Flipping the Switch
The landscape changed quickly for CPA firms after the coronavirus (COVID-19) pandemic hit. Managing partners had to deal with massive changes to their firms’ regular workflow and practice. These included:
- Working virtually—firms were forced to shut down their offices and empower their entire teams to work remotely.
- The Coronavirus Aid, Relief, and Economic Survey (CARES) Act—this hastily drafted legislation and the accompanying Paycheck Protection Program provision was thrust upon the banking and accounting professions virtually overnight. The rules and eligibility keep changing, making it very difficult to advise clients about how to utilize the program.
- Technology—firms were forced to equip their people with the ability to communicate and get work done remotely. Managing partners had to figure out how to virtually manage workflow and lead the firm.
- The extended tax deadline—the automatic extension for most filings caused numerous logistical issues, including a busy season that was extended by three months.
- Developing people—staff who were hired in the past four months met their new colleagues via video conference and completed training entirely virtually.
- Communication—firms faced new challenges associated with exclusively virtual communication, both across the firm and within the partner group.
The COVID-19 pandemic has changed all areas of business, including the accounting profession. CPA firms have faced a “perfect storm” in 2020: an endless tax season, economic disruption, plus the coronavirus itself.
Rosenberg Associates surveyed 61 CPA firms in the middle of June and asked them what issues they were struggling with in the current environment. Virtually all firms had annual revenue of $35 million or less. It is important this firm size context because the top 25–50 firms, from reports in the media, have been making more drastic operational moves, mainly layoffs and partner draw reductions, than local CPA firms. The following trends were reported by respondents:
- 69% of firms’ revenues were down or flat compared to 2019. Interestingly by the end of 2020, one-third of all firms expect to catch up to—not exceed—last year’s revenues. Only 16% of firms are expecting a decline.
- Half of the firms project their 2021 revenues to increase from this year. And 41% think revenues will be about the same.
- Only 10% of firms have laid off staff.
- Only 17% of firms have reduced partner draws or are planning to do so.
- Before the pandemic, only 15% of firms had their staff working remotely to a significant degree. Post-COVID-19, this is expected to rise to 36%.
The following are the major issues that respondent firms are trying to get their arms around:
- Remote work—virtually 100% of staff now work remotely, but the dominant sentiment expressed is that staff miss working in the office and the social and professional interaction with co-workers.
- Productivity—CPA firms have concerns about productivity, training and mentoring on a remote basis. No clear, successful solutions have emerged. Two ancient methods of measuring productivity—billable hours and personal contact with staff at work—don’t translate to the virtual environment. With remote work, partners are going to have to adopt new methods of measuring productivity.
- Business development—how will firms bring in new clients without being able to meet them face to face?
- Office space—social distancing and remote work requirements will have a huge impact on firms’ office space needs.
This article is part of a package analyzing the results of the 2020 Rosenberg Practice Management Survey.
Included in this package is “The State of the Profession: Analyzing the Results of the 2020 Practice Management Survey”
To participate in the 2021 Rosenberg Survey, please visit http://rosenbergsurvey.com between January 1, 2021, and July 15, 2021. To purchase a complete copy of the 2020 survey results, visit http://rosenbergsurvey.com at any time.