THE PCPS CPA FIRM
2013 TOP ISSUES
DIAGNOSTIC REPORT
CPA firms appear to be experiencing renewed demand for their services, based on the
findings of the 2013 PCPS CPA Firm Top Issues survey. Putting the economic uncertainty
of the past few years behind them, CPA firms clearly have an eye on the future — and on
further growth. While the top issues affecting CPA firms vary based on size, bringing in
new clients was a common concern for all. The survey also found an increasing focus on
staffing, an issue that had cooled off somewhat in past surveys in the wake of the
recession, and one that also would seem to indicate that business is improving.
CONTENT
INTRODUCTION ......................................................................................... 2-3
DIAGNOSTICS OF RUNNING A TOP-PERFORMING FIRM .................. 4-9
TUNE UP TO OPERATE AT PEAK PERFORMANCE ...........................10-11
WHAT’S NEXT ON THE ROAD AHEAD? ..................................................12
RESOURCES TO REV UP YOUR FIRM’S PERFORMANCE ..................14-17
TOP TEN ISSUES SURVEY ......................................................................18-19
INTRODUCTION
When the survey was last taken in 2011, bringing in new business also was
a critical concern. However, in that year, retention of current clients showed up
on every segment’s top-five list, while it only made two groups’ top five in 2013.
Firms, buoyed by a strengthening economy, seem more confident in their ability
to hold on to existing clients and seem to be shifting their emphasis to gaining
more work.
Another significant change in 2013: Succession challenges, a looming reality for
many practices, became a hot topic for nearly all firm segments. In 2011, only
the largest firm segments chose this issue for their top five.
The survey 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 identify trends that will help better serve the needs of
PCPS members.
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There was some remarkable consistency in the 2013 results, but
firms of each size had their own unique priorities and concerns.
For example, the survey was fielded shortly after April 15, and
in the wake of a particularly tough busy season (and in line
with previous surveys), the smallest firms picked tax law
changes and complexity as their chief concern. They also
cited workload compression as among their top five issues.
Throughout the years, the PCPS CPA Firm Top Issues Survey
has proven to be an excellent indicator of the chief challenges for
practitioners. For example, from the survey’s inception in 1997 through 2007, staffing
was the top concern for most firms (sole practitioners generally were the exception).
That changed in 2009, when for the first time all firms’ top priority shifted to one issue:
client retention. Bringing in new clients became a common concern in 2011, as firms and
clients rebuilt after the meltdown. This year’s results show that firms remain focused on
acquiring additional business and on laying a foundation for future transition in a
changing marketplace.
3
DIAGNOSTICS OF RUNNING A TOP-PERFORMING FIRM
Here’s an introduction to the firm segment lists and how they compare to results in past years.
The PCPS CPA Firm Top Issues Survey Commentary focuses on the top five issues for each
firm size. To see the top ten issues for each segment, and the 2011 and 2009 lists, turn to the
addendum on page 18.
4
1. Keeping up with changes and complexity of tax laws
2. Bringing in new clients
3. Seasonality/workload compression
4. Retention of current clients
5. The effect on firms caused by new federal & state
regulations (e.g., increasing complexity, costs to comply)
Grappling with the tax laws generally has been the greatest challenge for sole owners, barring
one exception in 2009 after the financial crisis. Most of the other items on this group’s list were
identical to those cited in 2011, although they were not necessarily in the same order. Like
many of the firmsegments, it appears that sole owners have pulled through the recession and
remain focused on the core business of running an accounting firm. However, this segment was
one of only two that chose client retention as a top five issue, indicating that they and their
clients may continue to face economic challenges. One newcomer to the list this year was the effect of federal and state regulations, which was not on the top-five list in 2011. Many
practitioners report that small companies are struggling with health care reform, and this
entry may reflect that problem. It may also be a result of complexities in state and local tax
regulations, particularly since CPAs now have greater mobility to do business across state
lines. Missing from this year’s list was keeping up with accounting and attest standards,
which dropped to No. 8 from No. 4 in 2011.
SOLE PRACTITIONERS
SOLE PRACTITIONERS
5
1. Keeping up with changes and complexity of tax laws
2. Succession planning
3. Finding qualified staff
4. Bringing in new clients
5. Seasonality/workload compression
Succession, which was not in this segment’s top five in 2011, jumped to second place this year.
