ALMOST a quarter of accountancy firms (24%) say they are likely to exploit the more favourable economic conditions to ramp up client fees over the next year, boosting profitability.
That’s the verdict of research from tax and accounting information group, Bloomsbury Professional.
The study found that the number of firms poised to increase their fees has increased by two fifths in the last 12 months, when just 17% of accountancy firms planned to increase rates.
Martin Casimir, managing director of Bloomsbury Professional, said: “During the recession, many firms were forced to cut or freeze their fees. Now, with the recovery well under way, firms are looking to boost profits by raising fees.”
“The threat of corporate cost-cutting and concern that clients would be unwilling to accept fee increases had previously discouraged firms – this now appears to be changing.”
The prospect of fee rises suggests that there is less intense competition among firms, he suggested. Casimir also cited the improved health of the economy means more new businesses, more investment, more deals and so more work.
He said some firms were still tentative about raising rates, with the majority looking at trimming unpropfitable areas of their work.
Trimming while growing
More than half of firms (55%) planned to cut unprofitable services to increase profits. Some 53% of respondents said they would look to improve credit control in order to boost profitability.
Work on fixed fee contracts overrunning and incurring extra costs were seen as the biggest risks to profitability facing accountancy firms in the next year, with almost a third (32%) ranking it as ‘high risk’.
Pressure from clients to reduce fees, and late payment from clients, were also viewed as significant risks to a firm’s future profits with 26% and 25% of respondents underlying these issues as high risks.
Adding to the feel good factor, the almost all respondents (96%) said they were unlikely to make staff redundancies over the next year – a big improvement on the results 12 months ago when 17% said they may have to cut staff.
Casimir added: “As business activity picks up, firms need to ensure they have the capacity to meet clients’ needs – thankfully that means that the threat of redundancies at all but a small minority of firms has disappeared over the horizon.”
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