INSIDE Public Accounting Releases The 2017 Accounting Firm Internal Operational Reports

INSIDE Public Accounting (IPA) has released their sixth annual Internal Operational Reports, comprised of the Firm Administration Report, the Human Resources Report and the Information Technology Report. This release coincides with the release of IPA’s 2017 National Benchmarking Report.

These internal operational reports examine further the operations and best practices of hundreds of accounting firms across North America, offering information on compensation, business incentives, bonuses, turnover, recruiting, partner compensation, technologies used and dozens of other topics and metrics – broken out by revenue bands and regions of the country.

The IPA Internal Operational Reports are used by managing partners, firm leaders, marketers, attorneys, firm administrators and business development directors to compare their firm’s performance against others, and to uncover trends, ideas and techniques to improve operations.

Key highlights from the 2017 INSIDE Public Accounting Firm Administration Report:

  • Training directors are now employed by 23% of all firms. In firms above $30 million, that number jumps to 54%.
  • Firms above $30 million are employing more social media staff this year, with 48% of firms of this size reporting they have someone dedicated to this area. Overall, 19% of all firms have social media staff, up from 16% last year. The average salary of a social media staff member is $60,579.
  • Sixty-seven percent of firms charge interest on overdue accounts receivables, with the average charging 1.3% monthly.
  • One in 15 firms report outsourcing some portion of tax return processing work, with the majority of those coming from firms greater than $30 million in revenue.
  • Firms acknowledge that they want staff looking for new business opportunities, whether it comes in the form of new clients or additional services to existing clients. Sixty percent of firms offer incentives for bringing in new clients for 0- to 2-year staff and 3- to 5-year staff. More than half the firms offer these incentives for all experience levels.

Key highlights from the 2017 INSIDE Public Accounting Human Resources Report:

  • Professional staff turnover declined this year, to 12.4% nationwide from 13.9% for the 2016 reporting year.
  • Professional staff have an average tenure of 6.6 years, about 100 days longer than in 2016, and roughly one year longer than a decade ago. Over the last decade, the tenure of professional staff employed at the largest firms, those over $75 million, trailed the all-firm average by as little as six months in 2007 to as much as 1.4 years in 2011. At that time, the average tenure was 4.5 years for professional staff at firm of over $75 million.
  • Nearly 50% of firms offer telecommuting options to all staff and 28% offer it to professional staff only.
  • Seventy-seven percent of firms offer flexible work schedules to all staff, while 16% limit this benefit to professional staff only.
  • Just one in six firms report they have a diversity recruiting program. One in three firms above $50 million report a diversity program in place.
  • Seventy-eight percent of all participating firms indicate they have a mentoring program in place. Twenty-six percent of firms offer outside mentor / life coach to staff members. Only one in nine firms rate the effectiveness of their mentoring program as “excellent.” Four percent rate their program as fair or poor.

Key highlights from the 2017 INSIDE Public Accounting Information Technology Report:

  • Sixty-seven percent of participating firms have a Bring Your Own Device (BYOD) plan for cell phones, with nearly 14% implementing within the last year. This increase is mostly seen in firms below $20 million and those in the $30 million to $75 million revenue band.
  • IT maintenance of applications is easier when using the cloud, according to 74% of respondents.
  • Cloud-based applications are being used more frequently across the board, and continue to be dominated by research (81% of firms), client portals (75%) and payroll (54%).
  • Only 30% of all participating firms have instituted a formal procedure to ensure information technology projects / issues are effectively managed

For additional insight into the results of the 2017 IPA Internal Operational Reports, access complimentary copies of the executive summaries.

INSIDE Public Accounting Releases 2017 National Benchmarking Report

INSIDE Public Accounting (IPA) has released the 28th annual National Benchmarking Report, based on fiscal year ends from September 2016 to June 2017. The release coincides with IPA’s release of The 2017 Accounting Firm Internal Operational Reports.

This report, the largest of its kind, is based on survey results from 559 North American accounting firms – a strong representation of the profession, including 238 firms under $10 million, 248 firms between $10 million and $50 million, and 73 firms above $50 million in net revenue. The report covers fiscal years ending from September 2016 to June 2017.

INSIDE Public Accounting’s National Benchmarking Report provides detailed information in 80+ pages of tables presented in nine different revenue bands and regional breakouts so firms can easily compare with other similar-sized firms.

