White paper

Stay ahead of the pack in the tax and accounting industry:
4 key trends

 Is your firm staying ahead of the pack or lagging behind the competition?

That is a crucial question today’s firms must consider as the tax and accounting industry is going through a dramatic shift accelerated by the COVID-19 pandemic and economic conditions.

A growing number of firms are rethinking various aspects of their business — from the clients they serve to the services they provide to the technology they leverage. In today’s environment, it is essential to remain competitive. The transformation sweeping the profession has been in motion for some time, but the onset of the COVID-19 pandemic and the unsettling economic conditions have undoubtedly kicked it into a higher gear.

Today’s clients want and expect more, and firms must find ways to navigate this historical demand for services while experiencing a labor shortage that was further exacerbated by the pandemic-induced “Great Resignation.”

This white paper explores four key trends impacting the tax and accounting industry and provides actionable insights to help firms stay ahead of the pack. Let’s take a closer look.

1. Know your worth

As a client’s most trusted advisor, tax and accounting professionals must know their worth and ensure they are properly compensated for their knowledge and expertise. It is a multi-pronged approach that sets the general population of tax and accounting firms apart from the leaders.

Raise prices

When was the last time your firm reevaluated its pricing? Are you charging enough for your knowledge and expertise? Given the findings of a recent Thomson Reuters survey of 300 tax and accounting professionals, there’s a chance you’re leaving money on the table.

One of the most significant differences between those thriving firms compared with the general population of tax and accounting firms is how they value and bill for their time. In fact, 31% believe the work they perform is worth more than what the firm charges.

Large tax firms were more comfortable with their billing rates, while small and mid-sized firms leaned toward feeling undervalued.

Capitalize on the success of your business. Your knowledge and expertise are valuable to clients, so it is time to reevaluate your pricing and ensure you are being appropriately paid.

Some firms may be leery of raising their prices out of fear they will lose clients. However, the reality is that clients will be more willing to pay higher prices if they clearly understand the value you provide. That’s why it is important to know your worth, communicate it to clients, and charge appropriately.

It is interesting to note that Thomson Reuters estimates 20% of the tax and accounting market is thriving, with some firms nearly doubling their tax preparation rates.

A key step in ensuring you are properly compensated is to cut ties with the industry’s long-standing practice of hourly billing and shift to value-based pricing, which we’ll discuss in more detail later. There are many wins in embracing value pricing. It enables firms to remain transparent, demonstrate their value, and eliminate billing surprises — all of which clients will appreciate.

Be picky about new clients

Are you taking on every new client who walks in the door? If so, it may be time to rethink this approach.

Firms can better serve clients and drive greater profitability by identifying their ideal clients and focusing on serving those that best fit that profile. Think of it as quality over quantity.

Given that many firms are operating with strained bandwidth, sharpening the focus to serve only ideal clients can be a critical move. In fact, it is an approach that is gaining traction. Thomson Reuters research found that more than half (54%) of firms indicated they are only taking on those new clients that match target profiles. Roughly 11% are considering implementing this strategy over the next three years.

Based on the findings, the most common policy around accepting new clients is only to accept new business clients that require traditional tax, accounting, payroll, or audit work (82%). However, 75% of firms still accept new individual clients that require tax prep work, 51% are limiting new clients to business clients that require advisory work — along with other ancillary services — and 27% are only accepting new individual clients that will require wealth management advice.

Cull or re-home unprofitable clients

For some firms, focusing only on those ideal clients may also mean culling or re-homing unprofitable existing clients.

Why? Because the time and energy a firm spends dealing with less-than-ideal or unprofitable clients is time that can be spent bringing in new, more profitable clients. This will also mean less stress for the staff and, ultimately, more profitability for the firm.

The decision to cull or re-home clients isn’t an easy one, but it is a move that some firms are taking. Thomson Reuters research found that 40% to 50% of firms have culled or re-homed between 1% and 5% of their client base, and 20% have done the same with between 6% and 10% of their client base.

Furthermore, 29% of respondents shared that they are re-homing clients with specific profiles, while another 3% plan to do so by the end of 2023, and 7% more indicated it is under consideration.

With the rise in client demands, the labor shortage facing the profession, and the complex regulatory environment, it is no surprise that culling or re-homing clients is emerging as a topic of discussion.

Interestingly, advisory firms are twice as likely as non-advisory firms to have re-homed specific client profiles.

When looking to cull or re-home clients, where do firms begin? Firms may want to start by classifying clients. Client classification can be a way to identify those clients who should pay more for the extra attention and work they require. It can also allow firms to weed out unprofitable clients to cull or re-home.

