Client accounting services (CAS) is becoming an important revenue category for public accounting firms of all sizes, with larger firms seeing it gain a significant slice of their revenue pie during the past two years, according to a survey from the AICPA Private Companies Practice Section (PCPS) and CPA.com, the Institute's marketing and technology subsidiary.

The percentage of net client fees provided by CAS, which includes outsourced finance and accounting services and other back-office support for clients, more than doubled for firms in the largest revenue segment tracked by the 2016 National Management of an Accounting Practice (MAP) Survey, initial results of which were released earlier this fall and showed top-line revenue growth among firms of all sizes.

Among firms with revenue of at least $10 million that offer virtual CFO and other client accounting services, CAS accounted for 9% of net client fees, up from 3.9% in the 2014 MAP survey. The CAS category also produced double-digit percentage gains in the next two largest MAP segments—firms with annual revenue of $5 million to $10 million and those with annual revenue of $1.5 million to $5 million.

"It's safe to say that nearly 10% of revenues in the profession are focused on client accounting," said Mark Koziel, CPA, CGMA, the AICPA's executive vice president—Firm Services, who discussed the survey results at the 2016 Digital CPA Conference in Las Vegas. "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 number one and number two revenue categories, but client accounting demonstrates growing significance to the profession."

Among firms that offer CAS, the percentage that the category contributes to the top line ranged from 20% for the smallest firms (those with revenue of less than $200,000) to 8.5% for firms in the second-largest revenue segment.

If you find problems everywhere you go, you may be the problem, leadership coach John Engels told a gathering of accountants.

In a keynote address at CPA.com’s Digital CPA Conference and the Information Technology Alliance’s Fall Collaborative, “Owning Your Leadership: Taming Discomfort, Summoning Courage,” Engels warned attendees that they – like most people – need to start being “emotionally responsible” if they hope to succeed in the firms and their lives.

He described the natural human tendency to avoid conflict and discomfort, and how it plays out in accounting firms, with leadership ignoring interpersonal issues or difficult partners, failing to call for accountability, and neglecting the training and coaching of young leaders.

“What discussions on the home front are being avoided due to discomfort?” he asked. “We’re ‘dancing to the beat of discomfort’ – when we know others are unhappy, so we dance around their unhappiness,” rather than addressing it.

Interestingly, the right approach to these issues often isn’t to focus on the problems themselves, Engels suggested, but rather to focus on the response to the problem.

Generally, it’s not the problem that determines the outcome,” he said. “It’s the leader’s response to the problem.”

That’s where emotional responsibility comes into play. As Engels describes it, emotional responsibility is taking responsibility for your own wants, needs, actions, reactions, responses and so on, without blaming other people, the situation, or the circumstances.

Among other things, it means facing up to uncomfortable situations, rather than retreating into busy work that we’re comfortable with. “We often get busy with what we know because it’s more comfortable than dealing,” he explained. “We choose comfort over progress.”

Rather than coach or teaching young staff, for instance, people often simply solve their problems or provide answers for them. And firm leaders often put off dealing with troublesome partners or major governance issues, citing the pressure of day-to-day client work.

The emotionally responsible, however, move beyond discomfort. “Comfort and discomfort are poor barometers for decisions, Engels said. “The road to progress often passes through discomfort.”

One of the critical elements of how responsibly addressing uncomfortable situations is to be willing to address the role of their own response. If they’re dealing with an unproductive partner, for instance, have they enabled the partner by being unwilling to address his lack of performance? Or have they given the partner counterproductive incentives through a compensation system that rewards the minimum effort? Worse yet, have they encouraged dissension among the partner group by complaining about the unproductive partner, without actually addressing his lack of productivity?

Responsible leaders will start by modifying their own part in an emotional or uncomfortable situation, so that they don’t create more of a problem than there already is. Once they modify their behavior, Engels suggested, other people within the organization will often modify their behavior to suit.

Profiles in courage

All of this, Engels acknowledged, requires courage – specifically, what he called “the Four Faces of Courage:”

• Face 1: Wise helpfulness. “Not all helpfulness is wise,” Engels pointed out – much of what passes for help is actually micro-management, or providing answers instead of direction, which cuts other off from opportunities to grow and learn.
• Face 2: Strategic connecting. Quality one-on-one time is different from mere regular meetings, he said – it involves self-disclosure, and sharing your story so that employee can understand you more fully and feel comfortable trusting you. “Don’t make the other person do all the sharing, all the work, all the risking,” Engels said.
• Face 3: Asking versus telling. It’s natural to want to provide answers to questions, but Engels suggested asking your staff challenging questions instead, to get them to think independently.
• Face 4: Managing relationship triangles. Leaders often find themselves in these kinds of three-sided situations – where, say, Employee B comes to you to complain about Employee C. It’s easy to commiserate with B, but more responsible to focus on getting B out of the victim position and into a more active role where they can work with C to fix the problem, or change their own behavior to mitigate it. “In these triangles, 100 percent of the time, B is part of the problem,” Engels said.

Client accounting services has become an important line of business for CPA firms in all size segments, 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 nine percent 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, topline results of which were released earlier this fall. 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 percent of revenues in the profession are focused on client accounting,” said Mark Koziel, CPA, CGMA, 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 number one and number two revenue categories, but client accounting demonstrates growing significance to the profession.”

Client Accounting Services/Virtual CFO Services as Percentage of CPA Firm Revenue

Note: Percentages represent median values for segments from firms that indicate revenue from this service area.

On another front, CPA firms use of cloud services has grown since 2014. Some 56 percent of all firms surveyed said they use cloud-based software, up 17 percent 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 (minus one percent). Use of cloud-based remote backup increased 14 percent to 57 percent 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 percent of firms provide staffers with tablets or mobile monitors to work remotely, with 91 percent of the largest firms ($10 million in revenue and up) doing so
• Some 49 percent of firms are using social media for business development, while 29 percent are using it for recruitment, although the latter is far more common for larger firms
• Some 43 percent of firms text clients to obtain information, although the practice is far less common in larger firms with more formal client communications.
• Some 30 percent of firms use Skype to communicate with colleagues and clients, compared to 10 percent in 2014
• Only seven percent of firms indicate that they do not operate in a paperless environment

The AICPA PCPS/CPA.com National Management of an Accounting Practice Survey is conducted every two years by the AICPA’s Private Companies Practice Section and CPA.com, the AICPA’s technology subsidiary. Representatives from 1,537 CPA firms were asked details about their latest fiscal year financial results. Responses were gathered from May through July this year. The poll’s main sponsor is Aon.