What are the top issues for small firms?
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Professional Insights

What are the top issues for small firms?

1 year ago · 3 min read

Every two years, the PCPS CPA Firm Top Issues Survey asks firms about their current primary concerns and those they believe are most likely to impact their practices over the next five years. The survey results are broken down by firm size, with separate top five lists for sole practitioners and for firms with 2 to 5, 6 to 10, 11 to 20 and 21 or more professionals.

In the 2021 survey, which was fielded from May 4th through June 18th, 2021, keeping up with the Paycheck Protection Program (PPP) and other business relief programs were seen as a challenge, but other long-standing issues, such as tax complexity and staffing, also remain top of mind.

Survey highlights

COVID business relief programs in the spotlight. Keeping up with COVID business relief programs was a top five issue for every firm size, and the number one issue for firms with 2 to 5 professionals. Given the many uncertainties during the program rollouts and the urgency of helping clients obtain relief, this was no surprise. Firms are still able to turn to the regularly occurring AICPA Town Hall series and the SBA Paycheck Protection Program (PPP) webpage for continued updates on these programs.

Tax complexity remains as a top concern. Managing tax changes and complexity remained the top issue for sole practitioners, as has been the case in the last four surveys. It was the number two issue for firms with 2 to 5 professionals this year and has also appeared in this group’s top five every year since 2015. Firms of every size continued facing challenges working with the Internal Revenue Service (IRS). Seasonality and the layering of deadlines was also a top five issue for firms with 5 or fewer professionals which isn’t surprising as the pandemic caused deadlines to be adjusted giving practitioners little time to take a break.

Staffing is a chief concern for most. Finding qualified people was the number one issue in 2021 for firms with 6 or more professionals, and it was in the top five for firms with 2 to 5 professionals. Survey results also revealed related staffing issues. The top five lists for firms with 6 to 10 and with 11 to 20 professionals both identified developing the next generation of leaders as a challenge. Firms with 11 to 20 professionals worried about effective staff utilization and management. Accordingly, all but sole practitioners ranked recruitment and retention as the top concern expected during the next five years. PCPS offers a variety of staffing resources, including the Small Firm Recruiting Brochure.

Succession slips from the top five. When the last survey was taken in 2019, developing and executing a succession plan was on the top five list for firms with 2 to 10 professionals, but it was not on any list this year. Given the pandemic, it makes sense that succession wasn’t top of mind, but now that we’re hopefully moving back to a new normal, consider turning to the PCPS Succession Planning Resource Center for tools and information on updating or creating a plan of action for your firm and spell out potential leadership roles for promising staff members.

New business models needed

The survey results reinforce the need for firms to consider new business models. With staffing a persistent concern in every Top Issues Survey, firms need to recognize that what has worked in the past is not sustainable for the future. For example, I recommend that firms struggling with staffing consider new billing and service protocols, such as value pricing and bundling services, and that they drop time sheets for staff. This step takes the focus off hours worked and moves it to the value of the output. Although work/life balance issues were not a top five issue for firms with 20 or fewer professionals, a staff person’s ability to manage their work and personal lives is certainly a factor in whether they join or stay with your firm.

In addition, while firms can’t control the IRS or the level of new regulations or technical requirements, a shift from time- and compliance-based services to advisory services can minimize some deadline pressures, limit the number of long days required and reward people for their contributions, not their time spent at a desk.

Managing a hybrid workforce appeared for the first time among the survey’s choices for issues that will have an impact over the next five years. It was chosen as a top issue by all firms with 6 or more professionals. As organizations return to the new normal, firms of all sizes should be open to new approaches when it comes to where and when their people work and consider accountability as the primary management technique for success. PCPS has partnered with Reality-Based Leadership to create firm-focused member resources to increase accountability and promote firm unity.

Looking ahead

Adapting to changing client needs, emerging technologies and a changing regulatory environment were on all firms’ lists of issues they expect to have an impact in the next five years. As firms continue to think about their future, they should take advantage of the many resources available to start tackling these top issues. Resources to address CPA firm top issues, along with the 2021 Top Issues commentary: Familiar challenges in extraordinary times will get you started.

Carl Peterson, CPA, CGMA

Carl Peterson, CPA, is Vice President of Small Firms at the Association of International Certified Professional Accountants.

In this capacity, he meets with small CPA firms regularly to understand their issues and represent these firms from an advocacy and firm development perspective. Peterson serves as the voice of small firms within the AICPA on standard-setting, regulatory and small business issues. He is responsible for ensuring AICPA initiatives continue to meet the needs of small firms.

Carl is a licensed CPA, and previously served as a managing partner at Peterson, Peterson & Associates, PLC, in Minneapolis/St. Paul, where he built its service and client base.

Carl has a history volunteering within the profession, including having served as a member of AICPA Council and as a member of the AICPA’s Accounting and Review Services Committee. In addition, he has served the Minnesota Society of CPAs as Chairman of the Board of Directors, as well as Chairman of the Political Action and Legislative Affairs committees. In 2013, he was honored by the Society with their Distinguished Service Award.

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