A concerning trend has emerged in the accounting industry where growth and profitability are core to the cause — declining revenue per professional. This shift has sparked discussions and prompted firms to reevaluate their strategies to adapt to evolving client demands, technological advancements, and competitive pressures.
According to a recent industry report, average accounting firm revenue increased a mere 5.7% at the start of this decade, the slowest growth in eight years prior. Estimates suggest that this growth rate hampered revenue per professional in the industry. This trend is echoed in other major accounting markets globally, indicating a widespread challenge facing the industry.
One of the primary drivers behind this decline is the commoditization of basic accounting services. With the advent of automation and cloud-based accounting software, routine tasks such as bookkeeping and data entry can now be performed more efficiently and cost-effectively. As a result, clients are increasingly reluctant to pay premium rates for services that can be automated or outsourced at a fraction of the cost.
To further add to the decline, increased competition within the industry has intensified pricing pressures and eroded profit margins. As new entrants, including boutique firms and technology-driven startups, disrupt the market, traditional accounting firms are forced to lower their rates to remain competitive
Another factor driving the decline in revenue per professional is the changing expectations of clients. In today's digital age, clients expect more than just compliance-focused services from their accountants. They seek services that drive business growth and innovation, e.g.,
Accounting firms have to evolve their service offerings and deliver greater value to clients in order to justify their fees. This requires a shift away from traditional, transactional services towards more consultative and advisory roles. Firms that fail to adapt to these changing demands risk losing clients to competitors who can offer a more comprehensive suite of services tailored to their specific needs.
In response to these challenges, forward-thinking accounting firms are embracing technology as an enabler of growth and transformation. By leveraging automation, data analytics, and cloud-based solutions, firms can streamline operations, enhance efficiency, and deliver higher-value services to clients.
For example, automated workflow tools and machine learning algorithms can significantly reduce the time and effort required to perform routine tasks, allowing professionals to focus on higher-level strategic activities that add greater value to clients. Similarly, data analytics tools can provide deeper insights into client financials, enabling firms to identify trends, patterns, and opportunities that may have otherwise gone unnoticed.
Moreover, cloud-based accounting platforms offer greater flexibility, scalability, and collaboration capabilities, allowing firms to work more closely with clients in real time and provide more personalized and responsive service.
In addition to embracing technology, accounting firms are also investing in talent development and upskilling initiatives to equip their professionals with the skills and knowledge needed to thrive in a digital-first environment. Continuous learning, providing access to training and development programs, and creating opportunities for career advancement and professional growth are core to the cause.
By investing in their people, accounting firms can build a workforce that is agile, adaptable, and equipped to navigate the challenges and opportunities of the digital age.
Author: Matt Beecher