of current clients
Keeping up with changes
& complexity of tax laws
Seasonality/workload
compression
Keeping up with accounting
& attest standards
Firms With 6-to-10 Professionals
Bringing in new clients moved to No. 1 from
No. 5 for this group in 2011. In addition, fee
pressure/pricing of services, which did not
figure on this group’s top 10 concerns in 2009,
popped into the top five. In fact, fee pressure
and pricing concerns landed in the top five
issues only for this segment and the largest
firms. As in 2009, this segment continues to
worry about retaining clients and qualified
staff, as well as dealing with tax law complexity.
Firms With 11-to-20 Professionals
The key news this year is the rise of partner
accountability/unity, which jumped to
No. 2 this year from No. 7 last time, perhaps
underscoring the importance of these
concerns in an uncertain economic climate.
Succession (No. 4) was not on the list for
these firms in 2009, indicating either that an
aging partner group has brought the issue
to the forefront or that improving economic
conditions have allowed practitioners to focus
on pressing practice-management challenges.
These firms also are worrying about finding a
good staff, an indication that the profession is
shaking off some of the recession’s effects and
once again seeking to expand. Given the soft
job market in recent years, this could mean
that firms ready to take on new people will be
in a good position to find high-quality job candidates.
firms with 6-to-10 professionals
Top 5 Issues
1
2
3
4
5
Bringing in new clients
Retention of current clients
Retaining qualified staff
(at all levels)
Keeping up with changes
& complexity of tax laws
Fee pressure/pricing of services
firms with 11-to-20 professionals
Top 5 Issues
1
2
3
4
5
Bringing in new clients
Partner accountability/unity
Retention of current clients
Developing a succession plan
Finding qualified staff
(at all levels)
3
Firms With 21-or-More Professionals
This segment has clearly found itself
motivated to think about the future. Succession
is in their top five and, along the same lines,
results imply that they also will be thinking
about identifying, developing and accessing
leadership training for new partners, which
turned up on their list at No. 10*. Strategic
planning (No. 7)*, which was not on their list
last time, appears that it will be an issue
looking ahead. These firms shared the same
top three concerns as the previous segment
(firms with 11-20 professionals), but in a
slightly different order.
*See page 13 for the Top 10 lists.
4
firms with 21+ professionals
Top 5 Issues
1
2
3
4
5
Partner accountability/unity
Bringing in new clients
Retention of current clients
Fee pressure/pricing of services
Developing a succession plan
What Does It Mean for Firms?
Taking a high-level view of the lists, it’s possible to draw a few conclusions
about CPA firm practice today.
It’s not just about putting out fires anymore. Although lingering economic uncertainty continues to cause problems for many firms and
their clients, some of the shifting priorities in this year’s lists show that firms are focusing on
future growth and development. While holding on to clients remains pivotal, firms have found
themselves able to consider other priorities, as well, including not only growth but also
succession and, among larger firms, strategic planning and development of future leaders.
Complexity of standards is a major issue for firms. This was a concern for all firms with 20 and fewer professionals, typically the kinds of practices
that serve many private companies. The AICPA has been involved in a historic effort to effect
meaningful changes in this area. Specifically, it is calling for action on the recommendations of
the Blue Ribbon Panel on Private Company Financial Reporting, which advocates differential
accounting for private companies and a separate standard-setting board that is in tune with
the needs of their financial statement users. CPAs can get involved by sharing their opinions
with the Financial Accounting Foundation, which is seeking feedback on the panel’s
recommendations, and by urging other stakeholders—such as private company clients, lenders,
investors, sureties and their own firm members—to provide their input, as well. Click here for
more information. Overall, there is a clear need for simplifying private company reporting
requirements. As discussed in “Resources to Help Firms Address Top Issues” section on page 7,
PCPS members have access to a variety of tools to help ease implementation of standards.
