Survey: Firm CAS Practices Break Out with 20% Growth
Client Advisory Services (CAS) practices reported a median growth rate of 20%, better momentum than the 15% projected and a significantly stronger performance than other practice areas, according to a new survey by CPA.com and the American Institute of CPAs (AICPA). Interestingly, survey data from the early months of the global pandemic indicated similar growth, suggesting these advisory services are a critical part of ongoing small business operations during difficult business cycles.
CAS has been the fastest growing area of consulting in public accounting and is projected to continue its impressive trajectory, according to the CPA.com & AICPA PCPS Client Advisory Services Benchmark Survey, which polled a cross-section of U.S. firms with offerings in this area. The report collected data from fiscal year 2019 and the early part of 2020, reflecting the onset of the pandemic. When the survey was last conducted in 2018, CAS practices reported a 12% growth rate.
The survey also indicated CAS practices are profitable, with median profit margins of 34% for all firms and 47% for top performers. That compares favorably to margins of 28% - 34% for all firm service categories, as reported by other benchmark surveys for the profession.
CAS firms have also managed remote work well during the pandemic, particularly top-performing firms who have embraced the move to digital, enabling efficient workflow solutions and cloud-enabled services. Some 96% of CAS firms helped clients apply for forgivable loans through the Small Business Administration's Payroll Protection Program (PPP) and other relief programs. More than half (55%) of firms also said that their revenue was up because of the work that came out of the pandemic.
"Client Advisory Services have become an increasingly strategic component of CPA firms' offerings, and this was never more clear than during the pandemic," said CPA.com President and CEO Erik Asgeirsson "Looking forward, we see new opportunities in business forecasting, business funding and other categories that will drive growth and provide greater value for clients."
The AICPA and CPA.com define CAS as a practice where firms advise clients across a spectrum of financial and accounting related decisions, with the goal to deliver higher value and deepen the trusted advisor relationship. CAS practices leverage technology and processes to provide timely updates and deeper business insights to their clients. The most common offerings by CAS firms are:
- Financial Statement Preparation (offered by 96% of surveyed firms)
- CFO/Controller Advisory Services (92%)
- Accounts Payable (90%)
- Forecasting/Budgeting (89%)
- 1099 Creation and Filing (89%)
The survey offers numerous insights about the evolution of CAS offerings and opportunities for future growth. Some of the takeaways include:
- Invest in talent. CAS practices deepened staff expertise and skillsets through additional training, with all practices increasing the number of average training hours from 27 to 37 per full-time equivalent (FTE) and top performers from 28 to 44. Firms should also explore non-traditional talent options to build their capacity to grow, including remote team members.
- Leverage technologies to drive efficiencies. Evaluate opportunities to implement robotic process automation and artificial intelligence or take advantage of unused capabilities already available in your cloud-based technology stack. IT investments will pay off by creating a much-needed capacity to serve clients. Challenge CAS team members to identify processes that can be further automated, made simpler or more efficient.
- Improve data collection and reporting. As CAS practices grow, leaders will need better data management, relevant KPIs and consistent reporting to effectively run their practices and get buy-in from firm leaders. There is still too much variability firm to firm on service metrics.
- Pilot changes in pricing, billing and benchmarking. CAS practices made a big shift to fixed fee and value billing models in the past two years, with a majority (60%) offering these structures to clients. Value billing models offer numerous benefits to both the firm and client and is an area where CAS practices can lead the way in the profession. The survey also suggested that, with an average close rate of 75%, CAS practice leaders may be underpricing their services.
- Communicate and market value to clients and internal stakeholders. The top three areas of resistance when selling new services arose from perceptions about the value of CAS services and questions about pricing. CAS leaders need to create their value proposition and regularly communicate it to stakeholders, including staff and external audiences. The survey also indicated that while marketing spending was up slightly for CAS practices, this was an area of opportunity for firms as total spend is still below standards for comparable industries and professions.
- Secure leadership buy-in and sponsorship. Nearly half (46%) of top performers reported a major barrier to success is internal firm team members who don't understand the value of CAS, equate it with lower-value bookkeeping, or push back on the CAS business model. Firm leadership must effectively address these issues with clear, consistent messaging regarding the value of CAS.
CPA.com will hold a free webinar today at 2 p.m. ET to highlight key insights from the survey and offer practical strategies for firms to strengthen and develop their CAS capabilities. The company's CAS Roadmap and CAS Client Assessment workshops, new CAS Firm Self-Assessment, whitepapers and other resources are also available for firms looking to start or expand a CAS practice. To learn more, please visit cpa.com/client-advisory-services.
Methodology
The CAS Benchmark Survey was conducted online from August to December last year with assistance from Convergence Coaching LLC and includes data from fiscal year 2019, as well as the early part of 2020, from 111 CAS practices. Besides general results, the survey analyzes the performance of top CAS practices, defined as those with the highest Net Client Fees Per Professional (NCFPP).
About CPA.com
CPA.com brings innovative solutions to the accounting profession, either in partnership with leading providers or directly through its own development. The company has established itself as a thought leader on emerging technologies and as the trusted business advisor to practitioners in the United States, with a growing global focus.
Our company's core mission is to drive the transformation of practice areas, advance the technology ecosystem for the profession, and lead technology research and innovation efforts for practitioners.
A subsidiary of the American Institute of CPAs, the company is also part of the Association of International Certified Professional Accountants, the world's most influential organization representing the profession. For more information, visit CPA.com.
About the Association of International Certified Professional Accountants, and AICPA & CIMA
The Association of International Certified Professional Accountants (the Association), representing AICPA & CIMA, advances the global accounting and finance profession through its work on behalf of 696,000 AICPA and CIMA members, students and engaged professionals in 192 countries and territories. Together, we are the worldwide leader on public and management accounting issues through advocacy, support for the CPA license and specialized credentials, professional education and thought leadership. We build trust by empowering our members and engaged professionals with the knowledge and opportunities to be leaders in broadening prosperity for a more inclusive, sustainable and resilient future.
The American Institute of CPAs (AICPA), the world's largest member association representing the CPA profession, sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It also develops and grades the Uniform CPA Examination and builds the pipeline of future talent for the public accounting profession.
The Chartered Institute of Management Accountants (CIMA) is the world's leading and largest professional body of management accountants. CIMA works closely with employers and sponsors leading-edge research, constantly updating its professional qualification and professional experience requirements to ensure it remains the employer's choice when recruiting financially trained business leaders.
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