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Over nine out of 10 accounting firms plan to establish a new service line over the next year as business optimism among firms continue to hold firm.
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Major bank finds 90% of accounting firms are aiming for launches
18 June 2019
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A new report by Commonwealth Bank on the Australian accounting sector shows that 59 per cent of accounting firms hold a positive view on business conditions over the next 12 months.
The annual analysis, which surveyed 37 accounting firms, found that firms were forecasting higher revenue and profit in the year ahead compared to their reported financial performance in FY18.
Close to three-quarters of those surveyed expect a revenue increase in FY19 while 60 per cent expect a profit increase.
The optimism is reflected by firms willing to venture into diversifying their services, with 35 out of 37 firms indicating they would establish or grow new service lines in the next 12 to 18 months.
Business advisory services were reported as presenting the greatest prospect for growth, with 54 per cent indicating the desire to enter into that sector.
Tax consulting is the next largest opportunity, driven by mid-sized and other firms, while large firms are particularly upbeat about the growth potential of management consulting services.
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In fact, compared with the previous edition of Accounting Market Pulse, more firms see opportunity for growth in every service line, except wealth management and financial planning, superannuation and risk management.
“It is clear that despite a backdrop of broader economic headwinds and the political uncertainty of the May federal election, the majority of accounting firms have remained bullish on future market conditions,” said Commonwealth Bank national manager professional services Marc Totaro.
“The sector’s high proportion of recurring revenue is providing many organisations with substantial comfort about their cash flow and fixed costs which may be buoying confidence.
“This financial flexibility also enables them to evaluate the need and opportunity to diversify into higher-margin service lines.”
With confidence at a high, top business challenges for firms have eased as well, with FY18’s top challenge of negotiating prices with clients falling from 68 per cent to 30 per cent in FY19.
However, finding quality staff remains an issue, with 62 per cent of firms acknowledging it as a key concern.
The issue has been felt across the accounting sector, with a Sage report last month finding that just 13 per cent of accountants believed that accounting training was adequate for the next 10 years.
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