Tax complexity and workload compression continue to weigh on firms. This is a perennial challenge for the smallest firms in particular, but it moved to the top of
charts once again for firms with one professional. It also made the top five for all firms with 10 professionals and under and the top 10 for all but the largest firms. In the most recent year,
last-minute congressional changes in tax laws were exacerbated by delays and other
inconsistencies at the Internal Revenue Service. Late-breaking changes left firms with less
time to prepare and have effectively compressed the season into an even shorter window.
Other changes—including new deadlines for brokerage house Forms 1099 and an extended
due date for Form 1065 partnership returns—added to the overload. Growing complexity
also meant clients relied more heavily on their CPAs for help at a time when some may have
reduced staffing in light of continuing economic uncertainties. Practitioners also noted that
technology has clients, banks and others accustomed to the immediate delivery of services,
which led them to expect shorter turnaround times.
5
Fee pressures and collections pose tough problems for practitioners. In 2009, only the largest firms cited fee pressure/pricing of services as an issue, and for that
group it was No. 6 on the list. Two years later, it is within the top six issues for nearly every
firm segment. While the economic crisis may have abated, firms still are clearly facing
demands to negotiate fees or cut prices. In many cases, clients assume that “temporary” fee
renegotiations made in the worst days of the recession are now permanent. PCPS advises
firms to understand and communicate the value of their services early and often, reminding
clients before and after an engagement of the benefits that the work offers them.
Practitioners also report in many cases that the hourly billing model has become a strain on
their business. On another front, firms can implement process improvements to maintain
profitability in the face of declining fees. These might include maximizing the use of
technology, ensuring adequate planning and supervision of the engagement, delegating
work to the appropriate levels and moving away from less profitable clients. To ensure that
these steps enhance profitability, firms should not allow increased efficiencies to make their
way into the pricing model.
The future is now. Succession planning is a new item on the list for firms with 10 and fewer professionals this year,
after dropping out of their top challenges in the last survey. Once again, it appears that firms
are in a position to look past day-to-day management issues and consider the future. As the
Baby Boom partner group grows older, PCPS has been emphasizing the importance of
succession planning for many years, and practitioners have clearly begun listening. In one
notable example, while only 9% of sole proprietors reported having a practice continuation
agreement in the 2008 PCPS Succession Survey, succession planning is now among this
group’s top 10 issues.
Leadership is key. Whether developing future leaders, improving strategic planning or making realistic
succession plans, the firms at the largest end of the spectrum clearly appreciate the
importance of thinking for the long term. Many firms also are wrestling with partner
accountability/unity, which was among the top two issues for firms with 11 and more
professionals. While this may have been a less urgent concern for some before the economic
downturn, firms are now expecting partners to make an active contribution to the practice’s
overall strategic goals. In a stronger economy, firms may have been more tolerant of partners
who did not contribute to business or staff development or were willing to withhold judgment
in hopes a partner might eventually grow into a leadership role. It seems clear that many firms
are now reconsidering their partner expectations and envisioning new standards for the
partnership role.
6
Resources to Help Firms Address Top Issues
PCPS continually creates new tools that help members tackle their most
important challenges and lay the groundwork for success. Here’s a roundup
of resources (most of them free to PCPS members) related to some of the
issues that appeared most often on the 2011 survey.
a
Keeping Up With Changes and Complexity of Tax Laws News updates, videos discussing new developments and access to the AICPA Tax Adviser and
Tax Insider are just some of the free tools available to AICPA members wrestling with this
challenge. Many of the toolkits and resources associated with specific legislation include
resources to help CPAs talk to clients and staff about the implications of new rules. The AICPA
also is actively involved in advocating for measures that would simplify tax regulations. In
addition, turn to:
• AICPA Tax Resources Page
• AICPA Tax Section (separate membership required, but many free resources at the site)
• AICPA 2010 Tax Relief Act Resources
• PCPS Small Business Jobs Act of 2010 Toolkit
• AICPA Healthcare Reform Toolkit
• The Tax Adviser
• AICPA Tax Insider
• Practitioners Symposium and TECH+ Conference in partnership with the Association for Accounting Marketing Summit, to be held June 11-13, 2012, in Las Vegas (PCPS members receive a $125 discount on registration).
