Entrepreneurship in the USA has reached record-breaking levels, with an average of 700,000 businesses established in a year. Yet, almost half of them fail in five years due to poor financial management. With the rise of cloud-based solutions amid COVID-19 complications alongside the demand for strategic help from the clients, accounting stats reveal that 2020 accelerated the coming of “the future of accountancy.” Take a look at the stats and facts below.
Demand for accountants in the future is expected to remain strong with the growing economy, globalization, and complex tax administration and regulations. As globalization continues, experts flag a rise in demand for accounting expertise and services related to international trade, mergers, and acquisitions.
Accounting employment stats point to an increase in the turnover rate in 2020 in every region around the country. While the largest firms experienced a steady turnover, the highest rates came from firms with $10 to $30 million in net revenue.
An accounting industry overview reveals ongoing budgetary pressures, an unstable tax landscape, and increased tax collection and audit activities to explain the dominance of SALT services. Executives predict a steady growth in the specialized area over the next few years.
Accountant statistics point to a trend towards industrialization across the industry in response to the growing client demand. When asked, 27% of buyers stated they wanted more familiarity with the business from their accountants.
Client retention is vital for accounting firms, and ensuring satisfaction is a top priority for many. Roughly 80% of work in any given year comes from existing clients for firms like Deloitte Consulting and Ernst & Young, accounting firm statistics show. Additionally, the research underlines that a whopping 59% of clients will never return after a negative experience with a firm.
(Customer Thermometer, ResearchGate, Business 2 Community)
Automation has a growing presence across accounting services, yet the majority of processes are still handled manually. This has proven to be time-consuming and cost defective, though. 67% of accountants ranked data entry errors as the most common mistake, and 25% said correcting those errors takes most of their time, bookkeeping statistics show.
The rate is an average for small, midsize, and large companies. Several firms were able to convert this demand into revenue. An accounting industry analysis further shows that firms may increase monthly client revenues by up to 50% by offering strategic advisory services.
Demand for strategic planning and review help is growing among small businesses, and they don’t limit their options to local firms; many are happy to work with online accounting companies.
Time management continues to plague small business owners, and accounting stats show that it is linked to the number of employees in an organization. 29% of small businesses with fewer than ten employees suffer from poor time management. The rate drops to 14.3% for companies with 10 to 99 employees, and only 3% of businesses with more than 100 employees complained about the issue.
Reactive accountants take action as a response to instigated activity by clients or events. A proactive accountant estimates and addresses looming issues before they become full-blown problems. Other than the reactive approach, untimeliness, lack of guidance and education are the most common complaints SMB owners have about their accountants.
With the overwhelming amount of daily updates, it is not surprising that firms are struggling to keep their clients up-to-date. Fortunately, most respondents did not struggle with the transition to remote work or communication with team members. Ensuring the security of documents, communications, and other information came after keeping clients in the loop at 10%.
The morale of finance and insurance professionals received a blow with the recession that came after the pandemic broke out, public accounting stats show. While the rate was significantly lower in the last quarter of 2020 at 59%, it seemed to have picked up by the first quarter of 2021, rising to 73%.
The use of cloud-based accounting platforms has been on the rise for some time, and nationwide lockdown turned it into a necessity rather than a preference. 62% of companies that did not feel prepared for remote work had no cloud-based systems in place. With the possibility of more lockdowns, cloud accounting statistics estimate a rise in demand for platforms that allow remote access.
Just last year, the accounting software market was worth a little over $12 billion. That number is expected to increase by more than 63%, reaching $19.6 billion in five years from now. The predicted compound annual growth rate sits at 8.5%.
Transformative investments mean cutting into profit margins to invest in ventures that will set firms up for future success. While there isn’t a definite categorization, innovation-focused investments such as blockchain or data analytics, building prototypes using AI, or hiring new C-suite executives for innovative purposes are considered transformative investments.
