As one of the top 100 most influential people in the US accounting profession, Mr Payne divides his time between Australia and the US.
In his address, Mr Payne highlighted some of the key changes that have emerged in the accounting industry over the past 20 years.
“We have an ageing profession with the average age of senior practitioners in the US now 50 years old,” Mr Payne said.
“Technology has flattened organisational structures resulting in many senior people performing work that would normally be carried out by their subordinates.
“...there has been a keen gender shift
towards women in the profession...”
“There has also been a keen gender shift towards women in the profession with
55 percent of women accounting for employees in US large firms, while in small firms 70% of employees are female. However, most women do not aspire to take on the role of a Partner.
“Employee loyalty overall has also weakened, resulting in increased staff turnover,” he said.
Mr Payne said accounting and business services in the US are worth $84 billion compared with $8 billion in Australia. The top 50 US firms account for nearly 50% of this figure with the rest being managed by smaller firms.
“No matter where you go in the world, the industry is highly fragmented - approximately 86% of the profession has less than 10 people employed in accounting practices.
“The revenue, payroll and margins per employee for firms of different sizes are virtually the same until you get to the big firms who you could say are in a totally different industry because they deal with different clients and provide different level services.
“In my view, there do not seem to be that many economies of scale although we do see larger practices making more money because they affect better leverage with more team members per partner; they also work with clients who are willing and able to pay for more valuable services and are therefore able to get better results.
“The accounting profession has not consolidated despite the large number of mergers – and it is unlikely to happen. As existing accounting firms merge, new small business practices are established.
“There is always a demand for small practices which are partly supply driven and partly demand driven,” he said.
“The firms outperforming the industry are the small accounting practices that have been operating for about 10 years and provide innovative thinking, compared with the long established firms.
“In 2005, firms with fees of more than $10 million per year grew their revenue by more than 15% compared with 9.5% in 2004. However, sole practitioners have to work much longer hours in order to get the work done to preserve their revenue.
“From 1997 to 2002 there was a 5.7% growth in the number of firms; revenue for CPA firms grew 19%; revenue per employee went up 13%; payroll per employee went up 22% - the net effect resulted in a slight increase in margin, but after inflation, there was virtually no growth.
“In the US, the top performing CPA firms are providing more than 25% of services in management consulting. With 48,000 management consultants in the US, their numbers almost match that of accounting firms.
“Management consultants provide expertise in administrative issues, financial planning and budgeting, equity and asset management, strategic and organisational planning, new business start-up and business process improvement.
“However, these services are already being provided by the accounting profession despite 76% growth in management consultant services in the past five years.
“Clearly, this tells us the market wants 76% more management consultant services than they did five years ago, but the accounting profession is not stepping up to provide it.”
Mr Payne said it is interesting to note that in 80 percent of US accounting firms, the dress code for accountants is casual attire.
“In US practices, between 43 and 47 percent of annual revenue is generated in just three months of the year during the tax season. During this time, the work load is very intense and it is difficult to attract young people to work in the industry under these conditions.
“...six percent of US firms currently send tax return work offshore
and this figure is likely to increase...”
Mr Payne said while only six percent of firms are currently sending tax return work offshore to other countries, such as India, he believes it is inevitable that this will increase in the future.
In the US, 50 percent of Mr Payne’s clients are happy with their offshore agreements,
30 percent are still coming to terms with the concept and the remaining 20 percent are not interested in sending their work offshore.
“To consider this concept, you need to find a partner who has a robust business model and you need at least 100 tax returns to make it worthwhile.”
Mr Payne added that firms looking to expand their business should look at hiring more staff before they need them. The work will come and if you are not equipped to manage it you overwork existing staff and if they leave, you are left playing catch-up.
In summary, Mr Payne advised senior partners to spend more time developing the business; hire the staff capacity before you need it to accommodate the extra work generated by senior partners; and adjust charge rates if you need to.