Key highlights from the 2017 INSIDE Public Accounting National Benchmarking Report:

  • Top-line organic revenue growth (excluding merger activity) fell this reporting year to 5.3%, down from 6.3% last year.
  • Merger activity remains strong, with 50% of firms above $50 million reporting at least one merger last year and across all firms, 19% reported at least one merger.
  • Increases in personnel costs as a percentage of total net revenue have contributed to lower profit margins for firms of all sizes, with the national average of net income as a percentage of net revenue now at 29.1%, down from 30.1% in 2016.
  • Professional staff turnover is down in firms of all sizes, with a nationwide average of 12.4% professional staff turnover.

“The ‘glass half full’ view is that many firms are recognizing the need to change and adapt to new technologies and client demands for the future, and are starting to make some of the investments needed to accomplish that. They are forgoing short-term profits to make investments in the future,” says IPA Publisher Mike Platt.

“The ‘glass half empty’ view is that the business model that has contributed to generations of healthy growth and ever-increasing income is showing signs of strain. More sophisticated clients are demanding more services, technological disruptions are challenging the status quo, and generational shifts in the way business is done are all forcing the profession to create new ways of delivering value,” says Platt.

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

Additional highlights from the 2017 INSIDE Public Accounting National Benchmarking Report:

  • Billing rates inched up for equity partners this year by 1.4% to an average of $345 for all firms.
  • Net income growth averages slowed slightly – to 5.2% from 7.8% in 2016. Factoring in the effects of mergers, the all growth rate slowed to 6.4%, down from 9.1% in 2016.
  • The average equity partner compensation for all firms is up an average of $10,000, to a nationwide average of $456,043.
  • Annual staff merit increases ranged from 5% to 7% on average, across all revenue bands and professional staff positions. Billing rate increases, however, were in the 4.0% to 4.5% range.
  • The percentage of female ownership this reporting year is at 18.9% for all firms, up from 17.5% in 2016.
  • Of more than 10,000 equity partners represented by participating firms, just 2% work a part-time or alternative schedule.
  • The average percentage of total professional staff with a CPA license is slowly inching downward in non-Big 4 firms. Across all firms, non-CPAs now make up an average of 57.9% of all professional staff, including partners.

The 2017 INSIDE Public Accounting National Benchmarking Report covers partner compensation, administrative salaries, revenue by service line, partner workloads, marketing costs, training requirements, realization, retirement plans and dozens of other metrics – both by revenue band and region of the country.

Regional highlights from the INSIDE Public Accounting National Benchmarking Report:

NORTHEAST

4.7% – Organic Net Revenue Growth
5.6% – Organic Net Income Growth
11.9% – Professional Staff Turnover
$83,005 – Average Professional Staff Comp.

SOUTHEAST

5.9% – Organic Net Revenue Growth
5.2% – Organic Net Income Growth
11.4% – Professional Staff Turnover
$77,991 – Average Professional Staff Comp.

GREAT LAKES

5.3% – Organic Net Revenue Growth
7.9% – Organic Net Income Growth
11.5% – Professional Staff Turnover
$74,487 – Average Professional Staff Comp.

GREAT PLAINS

5.0% – Organic Net Revenue Growth
2.3% – Organic Net Income Growth
13.1% – Professional Staff Turnover
$74.625 – Average Professional Staff Comp.

WEST

5.4% – Organic Net Revenue Growth
4.7% – Organic Net Income Growth
14.2% – Professional Staff Turnover
$83,362 – Average Professional Staff Comp.

 

 

 

 

For additional insight into the results of the 2017 IPA National Benchmarking Report, access a complimentary copy of the executive summary.

INSIDE Public Accounting Unveils 2017 Best of the Best Accounting Firms

Continuing the tradition of more than 20 years, INSIDE Public Accounting (IPA) has unveiled the 2017 list of the Best of the Best public accounting firms in the nation. This group, the highest performers within the profession, are ranked on more than 70 metrics. The 2017 Best of the Best firms produce superior financial results while planning for long-term, sustainable growth.

In 2017, 587 firms were eligible for this accolade by participating in IPA’s 27th Annual Survey and Analysis of Firms.

The IPA Best of the Best firms are scattered across the U.S. and Canada and come in all sizes – from 27 employees to 2,615. Two-thirds of the Best of the Best firms appeared on the list in 2016, demonstrating an impressive commitment to excellence and sustainability.