7
b
Retention of Clients When this issue jumped to the head of every list in 2009, PCPS immediately created the PCPS
Client Service Resource Center to provide members with the tools they need to address
issues such as communicating and connecting with clients; fees, billing and marketing; and
improving client service. Another PCPS resource developed to address client retention is “Client Service - A Five Star Model”. This guide, developed with Rainmaker Consulting, LLC,
is part of the Human Capital Center’s Owner Development section. The Five Star Model
focuses on helping firms build long-term relationships with their clients. PCPS also is in the
process of building a PCPS Marketing and Business Development Resource Center with new
targeted tools to help firms forge critical bonds with potential and existing clients. (Watch for
this center to debut in the summer of 2011.) Turn also to the Marketing and Practice Growth
section of the PCPS site. Among the exclusive tools available now to PCPS members are:
• The PCPS YOU Are the Value Workshop, developed from Leo Pusateri’s book You Are the Value: Define Your Worth, Differentiate Your CPA Firm, Own Your Market, written specifically for CPAs. The workshop walks firm members through practical strategies to help them build meaningful and lasting relationships with clients and helps participants discover and make the most of their own unique value. This online workshop, a free PCPS member benefit, is available to anyone in a PCPS member firm.
• Client advisory boards can be powerful tools to help firms retain current clients and attract new ones. The PCPS Client Advisory Board Toolkit contains a host of practical tools to get one started. It can be found at the PCPS Client Service Resource Center.
• The PCPS Economic Podcast Series features advice on marketing and client service.
• The AICPA Trusted Business Advisor Workshop focuses practical strategies for strengthening client relationships.
SM
• Practitioners Symposium and TECH+ Conference in partnership with the Association for Accounting Marketing Summit, to be held June 11-13, 2012, in Las Vegas. As always, this multifaceted conference will feature sessions with well-known experts describing tips for keeping top clients. (PCPS members receive a $125 discount on registration).
8
c
Bringing in New Clients Once again, the PCPS Client Service Resource Center is a great place to find tools to promote
the kind of high-quality client services that will impress new clients and turn existing clients into
enthusiastic referral sources. (The new PCPS Marketing and Business Development Resource
Center, scheduled to launch in the summer of 2011, also will contain a wealth of practice
development tools.) Other related resources include:
• Small Firm Marketing Brochures
• AICPA CPA Marketing Toolkit
• PCPS Podcast Series—Helping Firms with Internal Operations
• AICPA Trusted Business Advisor Workshop
SM
• Practitioners Symposium and TECH+ Conference in partnership with the Association for Accounting Marketing Summit, to be held June 11-13, 2012, in Las Vegas (PCPS members receive a $125 discount on registration).
d
Keeping Up With Accounting and Attest Standards As noted elsewhere, the AICPA is involved in a historic effort to bring greater relevance and
usefulness to private company financial reporting. (Click here for more information.) CPAs
concerned about the complexity of accounting standards are urged to learn more about this
initiative. In addition, practitioners should be aware of these resources:
• PCPS SSARS No. 19 Toolkit
• PCPS Risk Assessment Standards Toolkit
• PCPS SAS 112/115 Toolkit
• PCPS Technical Issues Alert
• The PCPS Independence Toolkit
• The PCPS client brochure, “Comparative Overview of Compilation, Review, and Audit Brochure”
• A Journal of Accountancy article, “Clarified Auditing Standards: The Quiet Revolution.”
• Practitioners Symposium and TECH+ Conference in partnership with the Association for Accounting Marketing Summit, to be held June 11-13, 2012, in Las Vegas (PCPS members receive a $125 discount on registration).
