A strong cross-section of data
This year, 341 firms participated in the Good Bad Ugly Survey process, and this report has been prepared on the basis of the data provided by them – a cross-section of city, suburban and regional firms of all sizes, ranging from sole practitioner firms through to large multi-office, multi-partner firms.
The data provided was based on the financial year ended 30 June 2013.
The context for the 2013 results: An era of digital disruption
In the past few editions of the Good Bad Ugly report we have reported how the Australian accounting industry is experiencing change and disruption – this theme continues and will remain.
Firms are now embracing the speed at which they must constantly develop and deliver relevant solutions for clients to drive growth and profitability.
For firms to flourish in this fast changing environment they must embrace new technologies, lower costs and resources to achieve a greater level of efficiency yet deliver more value to clients.
The key performance indicator results:
For a second consecutive year, revenue growth was maintained at 6% (based on the median result). Western Australia and Victoria reported larger revenue growth compared to New South Wales and South Australia where growth was between 3-4%.
Net profit per partner (before partner salaries) ranged between $214,983 (lower quartile result) and $449,012 (upper quartile result), with the median result being $326,835. When a notional salary of $200,000 was applied per partner, 26% of firms were not profitable (after partner salaries).
In previous editions of this report we have highlighted that leverage is a key driver of revenue and profitability. The highly profitable firms (the top 25% based on profit per partner) had leverage of 8 people per partner.
Charge rate multiplies
An increasing number of firms are removing the need for timesheets and charge rates, but for the majority who are still implementing charge rates, there has been a narrowing of the range in charge rate multiples. Lower quartile charge rate multiples are 3.5 times salary with upper quartile results averaging 4.5 times salary.
It seems productivity is a less relevant measure in accounting firms, with a reduction across all productivity measures. Are highly profitable firms more productive in terms of hours charged to clients? The simple answer is no. Productivity (chargeable employees excluding partners) ranged between 59.1% (lower quartile result) and 78.9% (upper quartile result), with the median result being 69.7%.
Partner return on effort
This is a simple measure of the return a partner receives for each hour worked (before partner salaries). There was a healthy increase in the median partner return on effort result to $175. There was minimal difference between highly profitable partners and all contributing firms.
Average hourly rate
Continuing the year on year trend of increasing average hourly rates, they ranged between $149 (lower quartile result) and $203 (upper quartile result), with the median result being $176. In 2010, the median average hourly rate recovered was $148.
Work in progress
Obviously this has been an area of focus for firms over the past 12 months, with a reduction in work in progress days. This ranged between 43 days (lower quartile result) and 14 days (upper quartile result).
Along with the reduction in work in progress days, debtors have also seen a reduction in the lower and upper quartiles, being 76 days and 44 days respectively.
Total expenses and salaries as a percentage of revenue both experienced increases compared to 2011-2012, with median results being 65.5% and 38.9% respectively.
The Good, the Bad and the Ugly of the Accounting Profession benchmarking report is produced by Business Fitness. To purchase your copy of the 2013 report, go to http://businessfitness.net/products/goodbadugly
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