IPA has also named 10 firms under $5 million in net revenue for the Best of the Best Under $5 Million. Unlike their large-firm counterparts, these firms earned this distinction with fewer resources to deliver top-notch client service, sought-after benefits and professional development across the firm – hallmarks of the Best of the Best.

As part of IPA’s ongoing commitment to identify and recognize high-performing firms across North America, IPA also highlighted the five Best of the Best Canadian firms. These firms, ranging in size from $6 million to $28 million, represent the top 20% of the highest performing Canadian firms that participated in the 2017 IPA Survey and Analysis of Firms.

“Best of the Best firms excel by achieving the delicate balance of focus on culture, clients, team and financial results,” says Michael Platt, principal of the Platt Group and publisher of the accounting trade publication, INSIDE Public Accounting. “Best of the Best firms are judged on dozens of metrics that truly take a holistic view of success. Their strategic focus on all areas that make accounting firms great have produced the results that merit this sought-after accolade.”

Kelly Platt, publisher of INSIDE Public Accounting, says firm leaders who are looking to improve can look to the results produced by the IPA Best of the Best. “Best of the Best firms show that discipline, planning and a systematic approach to improvement can result in measurable progress toward their goals. In a rapidly changing business environment, Best of the Best firms thrive.”

A full list of the 2017 IPA Best of the Best firms, including the Under $5 Million category and Best of the Best in Canada can be found on the INSIDE Public Accounting website.

IPA also ranks the largest accounting firms in the nation annually, the IPA 100, along with the IPA 200 and IPA 300, those firms ranking from No. 101 to No. 300 in the U.S. Visit the INSIDE Public Accounting website for more details.

You may order complete copies of the IPA Best of the Best, IPA 100, IPA 200 and IPA 300 firm issues: (317) 733-1920; editor@plattgroupllc.com.

2017 INSIDE Public Accounting Benchmarking Report Pre-Publication Offer

The 2017 Benchmarking Tools will be available in September.

IPA’s National Benchmarking Report is one of the most thorough, complete and insightful analyses of CPA firms in the U.S. The report is well-respected throughout the profession for being independent and accurate.  Benchmarking is one of the most effective processed firms can do to improve operations, increase profitability and productivity.

ORDER BEFORE AUGUST 15 AND SAVE!

Note: some associations have partnered with IPA to provide some of the benchmarking products to member firms. Please contact our office with any questions.

The Internal Operational Benchmarking Reports

The Firm Administration, Human Resources and Information Technology reports assist firm management uncover trends, areas of policy improvement, operational and procedural issues and to assist firms with planning, budgeting and implementing needed changes to move ahead in best practice style. Click on any one of the images below to find out more, and to view an excerpt from 2016.

Information Technology Human Resources Firm Administration

ORDER BEFORE AUGUST 15 AND SAVE!

The Financial and Operational Report Card

Understand Your Performance Relative to Your Competitors

This customized report provides firms with exclusive benchmarks of how their firm compares, in more than 20 metrics to hundreds of other firms across the U.S. The report is broken out by Top, Middle and Bottom Quartiles, and provides a visual of your firm’s overall performance. The report enables you to determine which processes and procedures could benefit the most from improvement, and in which areas these improvements might yield results. Why spend hours sifting through financial records, survey data and a host of internal reports, when you can find the answer in a financial and operational report card specific to your firm?

ORDER BEFORE AUGUST 15 AND SAVE!

The 2016 IPA Human Resources Report

The 2016 IPA Human Resources report engaged participation from more than 136 firms, contains 70 pages of tables and graphs, and includes information from 43 firms above $30 million, 23 firms between $20 million and $30 million, 45 firms between $10 million and $20 million, and 25 firms under $10 million. A few observations are worth noting.

PROFESSIONAL STAFF TURNOVER: Turnover averaged 13.4% last year, with 16% of firms experiencing turnover rates more than 20%, and 7% more than 25%. More than 3,200 professional staff left their firms last year. For every person who was terminated, 3.9 professional staff left voluntarily.

BENEFITS: Ninety-four percent of firms are offering medical coverage to all employees. This is down from 99% last year with the biggest decreases being seen in the firms above $30 million. The percent of firms offering dental and vision coverage also decreased.