Questions to ask about clients include:

  • How much time do they spend with the firm?

  • How many services do they currently utilize?

  • Do they pay the bills on time?

  • Do they dispute or argue over fees?

  • Does the firm make a good recovery on the fees?

  • Can the firm add further value to its business?

Set client expectations

Relationships, including client relationships, can be challenging. Unrealistic expectations and miscommunication are bound to surface occasionally, so managing client expectations and establishing deadlines up front is essential.

When staff and clients are on the same page, it helps strengthen client relationships, reduces stress, and ultimately drives greater profitability. It is important to remember that strained client relationships not only impact clients but can hamper a firm’s job performance and profitability and negatively impact staff morale.

Clearly defining upfront both the scope of service and the scope of the client relationship in an engagement letter is one of the most effective ways to manage client expectations. Without this, clients will too often try to push the boundaries of the accountant/client relationship.

The scope of service. This clearly describes which services the firm includes and those it doesn’t. Those services offered by the firm but not included within the scope agreement are out of scope. Those out-of-scope services are to be listed as additional fees. It is also critical to be clear about deadlines and the payment schedule.

The scope of the client relationship. This scope outlines how many meetings the firm has with the client each year, when those meetings take place, and which is the best way to work together — portal, email, etc. Also, don’t be afraid to let the client outline their expectations. Relationships are a two-way street, and when the expectations of both the firm and the client are clearly understood, they are more likely to be followed.

When firms fail to manage client expectations, it not only hinders client relationships and the firm’s profitability, it also negatively impacts the morale and work-life balance of staff. This is a critical factor to keep in mind in today’s war on attracting and retaining top talent.

2. Attract and retain top talent

Attracting and retaining top talent is not exactly a new concern for the tax and accounting professional. However, the pandemic further fueled the issue as a growing number of employees across numerous industries began to rethink their priorities and how and where they wanted to work. The tax and accounting profession was not immune.

Recruiting continues to be a significant challenge for firms, with only one-quarter reporting a very successful year in 2022. In order to find talent, many firms are first turning to job posting sites (60%), followed by referrals from friends and family (56%), professional referrals (54%), and professionals’ social media sites (44%), according to Thomson Reuters research.

To further sharpen their competitive edge in the talent search and help retain current talent, a growing number of firms are rethinking their operating models. This includes supporting a remote or hybrid work environment, promoting greater flexibility, and finding ways to broaden the pool of job candidates. Firms are also ramping up salaries to attract and retain talent.

Remote work and flexibility

The call for greater flexibility in the workplace is not new, but there’s no doubt that the pandemic left a significant mark and changed life as we knew it. The pandemic proved to be not just a tragic health crisis but also a financial crisis. Amid the loss of life, lockdowns, and mask mandates, people’s priorities began to pivot and many started reevaluating how they live and work.

Today’s employees are making it increasingly clear that they want to work to live, not live to work — and a growing number of firms are heeding the call.

Thomson Reuters research shows evidence of this trend, showing that the top three talent and retention strategies firms are employing are:

  1. A flexible work schedule (75%)

  2. Offering a competitive salary (73%)

  3. A flexible working location model (63%)

These same firms shared that if they were to focus on five recruiting and retention strategies over the next three years that they believe would have the biggest impact, they would be:

  1. Competitive salary (69%)

  2. Flexible work schedule model (59%)

  3. Flexible work location model (57%)

  4. Expansion of benefits (56%)

  5. Investment in technology to automate work or improve collaboration and connection (43%)

If there’s one thing firms discovered as a result of the pandemic, it is that remote or hybrid work is possible within the profession when expectations are set and communicated, and the right technologies are in place. Remote work is newer territory for some firms and requires a change in mindset, but in today’s tough job market, it is a shift that firms should not overlook.

Survey respondents indicated that they prefer a flexible working location, with the majority of respondents wanting to work remotely at least two days a week (62%). They also overwhelmingly want the flexibility to work outside regular work hours (71%).

Relocating for another job opportunity is not ideal for the majority of practitioners, with only 19% of respondents indicating that they are willing to move more than 50 miles away or out of state for a job opportunity. Having the ability to tear down geographic borders with cloud-based technology solutions that enable anytime, anywhere access is more important than ever before.

As noted earlier, many firms are looking to provide competitive pay to help them better attract and retain talent. In doing so, firms must be sure they are factoring in the living wage within their location. This may sound obvious, but it’s worth repeating, especially since research indicates that being financially stable is the leading long-term career goal for practitioners, and offering a competitive salary is ranked as the top attribute of an employer.