This may be because more of these firms’ partners are nearing retirement or because news of
the active merger and acquisition market is forcing them to reconsider their future. In addition,
finding qualified staff (at all levels) moved up to No. 3 in 2013 from No. 8 in 2011. Combined
with bringing in new clients, at No. 4, this appears to paint a picture of firms that are poised for
future growth, another possible reason that succession — and the long-term health of the firm
— are on their minds. Keeping up with accounting and attest standards, which was No. 5 in
2011, dropped out of this year’s top five for all firms with five or fewer professionals.
6
FIRMS WITH 2 – 5 PROFESSIONALS
FIRMS WITH 2 TO 5 PROFESSIONALS
1. Succession planning
2. Finding qualified staff
3. Bringing in new clients
4. Retaining qualified staff
5. Owner/partner accountability and unity
Succession planning, this group’s No. 1 issue, was not on their top-five list in 2011. Its prominence this year is consistent with findings in the 2012 PCPS/TSCPA National MAP Survey and the 2012 PCPS Succession Survey. Elsewhere, there were numerous
changes for this segment from their 2011 results. While 2011’s top-five list included client retention and fee pressure/pricing (with client collections coming in at No. 6), those concerns didn’t make the top-five list this year, an apparent sign of healthy business demand. Firms were worried about retaining qualified staff in 2011 and 2013,
but finding staff also moved into their top five this year. Owner/partner accountability and
unity appeared on this group’s top five for the first time. It seems that — while building
their businesses — this group of firms is turning inward to enhance their talent and their
leadership in order to facilitate renewed growth. It’s easy to see why succession — and
developing new leaders internally — would be on their minds.
FIRMS WITH 6 – 10 PROFESSIONALS
FIRMS WITH 6 TO 10 PROFESSIONALS
7
1. Bringing in new clients
2. Finding qualified staff
3. Succession planning
4. Retaining qualified staff
5. Retention of current clients
Four of the items on this group’s list were in their top five in 2011, but partner
accountability and unity, which was No. 2 in 2011, did not appear in this year’s top five.
Instead, retaining qualified staff moved onto the list at No. 4, underscoring the new
emphasis on staff — and once again likely reflecting a growing demand for CPA services.
This group’s top-two issues also attest to their apparent emphasis on growth. On the
other hand, this is one of only two segments that cited client retention as a top-five issue,
indicating that hopes for growth are tempered with concerns about existing business.
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FIRMS WITH 11 – 20 PROFESSIONALS
FIRMS WITH 11 TO 20 PROFESSIONALS
1. Owner/partner accountability and unity
2. Bringing in new clients
3. Retaining qualified staff
4. Succession planning
5. Finding qualified staff
Several of this segment’s 2013 issues also were unchanged from 2011, with a
couple of notable exceptions. Looking back at 2011 issues, client retention was
gone from this year’s top five, and fee pressure/pricing was not even in the top ten.
Instead, finding and retaining qualified staff jumped into the top five. Owner/partner
accountability and unity has been one of this group’s top two issues since 2009, and
succession planning also appeared in their 2011 top five. As can be seen in other
segments, these findings appear to paint a picture of firms seeking ways to lay a
foundation for robust future growth.
FIRMS WITH 21+ PROFESSIONALS
FIRMS WITH 21+ PROFESSIONALS
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TUNE UP TO OPERATE AT PEAK PERFORMANCE
Reviewing the data as a whole, the findings spotlight a number of trends and developments.
Firms have shaken off many of the worst effects of the recession. In 2009 and 2011, client retention was among the top five issues for all firms. This year, it’s only among the top five for two firm segments. Similarly, fee pressure/pricing, which showed up on two top-five lists in
2011, was not on any top five this year. Client collections, which was among the top ten issues for all but the largest firms in 2011, did not make any top ten list this time.
Practitioners are back in the business of growth. Demand is strong once again at CPA firms, as evidenced by:
• An emphasis on bringing in new clients
•Mounting concern about staffing issues, an issue that had moved from center stage in the recession years
Juggling busy season pressures and deciphering tax law complexity remain significant
hurdles for the smallest firms. The particularly challenging 2013 tax season may have
influenced these results, but tax law concerns have been a persistent top issue
for these practices.