CONTINUING EDUCATION / TRAINING: The average annual CPE budget allocated to partners is $3,127; entry-level staff is $1,818; and 9+-year experienced staff is $2,455. Nearly 70% of firms provide formal training for administrative personnel and 55% report they have an in-house training department.

EVALUATIONS AND PERFORMANCE REVIEWS: According to the survey, professional staff are reviewed semi-annually in 37% of firms, and annually in 46% of firms. Administrative staff are reviewed annually in 74% of all participating firms, two-thirds of all participating firms indicate that they review partners on an annual basis, and 49% indicate that partners are reviewed “as needed.”

Forty-one percent of firms indicate they use a 360-degree review program, and 76% of those firms include reviews of the partner group.

For more information about the Human Resources Report, view the Executive Summary or Order the 2016 Report, go online.

The 2017 Human Resources Survey has launched. Contact IPA for your invitation to participate.

The 2017 IPA Accounting Firm National Benchmarking Surveys Are Open For Participation

The 2017 INSIDE Public Accounting (IPA) Annual Survey and Analysis of Firms is now open to all accounting firms in North America. The results of the annual survey is the IPA National Benchmarking Report, the IPA 100, 200 and 300 firms ranking, and the coveted IPA Best of the Best firms. If you would like to participate, please contact our office.

DEADLINES FOR SURVEY SUBMISSIONS – FIRMS WITH FISCAL YEAR-ENDS OF…

…June 2016 through December 2016: May 5, 2017
…January 2017 through February 2017: May 19, 2017
…March 2017 through April 2017: June 5, 2017

THE 2017 IPA SURVEY AND THE INTERNAL OPERATIONAL SURVEYS ARE AVAILABLE FOR COMPLETION.

Your firm must complete the IPA Survey and Analysis form in order to participate in any of the internal operational surveys. If you would like to participate, contact our office.

Gain a competitive advantage and grow your firm with industry insight from the independent benchmarking leader in the nation.

BENEFITS OF PARTICIPATION

  • The opportunity to be included in the largest annual management of an accounting practice (MAP) survey in the country. To be benchmarked with more than 540+ firms nationwide and potentially be ranked among this year’s top firms in the: IPA 100, IPA 200, IPA 300 and the coveted IPA Best of the Best Firms in the nation.
  • If you participate in the surveys, you will receive a complimentary copy of the August 2017 issue of the award-winning INSIDE Pubic Accounting newsletter. This issue highlights the annual IPA 100 firm rankings, along with a detailed financial and operational analysis of the rankings.
  • An electronic complimentary copy of the 2017 Executive Summary, of the IPA National Benchmarking Report. If you participate in any or all of the IO surveys, you will also receive a complimentary executive summary when published in late summer.
  • You will receive preferred pricing on the 2017 IPA National Benchmarking Report, the IO Reports, and other benchmarking items. You may pre-order your reports now.
  • You will get preference for selection in articles written by IPA throughout the year, (an excellent opportunity to market your firm).
  • If you would like to participate, please contact our office.

CONFIDENTIAL DATA – WHAT YOU CAN EXPECT FROM INSIDE PUBLIC ACCOUNTING 

All confidential firm data, including salaries, compensation, income, etc., will be held in strict confidence. Salaries, compensation and sensitive data, such as income, revenues by niche, etc., will NOT be shared or publicized. We take extreme pride in our ability to collect this data to assist the profession and are now celebrating 27 years surveying accounting firms across the globe.

Please contact IPA at survey@plattgroupllc.com with any concerns or questions. IPA conducts a thorough review of each survey submission for commonly missed areas and for any and all errors. IPA will contact the person / contact named on the submitted survey form for any and all clarifications / updates. Some data, such as firm name, MP(s) name, firm net revenue, and organic growth may appear in the IPA Newsletter (if accolades are given).

IPA ASSOCIATION PARTNERSHIPS: INSIDE Public Accounting is pleased to partner with the following associations to provide survey and benchmarking services for their member firms: The Alliott Group, CPAmerica International, DFK International, INPACT Americas, LEA Global, Moore Stephens North America and PrimeGlobal. Please contact The Platt Group / IPA with any questions at (317) 733-1920.

