Accounting Services
Description
Companies in this industry provide services such as auditing, bookkeeping, payroll processing, and tax return preparation. Leading companies include ADP, H&R Block, and Paychex (all based in the US). Major companies that have international operations include the "Big Four" accounting firms: Ernst & Young and PricewaterhouseCoopers (both based in the UK); as well as Deloitte Tohmatsu Group (Japan); and KPMG (the Netherlands).
Worldwide, the Big Four dominate the market and have expanded in many countries by buying local firms. In countries such as China, the Big Four have affiliated with local firms. However, concern over the share of the audit market held by the Big Four has led European regulators to impose new rules meant to enhance competition.
The US accounting services industry includes about 133,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $153 billion.
COMPETITIVE LANDSCAPE
Demand for accounting services depends on new business formations, the increasing complexity of corporate business, and personal income. The profitability of individual firms depends on the right mix of services and effective marketing. Large firms have advantages in providing wider ranges of services to large corporate clients and having the resources to serve customers with many locations. Small firms can compete effectively by specializing and providing superior service. The US industry is concentrated: the 50 largest US companies account for just less than 50% of revenue.
PRODUCTS, OPERATIONS & TECHNOLOGY
Tax preparation and representation account for 30% of the industry revenue. Financial auditing accounts for about 25%. Other services include payroll services (about 20%) and general accounting (more than 10%). Some accountants have branched into accounting-related information technology consulting, business consulting, and personal financial planning. Small business owners often rely heavily on their accounting firms for advice.
Operations focus on providing a set of accounting-related services to businesses, individuals, or both. Most activities involve preparing, analyzing, and verifying financial documents as a way to provide information to clients. Common activities include setting up and maintaining accounting procedures and books, developing budgets, auditing accounting records, preparing financial statements and tax returns, processing payrolls, and billing. Metrics include client retention and acquisition rates, billing recovery rates, and quality, as measured by percentage of results contested by government or lawsuits.
Bookkeeping and accounting work involves the classification of financial transactions into appropriate account categories in the double-entry accounting system used in the US. Accountants may handle tasks directly for a client or supervise the customer's own accounting practices, whether manual or computer-based. Successful bookkeeping and accounting work often leads to tax preparation and related consulting for the same clients.
Audit work typically involves investigating the accuracy of a client's accounting system and tracking sample financial transactions through it. Typically, a small team of accountants conducts an audit over a period of weeks or months. In large client corporations with complicated businesses, external auditors may have an ongoing onsite presence. Auditing is challenging: to audit properly, an accounting firm must ask hard questions of the client, but to retain the client's business, the auditor must present an acceptable audit. The government requires publicly traded companies to have their accounts audited annually, and forbids an external auditing firm from providing consulting and certain other services to audit clients.
Worldwide, the Big Four dominate the market and have expanded in many countries by buying local firms. In countries such as China, the Big Four have affiliated with local firms. However, concern over the share of the audit market held by the Big Four has led European regulators to impose new rules meant to enhance competition.
The US accounting services industry includes about 133,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $153 billion.
COMPETITIVE LANDSCAPE
Demand for accounting services depends on new business formations, the increasing complexity of corporate business, and personal income. The profitability of individual firms depends on the right mix of services and effective marketing. Large firms have advantages in providing wider ranges of services to large corporate clients and having the resources to serve customers with many locations. Small firms can compete effectively by specializing and providing superior service. The US industry is concentrated: the 50 largest US companies account for just less than 50% of revenue.
PRODUCTS, OPERATIONS & TECHNOLOGY
Tax preparation and representation account for 30% of the industry revenue. Financial auditing accounts for about 25%. Other services include payroll services (about 20%) and general accounting (more than 10%). Some accountants have branched into accounting-related information technology consulting, business consulting, and personal financial planning. Small business owners often rely heavily on their accounting firms for advice.
Operations focus on providing a set of accounting-related services to businesses, individuals, or both. Most activities involve preparing, analyzing, and verifying financial documents as a way to provide information to clients. Common activities include setting up and maintaining accounting procedures and books, developing budgets, auditing accounting records, preparing financial statements and tax returns, processing payrolls, and billing. Metrics include client retention and acquisition rates, billing recovery rates, and quality, as measured by percentage of results contested by government or lawsuits.
Bookkeeping and accounting work involves the classification of financial transactions into appropriate account categories in the double-entry accounting system used in the US. Accountants may handle tasks directly for a client or supervise the customer's own accounting practices, whether manual or computer-based. Successful bookkeeping and accounting work often leads to tax preparation and related consulting for the same clients.
Audit work typically involves investigating the accuracy of a client's accounting system and tracking sample financial transactions through it. Typically, a small team of accountants conducts an audit over a period of weeks or months. In large client corporations with complicated businesses, external auditors may have an ongoing onsite presence. Auditing is challenging: to audit properly, an accounting firm must ask hard questions of the client, but to retain the client's business, the auditor must present an acceptable audit. The government requires publicly traded companies to have their accounts audited annually, and forbids an external auditing firm from providing consulting and certain other services to audit clients.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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