The Australian accounting sector continues to experience strong client demand, according to CommBank’s latest Accounting Market Pulse, driving elevated business confidence, higher revenue and profit predictions in the year ahead.
CommBank’s FY19 Accounting Market Pulse, an annual analysis into Australia’s accounting sector, shows 51 per cent of accounting firms hold a positive view of current business conditions. This optimism is expected to extend, with 59 per cent of companies taking a positive view on conditions over a 12-month horizon.
Marc Totaro, National Manager Professional Services, Commonwealth Bank, said, ”It is clear that despite a backdrop of broader economic headwinds and the political uncertainty of the May Federal Election the majority of accounting firms have remained bullish on future market conditions.”
Overall, accounting organisations are forecasting higher revenue and profit in the year ahead compared to their reported financial performance in the FY18. Looking closer at size-of-firm, the profit projections from the large firms remain the same as a year ago, while a far greater number of mid-size firms expect higher profits in the year ahead.
“The sector’s high proportion of recurring revenue is providing many organisations with substantial comfort about their cash flow and fixed costs which may be buoying confidence. This financial flexibility also enables them to evaluate the need and opportunity to diversify into higher-margin service lines," said Mr Totaro.
Given strong demand, many of firms’ top challenges have eased in the year to date. This includes negotiating prices with clients (net 68 per cent found it challenging in 2018 compared to 30 per cent in 2019) and winning new business (net 49 per cent in 2018 compared to 38 per cent in 2019). Conversely, attracting and retaining staff has remained steady or intensified.
“Organisations are still vying for new business in a competitive market and grappling with attracting top talent. These are clear indicators of strong demand for accounting services.
“Most firms believe their core strengths lie in their client service and expertise and this broadly corresponds to the thrust of their business development activities. Organisations are also investing in technology and implementing automation to improve service levels, turnaround times and to free staff up to focus on client relationships,” Mr Totaro said.