The 2016 IPA Firm Administration Report

The 2016 IPA Firm Administration report engaged participation from more than 130 firms, contains 70 pages of tables and graphs, and includes information from 41 firms above $30 million, 22 firms between $20 million and $30 million, 44 firms between $10 million and $20 million, and 27 firms under $10 million.

A few observations are worth noting.

CLIENTS / WORKFLOW / ACCOUNTS RECEIVABLE

  • Less than 1% of participating firms guarantee a specific turnaround time for tax returns.
  • Credit cards are acceptable for payment by 83% of firms.
  • Sixty-three percent of firms charge interest on overdue accounts receivables, with the average charging 1.25% monthly.
  • Less than 1 in 15 firms report outsourcing some portion of tax return processing work, with the majority of those coming from firms greater than $30 million in revenue.
  • Eighty-five percent of participating firms have a formal client acceptance process.
  • Only 3% of firms sell receivables to a third party.
  • Forty-three percent of firms indicated that they do not know or do not track their percentage of annual revenue “in the pipeline” at any given time. Of those that do track, 39% say that it’s between 0% and 5% of their annual revenue, while 16% indicate it’s more than 15% of their annual revenue.

FIRMWIDE METRICS / PROFITABILITY

Measuring profitability beyond the firmwide number can identify strengths and weaknesses. Consider the following percentage of firms and their means of tracking profit margin:

71% By Office
70% By Department
65% By Client(s)
47% By Staff

Philosophical differences exist among many firms on what information should be shared with staff.

  • Fifty-five percent of firms share top-line numbers firmwide.
  • Firmwide utilization is shared with all staff in 36% of participating firms.
  • Realization is shared with all staff in 34% of all participating firms.

FIRM GOVERNANCE

  • Fifty percent of firms report that their structure is more like a corporation than a partnership.
  • 74% have updated partnership agreements within the past three years with 26% of those doing so within the past year.
  • Only 44% of firms have a written / formal succession plan in place for all equity partners.
  • One in 14 firms have a succession plan for their high-level administrative staff.

View the 2016 Executive Summary and Pre-Order the 2017 Firm Administration Report.

Guest Blogger: Flexible Firms Are Moving to Unlimited PTO Programs

By: Renee Moelders, ConvergenceCoaching

Renee Moelders

Renee Moelders

More Results from Our 2016 Anytime, Anywhere Work™ Survey

With the emphasis on flexible work programs in CPA firms, it’s no surprise that Unlimited PTO has become a hot topic. Employees are drawn to the idea that they could take as much time off as they would like as long as the work gets done.  And firms are using this benefit to better position themselves in the CPA marketplace and attract and retain the best and brightest.

We asked a number of Unlimited PTO questions in our 2016 Anytime, Anywhere Work survey, and in this post, we’ll share the what we learned as well as some specific recommendations for firms who are interested in offering this cutting-edge benefit. If you’re just tuning in to our survey results, here’s what we’ve shared so far: an overview of our survey results, the benefits and challenges firms experience with their flex programs, how firms are enhancing their flexibility around WHEN their employees work, strategies firms are using to allow employees more control over WHERE they work, and seven technology ideas to enable flexible work programs.

Unlimited PTO:  A Major Differentiator

Only 5% of firms surveyed, or 8 leading edge firms, are offering an Unlimited PTO program, while another 19 firms (13%) are thinking about implementing such a program.

In this year’s Anytime, Anywhere Work survey, 97% of firms surveyed noted that they offer flex-time programs, demonstrating that offering flexibility is NOT a major differentiator for firms. If you are one of the leading-edge firms offering Unlimited PTO, be sure that you are promoting this competitive differentiator in your recruiting efforts, employee orientations, busy-season kick off meetings and other team member meetings – because you are special (for now)!

What is Unlimited PTO?

Unlimited PTO programs emphasize a culture of flexibility built on personal responsibility and mutual trust, and essentially the message to your people is “meet your work and production goals, finish your projects, and we don’t care when you take time off.”

Let’s take the example of the team member who crushes it one week, working 65 hours to finish reviewing a series of client deliverables and getting the monthly audit schedule published. The next week, this same team member has a dentist appointment during the work day on Monday and leaves early on Thursday for hockey practice. Because of these personal commitments, this person only puts 36 hours into the system. Under a traditional PTO model, she or he would be asked to take 4 hours of PTO for those two events, regardless of their extra effort made the prior week.

