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The Good Bad Ugly 2020 report shows an increase in partner profits despite an increase in unrecoverable working hours.
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Partner profits reach record highs in 2020
03 March 2021
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Profit per partner is at record highs since the Good Bad Ugly report’s inception, with partners earning an average of $384,462 in 2020, up from $379,000 in 2001.
Insights from high-performing practices revealed partners earning $1.6 million in revenue. Compliance services dominated their revenue breakdown at 56 per cent, with an average client fee of $8,020 and seven staff per partner.
High-performing firms, according to the report, recorded expenses made up of 59.6 per cent revenue, with a partner payout of $427,583 after a notional salary of $200,000.
The report highlights what many might already suspect: that the accounting profession was heavily relied upon throughout the pandemic. So much so that submissions for the 2020 report were down on previous years.
Two common reasons given, according to the report, were the time required to complete the survey, and just how different a year 2020 was.
The 2020 report found that, after speaking with many partners, a “majority” were working longer hours and, in countless cases, unsure whether the hours worked were recoverable.
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Despite a surge in unrecoverable hours, the report found “minimal” effects on revenue and profitability.
Over the course of the year, net profitability averaged at $885,015, with compliance dominating the average service profile at 58.3 per cent, with the average partner hosting 245 clients, and chargeable productivity — excluding partners — coming in at 73.6 per cent.
However, the pandemic didn’t just impact working hours and profitability. One Good Bad Ugly Insight Poll found increased cash flow among one-third of those surveyed, while another third noted slowed cash flow as a result of payment refusal and invoicing errors.
Lock-up days remained stable at 76 days, consistent with previous years.
Last year also saw increased investment in technology; in part, to facilitate remote working, according to the report, but also to modernise workflow and increase leverage.
Technology expenses have become a highly requested benchmark, according to the report’s creators, and it’s one that highlights a “definite trend” away from traditional standalone software and licensing. Instead, firms are moving towards modernised subscription models.
When combining the two, the report found that, on average, practices were spending $0.05 on technology to produce every dollar of revenue in 2020, up from $0.01 in 2016.
The increased spend reflects another trend seen through the report. The rise of automation and “software workers”, particularly in the completion of routine tasks within compliance.
Early data suggests that staff leverage could soon shift towards technology leverage, as the Good Bad Ugly Technology Insight report shows the industry trending to cloud or online systems for practices.
Later on, practices are expected to trend towards AI and machine learning, which are expected to have a larger impact.
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