For example, when considering the salary needs of a seasoned accountant, $80,000 to $99,999 may sound like a respectable salary. However, it may be too low depending on the location. At $80,000 a year, working a 50-hour week, an accountant makes $38.46 an hour. This means that a seasoned professional making $80,000 a year with a spouse and two children living in Hennepin County, Minnesota, would be living below the living wage in that county, which is $40.40 an hour.
Aggregated Occupational Employment and Wages reports from the Bureau of Labor Statistics ;
New hire info from AICPA 2021 Trends report

 In addition to being financially stable — which ranked number one at 98% — leading long-term career goals for professionals also include:

  • Having a good work-life balance (97%)

  • Having a long-term, stable job (97%)

  • Flexibility in work hours (91%)

  • Strong relationships with co-workers (79%)

  • Flexibility in where they live or ability to work remotely (78%)

Find talent in new places

As noted earlier, many of today’s firms are facing strained bandwidth. This is not only due to the impact of the “Great Resignation” but also a dwindling pipeline of new accounting graduates and the retirement of many seasoned professionals. Leading firms are open to finding talent in new places to expand the pool of job candidates.

Hiring and training non-accountants — people who would be a great fit for the firm and could be trained to do certain accounting-related functions — can be an effective way for firms to expand bandwidth.

According to the survey findings, recruiting non-accounting grads for entry-level positions is currently a strategy for 31% of firms, growing to 33% by the end of 2023, with another 9% considering it as a future strategy. Regarding seasoned professionals without accounting experience, 28% of respondents said they are actively recruiting from this talent base, with another 12% planning to do so by the end of 2023 or considering it as a future strategy.

While a growing number of firms are seeking talent in new places, there remains a lot of untapped opportunities. The numbers reflect that more than half of firms are not exploring new talent pools, which is known from other research to have become a valuable resource for vanguard and evolving firms in this talent-constrained market.

It is interesting that advisory firms are twice as likely to hire seasoned professionals without an accounting degree and 80% more likely to hire non-accounting graduates for entry-level positions. They are also four times more likely to recruit for relationship manager roles and almost seven times more likely to recruit for business development roles.

Exploring new talent pools is important, but so is leveraging technology.

3. Leverage technology

The majority (72%) of thriving firms are investing in technology to automate work and improve collaboration, as opposed to only 53% of other firms. Thriving firms are investing for a good reason.

Leveraging the right technology solutions enables firms to be less reliant on labor, better attract and retain talent, and, ultimately, drive greater profitability.

Become less reliant on labor

Between the staffing constraints, the rise in client demands and expectations, and the ever-changing regulatory environment, today’s practitioners are busier than ever. Therefore, firms must drive as many efficiencies as possible through the use of technology.

By leveraging solutions that drive greater automation and streamline workflows, firms can do more work with less staff. These solutions give those associates at the firm more time to focus on higher-value, higher-margin work, which we’ll discuss in more detail shortly. It is a critical factor to consider as many firms find themselves operating with strained bandwidth.

Integrating disparate systems and leveraging automation not only weeds out inefficient and time-consuming steps but also significantly reduces the risk of errors. This integration ultimately results in a more efficient workflow and improved client service without the need to hire a bunch of staff.

Replace manual, unsatisfying work

Tax and accounting professionals do not want to spin their wheels on mundane, repetitive tasks like data entry. With the right tools and resources in place, they don’t have to.

When firms implement better automation capabilities, they can weed out manual, unsatisfying tasks. This provides associates with the time they need to focus on more enjoyable and satisfying work, like strategic advisory services. Greater automation also improves accuracy and significantly reduces the risk of errors that comes with manual data entry.

Firms can better attract and retain talent when they have innovative technology to help associates work faster and smarter and, ultimately, deliver higher-value, higher-margin services. Furthermore, investing in technology demonstrates that the firm is forward-looking and open to innovation. All these factors help sharpen a firm’s competitive edge in a tough labor market.

Investing in the latest and greatest technology was listed as a top employer attribute (85%). This is a critical factor to consider in today’s challenging labor market.

Increase profitability

Inefficient processes not only place a greater strain on staff but will also cost your firm money. When firms invest in the right technologies, it leads to a happier, more efficient staff; happier clients; and, ultimately, a happier bottom line.

With robust automation and integration, time is no longer wasted on unprofitable tasks like data entry. Instead, professionals can work faster and smarter and spend their time delivering more profitable services like strategic advisory services.