Or how about the employee who has a three-week bank of PTO available to her. She has planned a two week fall vacation with her family, and has used the other week by the end of July. She tells her family that because she’s already scheduled her full three weeks, she won’t be able to take an extra two days at Thanksgiving, even though she’s ahead of her realizable revenue goals and other metrics. She feels like there should be a way to have the time off with her family but the firm’s policies don’t allow her that flexibility.

In both cases, instead of being treated like a trusted professional, empowered to integrate their life with their work, these team members feel like they are being “nickel and dimed” about their time.

Why offer Unlimited PTO?

While improving the morale of your people and empowering them to manage their own schedules, there can also be an attractive financial benefit for your firm in eliminating PTO. When you stop accruing and tracking PTO, you will ultimately experience a reduction of a sizeable accrued liability. In addition, firms spend so much time administering PTO accruals – tracking them, monitoring timesheets and employee accrual balances, and encouraging team members to burn PTO to keep accruals in check. Upon the creation of an Unlimited PTO program, the firm can regain that administrative time which can be repurposed for more meaningful HR efforts.

Another advantage of an Unlimited PTO program is the goodwill it creates in teams, where you trust your people to meet their production goals, hit their metrics for the year, bring in the amount of agreed upon business, and achieve whatever other expectations have been established for you. In essence, we treat our people like professionals. Many firms find that Unlimited PTO programs create more committed team members with a passion for the firm (and in turn, the firm’s clients!).

If you are already offering high levels of flexibility to your team members…if your leaders are less focused on using “face time” to measure an employee’s success…if your firm is doing a great job setting clear expectations and situations where there is poor performance, these matters are being managed…then you might be a candidate for an Unlimited PTO program.

In our survey, the few firms who are currently running an Unlimited PTO program shared these positive comments about their experience:

“Best policy we have implemented in a while!”
“I intend to take the entire month of July off this year.”
“Time worked is completely at the discretion of the team members.”
“Do it! You will be surprised how much your staff loves this benefit. They are professionals and manage their schedules fine.”

Managing the transition

One of the benefits the firm realizes when transitioning to Unlimited PTO is the removal of the accrued liability for PTO that firms would ordinarily carry on their balance sheet. It may, however, be hard for firms to imagine how they’d make the transition to Unlimited PTO without generating feelings of “takeaway” in the team. We asked our survey participants how they managed this transition and learned that of those firms with a program, 50% chose to dissolve any accrued leave upon conversion, 40% did not allow carryover of leave under the PTO model and therefore had nothing to convert, and 13% paid out some of the accrued leave to participants. None of those surveyed chose the answer options “Yes, we paid it out in full” or “No, but we will payout accrued leave if employees leave the firm.”

 

Firms may benefit from planning ahead for a transition by encouraging team members to “spend down” accrued PTO balances to minimize any feelings of loss associated with the conversion to an Unlimited PTO program. When asked the time of year when they converted from a traditional PTO program to Unlimited PTO, 25% indicated January – March while 13% chose the July – September timeframe. These differences may be the difference between December and June year-ends. The remainder of respondents chose “have always had Unlimited PTO” (25%), “N/A or not sure” (25%) and “When promoted to manager” (13%.)

Sharing best practices

Unlimited PTO programs are still a relatively new offering and as a result, there are many different options when structuring your program. Even so, there are best practices when transitioning to an Unlimited PTO program and we’ll share those with you here.

  • Eligibility for the program. Of the eight firms surveyed who offer an Unlimited PTO program, half make the program available to all exempt employees. No firms indicated that they offer Unlimited PTO to non-exempt employees and for many firms that makes sense due to legal issues around overtime that introduce barriers to establishing one program application for all employees. Firms should carefully design communications to minimize any feelings of resentment or feeling “less than” by non-exempt employees.