Undoubtedly one of the most used accounting software in the USA, Quickbooks, has been dominating the market for a while. Its competitors, Bench or Xero, are far behind in their share in the market, 12.61% and 7.72%, respectively.
While Quickbooks is used widely by small to midsize businesses for simpler accounting services, accountants prefer using Morningstar’s Office for advisory services. There is a shift towards all-in-one financial planning software, like Office, among accountants as opposed to using the best bits of a combination of software, which was a popular approach until recently.
(T3 Technology Hub)
Automation of certain services has increased competition in the industry significantly. By speeding up basic bookkeeping processes, it frees up a lot of human resources. Accounting job statistics suggest that a good redistribution of jobs can result in up to 34% revenue increase per employee.
Accountants anticipate spending less time on compliance tasks, such as bookkeeping and account preparation, 48% and 75%, respectively. Some think technology’s penetration into the industry means accountancy may gradually become obsolete. Still, many agree that it paves the way for skilling upwards toward more specialized areas, accounting market stats suggest.
Portfolio management also has a high adaptability rate (slightly above 81%) as other core technologies like financial planning and CRM software, yet its user rate is considerably low. E-signature and form filling and investment data/analytics both have high user rates, 7.96 and 7.74, but very low market penetration at 68.75% and 57.95%, respectively.
(T3 Technology Hub)
The impact of the pandemic eventually created economic winners and losers in the country, as evidenced by accounting statistics in Canada. 20% of respondents reported unchanged revenue figures, whereas 21% of firms reported increased revenues for their organizations. Optimism among professionals remained low as well, sitting at 17% in the third quarter of 2020.
The situation for the financial industry is not as extreme as other vulnerable sectors, such as tourism. As opposed to two-thirds of financial professionals who returned to the pre-crisis levels, only 15% of tourism experts could say the same.
Making Tax Digital aimed to make tax administration easier, more effective, and more efficient by implementing a fully digital tax system. While it was perceived as a hard-to-conquer challenge when it was introduced in 2017, accounting statistics in the UK show that a whopping 79% of business owners agree that they don’t mind using technology to manage business finances.
Although considered a canonically boring occupation, forensic accountants can be actual spies. It was accountants who brought down the infamous Chicago crime boss Al Capone, also known as the real-life Scarface. He was guilty of everything from gambling to murder, but the gangster was arrested and convicted of tax evasion.
46% of companies reported fraud in the last two years, accounting fraud statistics show. On average, a company had six such cases. The most common types were customer fraud, asset misappropriation, and cybercrime. The annual cost of cybercrime is forecast to go over $6 trillion this year.
The majority said they prefer to overpay and receive a refund, and 29% prefer to pay less than needed and receive a bill. Although it seems like it is a strategic move, most Americans are not on top of their tax liabilities. In the past three years, close to 3 in 10 taxpayers claim to have received an unusually large tax bill or refund.
The leading global accounting firms known as the Big Four — Deloitte, KPMG, PricewaterhouseCoopers, and Ernst & Young — perform the majority of audits of public and private companies in the US. They are often grouped because of their comparable size, wide scope of professional services, and attraction for prospective accountants. They employ just over a million people worldwide.
With the dawn of the digital era, spreadsheets and physical ledgers became obsolete. And now, with automation, recordkeeping processes have sped up tremendously, freeing up a significant amount of accountants’ time. Accounting stats reveal that the responsibilities of professionals have already begun to transform, just in time to address the growing demand across businesses for more strategic services. There is little doubt that cloud-based solutions, industrialization, and advisory services will define the future of accounting.
Sources: Accounting Today, INSIDEPublicAccounting, Intuitive Accountant, Datanyze, Thomson Reuters, Xero, FBI, BLS, CPA, Customer Thermometer, ResearchGate, Business 2 Community, Webinar Care, SmartVault, Deloitte, Business Wire, INSIDEPublicAccounting, T3 Technology Hub, T3 Technology Hub, Canadian Accountant, Deloitte, GOV.UK, FBI, PwC, AICPA, Statista