10
Firms should prepare for strong competition for good staff. Finding qualified staff was among the
top five for all but the smallest firms. In 2011, it only made the top-five list for firms with 11 to 20
professionals, and in 2009 it didn’t make any group’s top-five list. Firms would do well to renew their hiring and retention efforts so they are ready to service the new business they are seeking.
The time to think about succession is now. It is a particularly critical concern as Baby Boomers
head into retirement and as firms face concerns about finding and retaining staff who are
qualified not only to perform services but also to take on leadership roles. This task is complicated
by the differing attitudes and expectations of the next generation, professionals who may not want
to work the lengthy hours that current firm leaders put in. Firms that have not begun concentrating
on their transition to new ownership or leadership would be well advised to do so.
As firms regroup after the recession, partner unity and accountability are in the forefront in both
smaller and larger firms. During the downturn, firms were forced to scrutinize their policies and
procedures and to ask all owners to work together to maintain a thriving practice. Even if CPA
firms are experiencing improved demand today, practitioners seem to be using the lessons they
learned during the recession to set new standards for partners and to create a better sense of
consistency within their firms.
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11
WHAT’S NEXT ON THE ROAD AHEAD?
Although this commentary reviews the top-five issues for each segment, the survey
identifies the ten major concerns for every group and a brief look at these items can
identify issues firms should keep on their agendas. For example, although sole
owners are the only group that did not place succession in their top five, this issue
does figure in their top ten, and it’s clearly something all sole owners should be
addressing, no matter what their long-term goals may be. Firms with five or fewer
CPAs also put fee pressure/pricing as concerns on their top-ten list, the only ones to
do so. Developing a strategic plan was another issue on the minds of firms with 11 to
20 CPAs, and encouraging entrepreneurial spirit was a concern for the largest firms,
making it clear that long-range goals and staff development are critical.
It’s also interesting to consider an issue that did not appear on any segment’s top
ten issues in 2013: mergers and acquisitions. While the M&A market has been very
active, the survey respondents didn’t list it among their top five concerns. Are firms
growing — or planning to grow — organically instead? Or do they feel they’re on
top of the M&A action and prepared to respond to changes in their marketplace
and the opportunities they may present? These are clearly interesting questions that
are worth watching in the near term.
12
13
RESOURCES TO REV UP YOUR FIRM’S PERFORMANCE
The AICPA and PCPS continually create new tools and provide resources that help members
tackle the most important challenges and lay the groundwork for success. Here’s a roundup of resources (many of them free to or discounted for PCPS members) related to the issues that
appeared most often on the 2013 survey.
To Do
Bringing in New Clients and Client
Retention
14
AICPA/PCPS Member Resource
Identify new service opportunities that
resonate and build client trust
PCPS Practice Growth Center: Trusted Business Advisor Toolbox
Start conversations and reinforce your
message about the valuable year-round tax
services you provide
AICPA Tax Practitioners Toolkit
Form a board of current and prospective
clients to gain perspective on their expectations and how the firm can improve,
cross sell and add to its service offerings
PCPS Practice Growth Center: Client Advisory Board Toolkit
To Do
Succession
Planning
Finding and
Retaining
Qualified Staff
AICPA/PCPS Member Resource
1.Understand your options (selling, merging or developing and transitioning new leadership)
2.Decide and implement a plan using the templates and checklists
PCPS Succession Planning Resource Center
• Transfer An Accounting Practice checklist
• Due diligence checklist
• Shareholder in training checklist
• Sample Practice Continuation Agreement
Put your succession plan into high gear by
attending an interactive workshop with
experts guiding you through developing —
or altering — and implementing your firm’s
succession plan
AICPA Succession Summit
Train emerging partners and top talent to be
solid leaders and gain the entrepreneurial spirit it takes to continue the legacy of your firm
Emerging Partner Training Forum
Design programs that will support different
work styles, provide motivation and create
engaging work environments
PCPS Human Capital Center: Employee
Retention and Work/Life section
Perform a realistic assessment of your staffing
needs and consider which recruiting methods
will give you the best bang for your buck
PCPS Human Capital Center:
Team Recruitment section
Provide a solid career path that provides
vision for advancement by tailoring job
descriptions that detail the competencies
needed at each level
PCPS Human Capital Center:
Firm Competency Model
15
To Do
Keeping Up
with Changes
and Complexity