  • Create accessibility and response time expectations. Firms that develop clear requirements for how quickly calls and emails are returned (even if it’s only to confirm receipt and set a future date for follow-up) are likely to have fewer upsets operating in a more flexible manner. Team member calendars should clearly reflect accessibility details – whether team members are off or not and how they can be reached when they are available but working away from the office.
  • Plan how Unlimited PTO will intersect with other types of leave. Unlimited PTO still exists in the “Wild, Wild West” of HR policies because there isn’t much case law yet upon which to base policies and practices. There is, however, one clear recommendation – ensure you separate any legally required leave of absence programs from your Unlimited PTO program. For instance, time off due to extended illness, injury, maternity, disability and FMLA would have separate rules and requirements and your staff won’t use Unlimited PTO to cover those needs. We’d recommend you contact your firm’s labor counsel before finalizing any policy to ensure that your state’s labor laws are covered appropriately.
  • Map out changes to blackout periods, coverage requirements and the process to request time off. There will likely be times when the team needs to all be working together and time off would be less acceptable. To maximize the feeling of flexibility, we’d recommend that you minimize blackout periods and make the request process as easy and flexible as possible.
  • Teach your team to flex up. Flexible work environments require flexibility from those using flex, too. They require clear, specific and frequent communication, as well as accessibility and responsiveness. Clarify ahead of time when peak periods or “all hands-on deck” client engagements will require the team to change their ordinary schedules or come into the office.
  • Consider mandatory time off. Under traditional PTO programs, HR often has to coax certain team members to use their leave, and under an Unlimited PTO model that will likely be the case as well. In Take a Vacation: It’s Good For Productivity and the Economy, the author notes that time off results in higher productivity, stronger workplace morale, greater employee retention and significant health benefits.

 One survey participant shared this recommendation:

“Often the high performers take less PTO time than if they had a bank of hours. You really have to encourage them to use their PTO.”

If many of your team members are reluctant to use time off, stay tuned for our upcoming blog on sludge and learn more about creating acceptance and transparency on the team for the use of flex programs.

Measuring success and ensuring accountability

As you transition to Unlimited PTO, plan to assess the program’s success at regular intervals. Building in an evaluation process will provide support among your leaders who are less confident about the change and will allow them to rest assured that the program will be adjusted if results aren’t what you’re anticipating. Any program you create should protect your firm’s business model deal-breakers like:

  • Production is at or above expectations
  • Projects are being completed in the anticipated timeline
  • Client service hasn’t been negatively impacted
  • Team members are taking time off as expected and are satisfied with the program as designed

Consider evaluating your program at 90 days, 180 days and year-end, with an ongoing annual review after year one. Rather than trying to build the perfect program out of the gate, be willing to adjust and make changes over time to ensure the program meets both the needs of the firm and your team members for the long-term.

We are encouraged by the interest and buzz around Unlimited PTO programs and can’t wait to see new developments unfolding in the public accounting firm marketplace!

AICPA: Client Accounting Services Emerging as Significant Revenue Source

Client accounting services has become an important line of business for CPA firms of all sizes, even as overall client fees are growing, according to a survey sponsored by the AICPA Private Companies Practice Section and CPA.com.

One trend is growing penetration of the client accounting services/virtual CFO services category for larger firms. The slice of net client fees represented by that service area, which includes outsourced finance and accounting services and other back-office support for clients, more than doubled to 9% for the largest firms with annual revenue of $10 million or more who are active in this area, according to the 2016 National Management of an Accounting Practice (MAP) Survey. It also increased by double digits for the next two largest segments: firms with revenue of $5 million to less than $10 million and revenue of $1.5 million to less than $5 million.

“It’s safe to say that nearly 10% of revenues in the profession are focused on client accounting,” said Mark Koziel, the AICPA’s executive vice president of firm services, who discussed the survey results at the 2016 Digital CPA Conference. “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 No. 1 and No. 2 revenue categories, but client accounting demonstrates growing significance to the profession.”

On another front, CPA firms use of cloud services has grown since 2014. Some 56% of all firms surveyed said they use cloud-based software, up 17% from two years ago. Six of seven CPA firm revenue segments reported increases, with only the largest category ($10 million in revenue and up) reporting a slight decline (-1 %). Use of cloud-based remote backup increased 14% to 57% for all firms, and an identical number reported that they capture source documents digitally.

“We’re seeing broad pickup in cloud services and other emerging technologies,” said Erik Asgeirsson, president and CEO of CPA.com. “The next wave that leads to greater productivity and capabilities for advanced firms is fuller integration of these technologies and the elimination of bottlenecks in work processes.”

