Updated Effects of COVID on CPA Firms – New Survey Results

This month, we repeated a survey of 52 CPA firms to better understand the effects COVID is taking on the industry. The vast majority of respondents were repeat participants from our June COVID survey of 61 firms. Read our previous blog post here.  

Most firms surveyed were in the $7-15M revenue range. Forty-seven of the 52 are multi-partner firms; five are sole practitioners.

Here are some interesting overall observations from September’s survey

1. Firms’ revenues are doing okay:
   • 63% of all firms’ YTD billings are up from last year compared to 31% in June.
   • By the end of the year, 62% of firms expect their full-year 2020 revenue to be up from 2019. This compares to 34% in June. Firms’ billings are catching up.
2. Collections are lagging billing increases per above, but not as much as predicted by firms in the spring. As of September, 48% of firms are reporting higher collections compared to last year. This lags the billing increase of 63%.
3. Looking ahead to 2021, firms are still not optimistic: 42% of firms project their billings in 2021 to increase from 2020 with 58% feeling that revenues will either be down or flat.
4. Very few firms – 10% – have laid off or furloughed staff. No change from June.
5. Very few firms have cut partner draws – 14%. Largely unchanged from June.
6. Very few firms anticipate many clients going out of business – 15%, which actually is ahead of the 10% figure in June.
7. Firms feel that 36% of their workforce will work remotely post-virus, an increase from 11% before the virus. This is similar to the polling in June.
8. We asked five operating questions regarding anticipated operating policies in a post-virus environment. The takeaway here is that firms expect the virus to impact the way they operate in dramatic ways.
   • Will firms return to a situation where the majority of personnel work IN the office? Firms are split roughly 50-50 on this.
   • Will firms maintain the same amount of office space? 58% say yes; 42% say no or not sure.
   • Will firm personnel return to a situation where they resume the same amount of traveling to clients as they did pre-virus? 56% say yes; 44% say no or not sure.
   • Will firm personnel return to a situation where they resume the same amount of air travel to clients, conferences, etc.? Only 27% say yes while 73% say no or not sure.
   • Will firms be convening client meetings in their office at the same pre-virus rate? 56% say yes and 44% say no or not sure.

Issues to ponder

1. How satisfied are CPA firm personnel (partners included) working remotely? There appear to be mixed feelings on this. With nearly eight months of remote working behind us, if firms haven’t already done so, they should be meeting with staff to understand what is and what is not working and how to improve working arrangements.
2. How does productivity right now compare to what it was before the virus? This is a bit complicated to answer and the “jury is still out.”
   • It’s possible remote workers may be working more hours because they have nothing else to do. One survey cleverly made this observation: “People working more hours is not a victory for productivity but a byproduct of captivity.”
   • There may be increases in productivity because (a) personnel have more control over when and how they work and (b) commuting time has plummeted.
   • Offsetting this of course is the challenge of working efficiently at home when young children are around.
   • Another challenge is training and mentoring young staff, which is more difficult to do remotely than face-to-face. Firms continue to address this.

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Overall, the updated assessment of the impact of the virus on CPA firms can be described this way:

• Firms are weathering the COVID storm nicely.
• Firms’ view of the COVID environment and its financial impact on their firms’ performance as of early September 2020 is improved from what they were looking at in June when the virus was still novel and the future uncertain.
• Firms are anticipating several permanent changes to their firms’ operations as a result of the virus, regardless of whether the crisis ends in 2021, as we all hope.