Xero, the global small business platform, today announced the release of its State of the Industry Report for Canada, which found that the country’s accounting and bookkeeping firms have experienced widespread revenue and profit growth, linked to the adoption of new operating models and cloud solutions.
The report revealed that 70 percent of Canadian accounting and bookkeeping practices surveyed experienced growth in revenues over the past 12 months, with more than half (56%) of those practices attributing their revenue growth to an increase in clients. At the same time, 70 percent of practices reported increases in profits, with an increased number of services provided (48%) and streamlined internal processes (41%) most commonly cited as reasons for rising profitability.
“Canada’s accounting and bookkeeping industry has responded to successive waves of disruption with resilience, ingenuity, and a remarkable willingness to adapt,” said Faye Pang, Country Manager for Canada, Xero. “We’re seeing subtle but significant shifts towards business models and uses of technology that amplify the value practices can offer their clients. The positive impact that these changes are having on revenues and profitability suggest that they could well become the industry norms of the future.”
The report’s findings point to growing change in the fundamental value proposition that accounting and bookkeeping practices offer. In the past 12 months alone, 22 percent reported adding client advisory services to their offerings; while 32 percent introduced value based pricing to their clients, most commonly to drive higher revenues and make billing easier to understand for clients. Additionally, practices that offered client advisory services or value based pricing were more likely to have witnessed growth in revenues in the past 12 months than those which did not.
“The rising adoption of client advisory services and value based pricing has been largely driven by demand from clients for trusted, transparent services that grow their businesses,” said Pang. “Given their accretive impact on revenues and profits, we may very well see them upend industry norms like the dominance of billable hours in the near future.”
Practices turn to the cloud to take on top talent
Cloud solutions also emerged as a significant factor in how practices empower their employees and, in turn, compete for top talent amidst challenging hiring conditions. Surveyed practices reported nearly half of all client work (45%) is now performed using cloud solutions, with the most common reasons for cloud adoption including support for flexible working, easier access to data, making work easier and more effective collaboration with clients. And 60 percent of all respondents agreed that practices using cloud-based software experience higher staff retention, while 66 percent felt that the use of cloud-based software helps practices attract more new staff.
The report also found that 74 percent of practices using cloud accounting solutions had experienced increases in revenues, compared to just 41 percent of non-cloud users. In fact, 32 percent of practices cited the use of cloud as a factor that directly led to their increases in revenue.
“The accounting and bookkeeping industry is increasingly aware that cloud-based solutions drive greater growth by not only making operations more efficient, but also creating more optimal conditions for collaboration and flexibility. Practices which adopt cloud solutions can give themselves a competitive advantage in hiring, retaining, and engaging top talent to do their best work,” said Pang.
“We’re seeing significant change to the industry as a result of this increasingly collaborative and engaged approach to generating value for clients – one which bodes well not just for practices’ returns, but the health of the entire Canadian business community.”