Among other findings of the survey:

  • Some 38% of firms provide staffers with tablets or mobile monitors to work remotely, with 91% of the largest firms ($10 million in revenue and up) doing so
  • Some 49% of firms are using social media for business development, while 29% are using it for recruitment, although the latter is far more common for larger firms

Transparency, Feedback and Mentoring: Improved Communication Goes a Long Way With Young Professionals

By Christina Camara
INSIDE Public Accounting

As the economy has improved over the last few years, the search for the best accounting professionals has heated up with it. Now, it’s safe to say, the profession is immersed in a full-fledged talent shortage, which is worsened by waves of partner retirements and staff departures.

Chris Camara

Chris Camara

Year after year, accounting firm leaders say staffing is a huge concern. According to the most recent AICPA Top Issues survey, the No. 1 issue was retaining qualified staff and No. 2 was finding qualified staff for firms with 21 or more professionals.

Demographic shifts, revealed through more than 540 responses to IPA’s annual Survey and Analysis of Firms this year, show that while the percentage of young people entering the accounting workforce is growing, those with several years of experience is shrinking.

Additional research, conducted by IPA and ConvergenceCoaching, shows that firms can take advantage of easy-to-implement, no-cost (or low-cost) solutions that young people say would greatly improve their work experience. A key theme? Communication.

RTR imageGiven the critical importance of the under-40 age group to the future of the CPA profession, IPA surveyed 723 accounting professionals aged 21 to 40. The full results can be found in “The Road to Retention: Motivators and Drivers for Young Public Accounting Professionals.”

Here are some suggestions gleaned from their comments.

Share Information

When the “Road to Retention” survey respondents were asked to name the most important pieces of information they would like the partner group to share, the top five responses were:

  • More defined career expectations – This was the highest-ranking factor, mentioned by 38% of respondents. Young professionals said they wanted a clear, written explanation of the competencies expected at each level of advancement at the firm, as well as honest feedback on their performance and appreciation for their contribution.
  • An understanding of the firm’s vision and strategy – This response suggests firm leaders may not be clearly communicating their firm’s vision. Young professionals want to know if they’re part of an enterprise that matches their own values.
  • A clear understanding of the path to partnership – Similar to the top response, this answer suggests 21- to 40-year-old professionals don’t want to simply keep their heads down and work until someone notices them. They want to know, up front, what it takes to climb the ladder to firm ownership.
  • Knowledge about the firm’s finances – How does the firm measure success? Is the firm financially healthy? What metrics are used to measure this? Young professionals would greatly appreciate more transparency around firmwide performance numbers. IPA surveyed 134 firms this year on issues specific to firm administration and found that they differ widely on the types of financial information that are shared with staff. IPA’s 2016 Firm Administration Report says that 55% share top-line numbers firmwide, while 36% share utilization figures and just 14% share data on profitability with all staff.
  • Improved communication – Under-40 CPA professionals are looking for clear, consistent and more frequent communication.

Other Communications Issues cover_2016

IPA also recently surveyed 136 firms for its 2016 Human Resources Report and found additional results that back up the concerns of the young professionals surveyed in Road to Retention.

For example, nearly a third of under-40 CPA respondents listed their firm’s mentoring program as an area of weakness. Of all firms that participated in the IPA Human Resources survey, mentoring programs are offered by 80% but only one in 10 rate effectiveness as excellent. In fact, 11% rate it as “fair” or “poor.”

Furthermore, results from both surveys show that firms can be doing a better job at communicating with their staff about their performance.

According to the IPA HR survey, professional staff are reviewed semi-annually in 37% of firms, and annually in 46% of firms. Young professionals told IPA/ConvergenceCoaching that they want feedback much more frequently than what 83% of firms in the HR survey are currently offering. The 20- to 33-year olds most often reported that they want performance feedback monthly; the 34- to 40-year-olds want quarterly feedback.

Last, firm leaders should consider yet another communication issue raised by young professionals: They say firm leaders and managers are not doing a good job of involving them in decisions, with clients or internally, that affect them. It was the No. 1 overall firm weakness cited.

Improving communication will certainly be time-consuming and will take a concerted effort, but the data shows the payoff should be well worth the investment. “The Road to Retention” offers a recommendation: Form an advisory board made up of under-40 professionals. Give the group the task of studying changes they’d like to see in the firm and recommending how to implement them. The next part is critical: Listen to their ideas and put them into practice if they make sense. The future of your firm depends upon it.

Christina Camara is managing editor of the monthly INSIDE Public Accounting newsletter.