Increasing service variety key to growing profit margins for Australian Accounting Practices: New Bstar and Bendigo Bank Report
Creating a more diverse revenue mix will significantly increase the profitability of Australian Accounting practices, according to a new study released by business advisory solutions firm, Bstar in partnership with Bendigo Bank.
However, while more than 70 percent of accounting practices surveyed believed their existing client base provided good or better than good opportunities for growth, three in every four Australian accountants’ efforts to organically grow their businesses are being stymied by a range of restrictions.
The Bstar Accounting Industry Insights Report 2020/21 in partnership with Bendigo Bank, which surveyed Accounting Practices throughout Australia, identified 10 Key Growth Success Factors accounting practices can implement to transition and evolve their businesses into practices of the future.
According to the Report, advisory accounting fees generated less than 20 percent of total practice revenue for just over half (51 percent) of Australian accounting practices in 2018. As a result, purely focusing on increasing advisory services, will not assist accounting practices to organically grow.
The Report also found that two-thirds (66 percent) of accountants do not have a formal plan in place to improve the value of their practice and that for half of survey respondents (54 percent) staff are either not engaged, motivated or skilled enough to help grow the practice.
Grant Boxham, CEO, Bstar said the new Report presents practical solutions accountants can implement to increase the number of services provided per client, as well as strategies - such as skills diversification - to diversify revenue mix.
"In our fourth annual Accounting Industry Insights Report, we have once again focused on providing practical insights to empower accounting practices to create their own client-centric growth plans," Mr Bloxham said.
The study revealed more than one-fifth (22 percent) of practices have a gross return of less than $60 per hour, while 24 percent receive less than $160,000 revenue per accountant.
Practices also continue to heavily rely on Accounting Tax and Compliance work to generate the most of their revenue. Even though both individuals and businesses rely on accountants for lodgement work, the size of fees for these services are in steady decline. Reflecting this, one in two (51 percent) practices had between zero and 10 percent fee growth, while seven percent are growing their fees by 10 percent or more.
"The report's findings show that creating a diverse revenue mix will take a practice from an industry average profitability of 19.3 percent, to a benchmark profitability of 28.2 percent, continued Mr Bloxham.
“Ultimately though it is service diversification which will secure stronger profit margins for accounting practices and drive greater value for clients into the future," he concluded.
Andrew Smith, Head of Business Customer, Bendigo Bank said one of the biggest challenges faced by all Australian businesses, no matter the industry, is how to keep costs down while at the same time, increasing and diversifying revenue to allow growth.
"In this current market environment and in a world of constant change, personal relationships with partners that understand the business reality of accounting practices and genuinely care about supporting them is invaluable to helping them take control of their future.
"The Report shows that accounting firms, just like many organisations across the economy, face common growth challenges.
"However, by developing clear strategies to diversify their skills base, build strong referral networks, ensure cultural alignment of team members, invest in technology and partner with likeminded organisations, firms can greatly increase their ability for future success." Mr Smith said.
The Executive Summary of The Bendigo Bank Bstar Accounting Industry Insights Report 2020/21 in partnership with Bendigo Bank is available to download from https://bstar.com.au/shop/2020-21-accounting-industry-insights-report/