November 05, 2020

How The Pandemic Is Affecting The Accounting Industry

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How The Pandemic Is Affecting The Accounting Industry

To learn about how COVID-19 is impacting the accounting industry, we sent a survey to a small group of accountants across the US. 

The results from this survey indicate that the accounting industry is much less hard-hit than many other industries. While many accountants been significantly impacted, overall, the industry is doing relatively well. Many firms report only minor client loss due to the pandemic, or even no client loss at all — though results vary based on industry specialization and other factors. 

We asked these accountants to tell us the biggest challenges they are facing. While they weren’t much worried about keeping existing clients, they were worried about adding new ones — especially in a time when in-person networking is not a viable client acquisition strategy. 

We also asked how they are adapting to overcome their biggest challenges. Their answers clustered around one big idea: the pandemic has driven up demand for services like PPP documentation and cash flow forecasting — and this provides an opportunity to help the clients with a critical need while also boosting revenue for the accounting firm during a difficult time. 

Read more about the survey results below. 

About The Respondents

We’ll be updating this post as new responses come in. The statistics below are based on responses so far. 

Types of respondents: 

The vast majority (78%) of respondents currently work at or own an accounting / bookkeeping firm. The remainder either work as in-house accountants for a business or non-profit, or consultants in related fields (e.g. accounting technology). 

Where they are located:

  • Colorado
  • Florida
  • Massachusetts
  • Minnesota
  • North Carolina
  • Texas
  • Canada

Size of their companies:

  • 56% are 1-person businesses
  • 22% have 2-10 employees
  • 11% have 21-50 employees
  • 11% have 51-100 employees

Pandemic Impacts Based On Business Size

Respondents were asked to rate the impact of the pandemic on their business on a scale of 1-10: 1 for no impact, 10 for huge impact. 

The results were all across the board. For every company size and type, some were impacted a lot, while others were hardly impacted at all.

About 55% had experienced major impacts due to the pandemic (with responses of 5/10 or higher). However, the remaining 45% barely experienced any impact so far. 

In the chart below, you can see the average impact by company size: 

How The Pandemic Is Affecting The Accounting Industry

 

Surprisingly, the impact appears to be the least significant for those who answered “It’s just me”. One might have expected larger firms to be better able to weather the storm. 

Please note: so far, only a limited number of responses have come in. We’re updating the results as the results come in, but at this point, the sample size is not yet sufficient to draw statistically significant conclusions. Therefore, please take all quantitative findings with a grain of salt for now. 

What Accountants Are Most Worried About

We asked respondents to tell us the biggest challenge they’re facing as a result of the pandemic.

The prospect of losing clients was a major concern — but surprisingly, it was not the #1 concern for most survey-takers. Under 30% answered that their #1 concern is losing clients. The most common other answers were as follows: 

  1. Dealing with the constantly changing rules and requirements for the various pandemic assistance programs, including loans and grants (especially PPP) as well as tax credits, extensions, and other changes. 
  2. Finding new clients, especially without the ability to do in-person networking.
  3. Staying connected with clients and staff.

We also asked respondents to tell us the biggest challenges their businesses face now — regardless of whether they are related to the pandemic. The most popular answers were:

  1. Getting new clients (55%)
  2. Low-margin services take up all my time, so I don’t have enough time to focus on other things, such as high-margin services (33%)
  3. Recruiting good staff (33%)
  4. Keeping existing clients (22%)

(Totals add up to more than 100% because survey-takers could select more than 1 response.)

This matches feedback that we hear at BooksTime all the time: accountants struggle to find time for everything they need to do. Most would prefer to focus on building client relationships, providing high-margin advisory services, or generating new sales (given that sales is one of their top challenges). However, many accountants end up spending tons of time on more menial tasks: reviewing the work of their more junior colleagues, following up with clients to get documents, recruiting and training new staff, or handling endless emails about minor bookkeeping questions and tasks. 

Frustration with these distractions has led many accountants to outsource as much as possible, such as bookkeeping and payroll, so they can focus on higher-level services and building client relationships. If you’re an accountant, and you want to avoid spending a lot of time on your clients’ bookkeeping work, BooksTime’s partnership program for accountants could be a great fit for you. Interested to learn more? Feel free to get in touch for a free consultation.

Client Cancellations Due To COVID-19

The average accounting firm reported losing 4% of their clients due to the pandemic. However, responses were highly variable, and some respondents lost close to 50% of their customer base. 

The most surprising result was that approx. 44% of accounting firms reported losing 0% of their clients due to the pandemic. Of these firms, half were 1-person firms, 25% had 2-10 employees, and the remainder had 21-50 employees. 

Unsurprisingly, firms that had the least churn tended to have diversified client bases, serving businesses in several different industries. 

Overall, this is very encouraging news for the industry: many accountants are hardly affected at all (so far, anyways). 

We’re not sure how respondents evaluated whether a client loss was mostly due to the pandemic, or mostly due to other factors. This causes some difficulty in interpreting the results.

What Accountants Are Doing To Survive

Accountants have adopted a number of different strategies to buoy their businesses during these challenging times.

The most popular tactics reported by survey takers include:

  1. Offering clients advice on PPP, EIDL, CARES Act, FFCRA, etc. – 62.5%
  2. Investing more in marketing and sales – 37.5%
  3. Offering clients more cash flow management advice – 37.5%
  4. Lowering prices for clients – 0%
  5. Used to work in an office, now I work remotely – 12.5%

(Total does not sum to 100% because respondents could pick more than one.)

  • Offering clients advice on pandemic relief programs:

This was the most popular response to the pandemic among accountants. 

Accountants everywhere report that client demand for this type of advice is through the roof. Offering this service is a great opportunity to help clients with something that’s important to them, while at the same time boosting revenues for the accountant — a real win-win!

However, this opportunity corresponds with the #1 challenge that accountants reported: keeping up with the changing laws and guidance on programs like PPP (as mentioned above).

  • Investing more in marketing and sales: 

One of the top challenges that accounting firms reported facing was adding new clients, so it should be no surprise that accountants are investing more in this area. 

  • Offering clients more cash flow management advice:

Now more than ever, businesses want to track their cash carefully so they avoid cash flow issues. Accountants are responding to the demand for this service with cash flow advice, reports and projections. 

Similar to tactic #1, this takes a problem that clients are facing — one that is especially acute in the age of the coronavirus — and turns it into an opportunity to deliver more value for clients, while also earning more revenue for the accountant. 

  • Lowering prices for clients:

No accounting firms reported lowering prices for clients — a sign of health in the accounting industry.

  • Used to work in an office, now I work remotely:

It appears that there was a low percentage of respondents who reported switching to remote work because most were already working remotely. The accounting industry (especially small firms who work with small businesses) has been shifting toward remote work for years, as the technology has evolved to make remote work more efficiently and secure than ever before. 

How BooksTime Can Help

We’re here to support accountants through this difficult time. Now more than ever, accounting firms need to save time so they can focus on higher-level services, developing client relationships, and sales. BooksTime’s partnership program for accountants helps you do exactly that — while also boosting your margins on services like bookkeeping. To learn more, give us a call at 888-90-BOOKS, or send a text message to ‪(617) 564-0239‬.

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Author: Charles Lutwidge

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