Consider this: with the right tools and resources in place to deliver strategic advisory services, firms have experienced a 150% increase in existing client monthly billings and a 200% increase in new client billings.

These numbers are significant and speak to the importance of leveraging technology and embracing advisory.

4. Embrace advisory

Strategic advisory services have, in recent years, taken center stage within the profession.

The increased focus on advisory has been driven, in large part, by a shift in client expectations, the commoditization of tax prep, and advancements in technology like cloud-based solutions. It was then further accelerated by the COVID-19 pandemic as many accounting professionals soon found themselves wearing a multitude of hats in their role as trusted advisors. Clients turned to their accountants for guidance about everything from applying for Paycheck Protection Program loans to managing cash flow in hopes of staying in business, and accountants swiftly stepped up to the plate.

Today, while compliance-based services are still essential, the rise of strategic advisory services shows no signs of slowing. This is evidenced by the fact that, according to Thomson Reuters research, 50% of survey respondents said they have expanded their portfolio to include advisory services, and one-third have formalized their advisory offering.

It is easy to understand why when looking at the benefits of advisory.

Better attract and retain talent

Firms that provide strategic advisory services strengthen their ability to attract and retain talent. As noted earlier, today’s professionals do not want to spin their wheels on mundane, unsatisfying work. Compliance work, albeit important, is based on what has already happened. Advisory services are about the future — what steps can be taken now to get a more desirable result or outcome? Shifting to advisory results in more satisfying work for practitioners and stronger client relationships.

It should also be noted that firms offering advisory services use more technology than non-advisory firms. This means that practitioners in advisory firms are not only performing higher-value services but are also working faster due to greater automation and workflow efficiencies.

Easing the strain on staff while enabling them to engage in higher-value work is paramount for firms looking to attract and retain talent in a tough labor market. Today’s employees not only want but demand a better work-life balance — and firms that heed the call stand to benefit.

Overall, Thomson Reuters research found that advisory firms are more likely to cull or re-home unprofitable clients, invest in automation and technology, and offer greater flexibility and better salaries. Not surprisingly, advisory firms have found themselves more successful than non-advisory firms at recruiting and retaining talent.

Enjoy a recurring revenue stream

Iron out the peaks and valleys of tax season and benefit from a recurring revenue stream by implementing a scalable advisory services model and embracing value-based pricing.

Instead of meeting with clients once or twice a year — usually around tax season — firms are regularly communicating with clients and charging a monthly fee for their services. Enter value-based pricing.

It is vital to embrace value-based pricing and shift away from the long-standing tradition of hourly billing. Value-based pricing enables firms to stay transparent, demonstrate value, and eliminate billing surprises. These are key ingredients to a successful advisory relationship.

To set your fees, value your knowledge at different price depths or tiers. Consider:

  • What type of advisory services are you delivering?

  • What kind of value does it bring to the client?

Here’s how these tiers and a value pricing strategy might look:

  • Tier 1: If the service you deliver brings a direct bottom-line benefit, you can charge the greatest percentage of value for your fee.

  • Tier 2: Services that have an indirect movement to the bottom line will have a lesser percentage of the price to value.

  • Tier 3: Services that deliver a protective benefit of sorts may have the smallest percentage of value to price. For example, your firm provides a service to a client that makes them less susceptible to fraud or negative audit findings.

Firms benefit from the annual revenue model, and clients appreciate knowing how much they will be charged each month, which helps them budget accordingly. It is a winning combination that results in a consistent revenue stream for the firm, more meaningful client relationships, less stress, and a greater work-life balance for staff.

Stop chasing client data

Advisory firms that work with clients year-round not only benefit from a recurring revenue stream but are also more connected to clients’ financial data. Why is this important?

It enables practitioners to not only provide clients with forward-looking, proactive guidance; it also means they are no longer chasing down client data. Chasing down a client when needed is an inefficient use of time and puts an added layer of stress on staff.

Being more connected to clients’ financial data results in stronger and stickier client relationships and is an attractive benefit for firms looking to attract and retain talent better.


Remaining competitive in today’s complex environment may be challenging, but it is far from impossible.

Firms that know their worth, reevaluate their approach to hiring and staffing, leverage technology, and embrace advisory services can effectively tilt the scale in their favor and maintain a competitive edge.

The good news is that firms are not alone in their journey. Turning to a solutions provider like Thomson Reuters can help ensure your firm is on the path to success and has the tools and resources in place to stay ahead of the pack.

Don’t miss out on unlocking the secrets to success. Follow our recent webinar, “Staying ahead of the pack: Discover the formula for success” and see how you and your firm can get ahead of the competition today.

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