of Tax Laws
Seasonality/
Workload
Compression
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AICPA/PCPS Member Resource
Stay connected to tax issues and receive
timely alerts on tax regulations, court
decisions, legislation, and practice management
AICPA Tax Section Membership, including
Tax E-Alerts
Stay up-to-speed on the latest developments
in Washington and the profession’s response
to them with the recurring webinar series
Washington Tax Brief webinar series
Visit the web page that is your one-stop-shop
for newly developed tools and aids you may
find useful based on the time of year or
trending issues
Tax Practice Resources web page
Find out how other practitioners in similar size
firms are addressing compression issues
The PCPS Practicing CPA
Evaluate clients to see which ones aren’t the
right fit for your firm and are hindering your
efficiency; spend more time and resources on
finding and serving your ideal clients
PCPS resources on evaluating and firing clients:
• Client Evaluation Tool
• Client Disengagement Letter
Keep tabs on AICPA advocacy efforts to
change tax due dates
AICPA Advocacy
To Do
Owner/Partner
Accountability
and Unity
The Effect of Federal and State
Regulations
AICPA/PCPS Member Resource
Develop a culture of performance and
accountability
PCPS Human Capital Center: Partner
Accountability & Unity Guide and Action Plan
Grow and develop leadership skills and
accountability and also take full advantage of owner retreats by providing the time for
owners/partners to focus on strategic
planning that connects on a deeper level
PCPS Human Capital Center:
Leadership & Partner Retreat Guide
Conduct a “Future Forum” that engages all partners in developing a unified forward-thinking vision as part of strategic
planning at your next partner retreat
PCPS CPA Horizons 2025 Toolkit
Advise and prepare clients for the impacts of health care reform with client-facing
brochures and talking points; use the staff
training PowerPoint in the toolkit to get your
professionals in the know
AICPA Health Care Reform
Resources Center:
PCPS Health Care Reform Toolkit
Follow AICPA advocacy efforts on the state
and federal level to see which issues should
be on your radar screen
• CPA Advocate Newsletter
• AICPA Federal & State Issues Web pages
For these and many other practice management resources, please visit aicpa.org/PCPS.
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ADDENDUM 1
PCPS CPA FIRM TOP ISSUES SURVEY
COMPARISON BETWEEN YEARS
2013
20112009
SOLE PRACTITIONERS
1Keeping up with changes and complexity of the tax laws
2Bringing in new clients
3Seasonality/workload compression
4Retention of current clients
5The effect on firms caused by new federal & state
regulations (e.g., increasing complexity, costs to comply)
6Finding qualified staff
7Succession planning
8Keeping up with and implementing new accounting
and attest standards
9Fee pressure/pricing of services
10Leveraging technology to enhance client service
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
2-5 PROFESSIONALS
1Keeping up with changes and complexity of the tax laws
2Succession planning
3Finding qualified staff
4Bringing in new clients
5Seasonality/workload compression
6Retention of current clients
7Retaining qualified staff
8Keeping up with and implementing new accounting
and attest standards
9Fee pressure/pricing of services
10The effect on firms caused by new federal & state
regulations (e.g., increasing complexity, costs to comply)
18
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
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
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
2013
20112009
6-10 PROFESSIONALS
1Succession planning
2Finding qualified staff
3Bringing in new clients
4Retaining qualified staff
5Owner/partner accountability/unity
6Seasonality/workload compression
7Keeping up with changes and complexity of the tax laws
8Aging of owners/partners
9Effective utilization & management of staff
(capacity, pushing work down)
10Retention of current clients
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
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
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
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
11-20 PROFESSIONALS
1Bringing in new clients
2Finding qualified staff
3Succession planning
4Retaining qualified staff
5Retention of current clients
6Seasonality/workload compression
7Owner/partner accountability & unity
8Developing/implementing a strategic or long-range plan
9Identifying new owner/partners
10Owner/partner development
21+ PROFESSIONALS
1Owner/partner accountability & unity
2Bringing in new clients
3Retaining qualified staff
4Succession planning
5Finding qualified staff
6Retention of current clients
7Developing an entrepreneurial spirit among staff
to enhance their client- and industry-specific knowledge
8Seasonality/workload compression
9Aging of owners/partners
10Effective utilization & management of staff
(capacity, pushing work down)
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any senior technical committees of, and does not represent an official position of,
the American Institute of CPAs. 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.
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