How Other CPAs Run Their Businesses (1993)

The 1992 management of accounting practice survey administered by the Texas Society of CPAs aims to help CPA firms examine their own performances over the past year and to compare themselves with other firms. There was voluntary participation by 2,269 firms in four size categories: individual practitioners, small firms (multiowner with revenues less than $350,000), midsized firms (multiowner with revenues between $350,000 and $900,000) and large firms (multiowner with revenues above $900,000). National firms were not included. In making comparisons across years, one must remember that some of the differences are attributable to changes in those who chose to respond to the survey. FINANCIAL CHARACTERISTICS Accounting practices prospered during the past year, with average net income per owner up 4.7% to $82,200, compared with 1991's $78,500. Every firm category exceeded the previous year's results, except at the small firm level, where there was a 1.7% net decrease. This performance was due primarily to the reduction of overhead expense. Although charged hours per hours worked per person decreased slightly from 1991, net fees realized per charged hour ($49.90) were 7.3% higher than they were last year ($46.50). Each firm category increased its fees. The greatest increase occurred at the individual level, which saw a 9.1% average jump. At the same time, firm size fell to an average of 11.2 people from 11.6 in 1991. This reduction in force decreased total overhead expense, thereby increasing average net income per owner. However, 1992 survey responses showed a slight increase in the number of new professional personnel hired (1.4 in 1992 versus 1.3 the year before). The average 1992 starting salary was $21,000, up only 1.4% from 1991's $20,700. At midsized firms, starting salaries actually fell .2%, while larger firms reported slight increases. Use of overtime and incentive bonuses remained relatively constant at 34% and 51.2%, respectively. Additionally, a lower proportion of firms (26.6%) adjusted salaries more frequently than annually than did in 1991 (29.9%). It appears that to increase profits, firms are adopting leaner operations. SOURCES OF FEES Fees derived from various service categories did not vary much. Exhibit 1 above shows that - as one might expect - among aggregate revenue sources, tax services were most firms' bread and butter, although the proportion of tax services offered increased as firm size decreased. Audit services, on the other hand, while providing a little over 11% of all fee collections (as a weighted average), increased directly with firm size. The provision of review, management consulting and write-up services apparently did not relate to firm size. Services outside the traditional mix apparently contributed little to the bottom line. MARKETING ACTIVITIES Firms adopted diverse marketing approaches. As can be seen in exhibit 2 at left, individual practitioners and small firm owners were much less likely to market their services than were midsized and large firms. Bigger firms tended to rely heavily on public speaking, firm brochures and newsletters, while individuals and small firms were somewhat more varied in their advertising methods. …