9
10
e
Seasonality/Workload Compression Seasonality Success is a PCPS newsletter dedicated to helping CPAs make the most of busy
season and other opportunities throughout the year. “Pre-Season Success Strategies,” a topic
in the PCPS Economic Podcast Series, provides tips that can prepare any practitioner for
combating the issues around seasonality. In addition, the PCPS Human Capital Center’s
Work/Life and Retention section provides a host of resources to help firms address staffing
issues related to workload compression. The AICPA also takes a leadership role in advocating
for legislation and regulation that are in the best interests of the public and CPAs, including
measures that would minimize workload compression.
f
Fee Pressure/Pricing of Services When CPAs experience fee pressure and are tempted to cut or negotiate fees, it’s important
to have a solid perspective on which clients are the most valuable to the firm. The PCPS
Client Evaluation Form, available in the PCPS Firm Strategy and Planning tools (accessible
through the PCPS site’s Resources section) is a spreadsheet that enables firms to rank clients
in order of greatest importance, based on set criteria. In addition, PCPS Profitability and
Pricing Strategies tools (accessible through the PCPS site’s Resources section) include an
action plan, pricing tool, sample client culling letter and more resources. Fee pressure is also
the topic of one of the presentations in the PCPS Economic Podcast Series. CPAs who are
aware of the value of their services and are able to articulate this value to clients may be able
to avoid fee pressure and set themselves apart in the marketplace. Leo Pusateri’s book You
Are the Value: Define Your Worth, Differentiate Your CPA Firm, Own Your Market written
specifically for CPAs, offers advice on how to accomplish those goals. The PCPS YOU Are the
Value Workshop helps members put the book’s advice into practice.
g
Finding Qualified Staff (at all levels)/Retaining Qualified Staff (at all levels) While the economic slowdown may have lowered the competition for staff, it has also
underscored the importance of holding on to the best people in order to maintain practice
quality. To sharpen a firm’s competitive edge, the PCPS Human Capital Center is the first place
to turn for valuable tools that address issues such as team recruitment and development, work/life and retention, performance management, reward & compensation & incentives and
other related topics. Other resources include the PCPS Human Capital Forums and HR
Networking Group, which offers education and networking opportunities to those charged
with staffing responsibilities. In addition, CPAs can find sessions on staffing at the Practitioners
Symposium and TECH+ Conference in partnership with the Association for Accounting
Marketing Summit, to be held on June 11-13, 2012, in Las Vegas (PCPS members receive a $125 discount on registration).
h
Partner Accountability/Unity A struggling economy, a hot M&A market, a large percentage of partners heading toward
retirement all are among many challenges facing CPA firm leaders. They may explain why
accountability and unity remain a top issue for firms with 11 or more professionals, jumping
from No. 7 in 2009 to No. 2 this year for the 11-to-20 professionals firm and from No. 2 to No. 1
for firms with 21 or more professionals. PCPS will be publishing a new learning guide and
related tools describing how to drive an accountability culture and how to build a leadership
model. Look for these resources in fall 2011. Related resources in the PCPS Human Capital
Center include:
• The PCPS CPA Firm Competency Model. This outstanding tool includes descriptions of roles and expectations for every firm level, including partner, in areas such as technical ability and business knowledge; client service; productivity; business development; and people development and teamwork.
• The PCPS Human Capital Center’s Reward & Compensation & Incentives section features tools such as a Pay for Performance Learning Guide and the related Sample Partner Win-Win Agreement.
11
i
Developing a Succession Plan The PCPS Succession Planning Resource Center helps CPAs achieve a range of long-term
goals, whether it involves positioning the firm to sell or merge, developing future leaders,
determining value or simply turning out the lights at retirement. CPAs will also find sessions
on this topic at the Practitioners Symposium and TECH+ Conference in partnership with the
Association for Accounting Marketing Summit, to be held June 11-13, 2012, in Las Vegas
(PCPS members receive a $125 discount on registration).
This publication has not been approved, disapproved or otherwise acted upon by any
senior technical committees of, and does not represent an official position of, the American
Institute of Certified Public Accountants. It is distributed with the understanding that the
contributing authors and editors, and the publisher, are not rendering legal, accounting or
other professional services in this publication. The views expressed are those of the authors
and not the publisher. If legal advice or other expert assistance is required, the services of a
competent professional should be sought.
