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Leading accounting firms expect operating margins to increase over the next six months, according to CBA’s Accounting Market Pulse report.
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Operating margins expected to rise
05 December 2014
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The report, which surveyed C-suite and board level respondents from 20 leading accounting firms, showed a generally positive outlook for the accounting sector in the short and medium term.
Marc Totaro, national manager, professional services, at CBA said a belief that broader economic conditions will improve as well as a widespread expectation of revenue growth underpin the sector’s positive sentiment.
“In addition, firms flagged increasing operating margins over the next six months, particularly amongst larger firms,” he said.
Mr Totaro said the research failed to pinpoint a single reason for the expected increase in margin but said he expects mid-tier firms to benefit from recent investment in outsourcing and offshoring.
“The margin improvement that the mid-tier firms are expecting, I suspect that a lot of that is driven by them playing catch-up with the top-tier firms around investment in outsourcing and offshoring.
“The top firms have been doing it for a number of years and I think the mid-tiers are now catching up, so that could explain part of the story as to why they are more positive around the margin improvement.”
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Despite the positivity around operating margins, firms nominated negotiating fees with clients as the most challenging business element right now. Mr Toraro put this down to the competitive post-GFC environment in which firms now operate.
“Negotiating price with clients is a natural consequence of the fact that it’s so tough to win new business,” he said.
“You really want to retain existing clients and clients are under more pressure themselves and so they’re really testing the market for value proposition.
“I think a lot of the time it does result in a reduction in fees, particularly for the compliance-type work, auditing-type work,” Mr Totaro said.
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