Profitability in the accounting genre is a residual – the income left after deduction of all the expenses – which all profit-making entities, including the CPA firms strive to achieve. However, in 2022, the fast and everchanging variables that affect it need to be considered, labor shortage and inflation being atop the list, which is stressing out the already-thin margins these firms are operating with. In this situation, outsourcing and staff augmentation will prove instrumental to achieving an optimized payroll, and hence, profitable operations.
CPA Firms in the United States
According to Accounting Today, there are around 46,000 CPA firms in the United States. A small firm is deemed to be earning an annual revenue of $200,000/ or less and employing 20 people or less. Only 500 firms out of the total number of firms in the US classify as medium-to-big firms as these are earning beyond $200,000 per annual and employ more than 20 people. This means that approximately 45,500 firms in the United States are small sized firms.
The Big Four
Big Four in the context of CPA firms refers to the four firms that are biggest in terms of annual revenues: Deloitte, PwC, Ernst & Young and KPMG, that earned $23.16b, $18b, $15,82b and $9.57b revenue respectively in 2020. The revenue of these New York-based CPA giants aggregates to $66.55 billion.
What About the Smaller Firms?
Not all CPA firms classify as Big Four and most of the small-to-medium sized firms – that form majority of the accounting diaspora in the US – must make rigorous efforts to generate the desired level of annual revenue.
What Is the Challenge?
However, the growing payroll cost in the US can easily devour this hard-earned revenue. The Great Resignation, growing demand for workplace flexibility and soaring inflation levels in the US pose a serious threat to the profitability margins of such firms as their services are price competitive.
So, the challenge is two-dimensional: First, the CPA firms are facing an acute shortage of skilled workforce – particularly, accounting professionals who are willing to work in the office premises – and second, the available workforce demanding an ever-increasing compensation.
What Should Be the Response?
This requires a two-pronged response: First, leveraging outsourcing and staff augmentation solutions and, second, finding service providers that can offer a quality assurance commitment on top of providing a remote professional resource.
Concern for Quality!
The response to the profitability challenge facing the CPA firms needs slight elaboration. It is always easy to find an outsourcing or staff augmentation partner, and the recent times have witnessed a mushroom growth of such service providers. However, the question remains whether hiring a remote staffer from a far-off location, such as the South Asia, Southeast Asia or the Far East, is enough to bring about payroll savings and secure profitability in this situation?
The answer is, no! Merely hiring a remote professional resource, such as an accountant or a business analyst or trade spend specialist, is not enough, if the outsourcing or staff augmenting partner is not assuring the management of its quality.
Expertise Accelerated advises the CPA firms to partner with outsourcing and/or staff augmentation specialist that will not only provide the required human resource but also commit to quality assurance so that the savings made on payroll costs are not offset by quality issues associated with the remote hiring.
Expertise Accelerated as the Outsourcing and Staff Augmentation Partner
Being an outsourcing and staff augmentation specialist endeavoring to deliver payroll savings to US businesses, Expertise Accelerated offers a full spectrum of quality assurance as a policy matter, starting from the recruitment of the professional resource until its amicable absorption into the client company.
A Word About Haroon Jafree
Haroon Jafree is a Connecticut-based Certified Public Accountant who is an expert at optimizing cost through outsourcing and staff augmentation solutions. Additionally, he specializes in CPG and retail industry-related trade promotions management and has served years at C-suite levels in notable US companies, delivering phenomenal cost savings through process redesign and reengineering. He is the CEO of Expertise Accelerated.
Outsourcing and Staff Augmentation as Instruments of Cost Optimization
Expertise Accelerated CEO Haroon Jafree’s (CPA) Businesses Reducing Costs Amid Inflation: a Myth or a Reality? featuring the strategic importance of outsourcing and staff augmentation as instruments of cost savings and, hence, profitability is a worthy read in this backdrop.