12
PCPS CPA Firm Top Issues Survey
Comparison Between Years
2011
2009
1 Professional
1Keeping up with changes and complexity of the tax laws
2Retention of current clients
3Bringing in new clients
4Keeping up with accounting and attest standards
5Seasonality/workload compression
6Fee pressure/pricing of services
7Management of and control of technology (e.g., servers in
the cloud, mobile devices, client portals) and keeping
up with the investment in technology
8Managing work/life balance initiatives
9Developing a succession plan
10Client collections
1Retention of current clients/Client retention
2Keeping up with changes and complexity of the tax laws
3The effect on smaller firms caused by new regulations and standards
4Keeping up with standards
5Work/life balance initiatives
6Keeping up with technology
7Seasonality/workload compression
8Marketing/practice growth: bring in new clients
9Public perception of the value of the CPA license
10Private Company GAAP
2-5 Professionals
1Bringing in new clients
2Retention of current clients
3Keeping up with changes and complexity of the tax laws
4Seasonality/workload compression
5Keeping up with accounting and attest standards
6Fee pressure/pricing of services
7Managing work/life balance initiatives
8Finding qualified staff (at all levels)
9Developing a succession plan
10Client collections
6-10 Professionals
1Bringing in new clients
2Retention of current clients
3Retaining qualified staff (at all levels)
4Keeping up with changes and complexity of the tax laws
5Fee pressure/pricing of services
6Client collections
7Developing a succession plan
8Seasonality/workload compression
9Finding qualified staff (at all levels)
10Keeping up with accounting and attest standards
1Retention of current clients/Client retention
2Keeping up with changes and complexity of the tax laws
3The effect on smaller firms caused by new regulations and standards
4Keeping up with standards
5Work/life balance initiatives
6Keeping up with technology
7Seasonality/workload compression
8Finding qualified staff (at all levels)
9Marketing/practice growth: bring in new clients
10Client collections
1Retention of current clients/Client retention
2Retaining qualified staff (at all levels)
3The effect on smaller firms caused by new regulations and standards
4Keeping up with changes and complexity of the tax laws
5Marketing/practice growth: bring in new clients
6Finding qualified staff (at all levels)
7Client collections
8Keeping up with standards
9Keeping up with technology
10Work/life balance initiatives
11-20 Professionals
1Bringing in new clients
2Partner accountability/unity
3Retention of current clients
4Developing a succession plan
5Finding qualified staff (at all levels)
6Retaining qualified staff (at all levels)
7Keeping up with accounting and attest standards
8Client collections
9Fee pressure/pricing of services
10Keeping up with changes and complexity of the tax laws
1Retention of current clients/Client retention
2The effect on smaller firms caused by new regulations and standards
3Retaining qualified staff (at all levels)
4Marketing/practice growth: bring in new clients
5Keeping up with standards
6Finding qualified staff (at all levels)
7Partner accountability/Partner unity
8Identifying and developing new partners/Developing a succession plan
9Client collections
10Keeping up with changes and complexity of the tax laws
21+ Professionals
1Partner accountability/unity
2Bringing in new clients
3Retention of current clients
4Fee pressure/pricing of services
5Developing a succession plan
6Retaining qualified staff (at all levels)
7Developing/implementing a strategic or long-range plan
8Finding qualified staff (at all levels)
9Seasonality/workload compression
10Identifying, developing and accessing leadership training
for new partners
1Retention of current clients/Client retention
2Partner accountability/Partner unity
3Identifying and developing new partners/Developing a succession plan
4Marketing/practice growth: bring in new clients
5Retaining qualified staff (at all levels)
6Fee pressure/pricing of services
7The effect on smaller firms caused by new regulations and standards
8Client collections
9Keeping up with standards
10Mentoring and career coaching
Copyright © 2011 American Institute of CPAs®
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