Small and Midsize Firms Help Drive Profession’s Comeback

A survey by the Accounting Office Management and Administration Report (AOMAR), a monthly newsletter for CPA firm managers, aligns the accounting profession’s future success with the increasing strength of small and midsize firms.

As profits rebound and firms begin to grow, it is the relationships fostered by these smaller firms that will account for the profession’s stability in upcoming years, the survey finds.

“The strong ties to clients that small and midsize CPA firms have maintained and strengthened make it probable that the profession will thrive in the future in firms where relationships count…,” according to an analysis of the 2004 CPA Firm Practice Management Survey in AOMAR’s December issue.

Small and midsize practices will charter new territory in joint ventures—sharing clients and swapping engagements—with competitors, including the Big Four, as requirements of the Sarbanes-Oxley Act drive firms to forego public audit work as they distance themselves from Securities and Exchange Commission practice. This trend is likely to continue “no matter what legislative changes occur,” AOMAR reported.

Small and midsize firms will also grow as they diversify their services by nurturing small niches of general accounting practice, AOMAR reported. “More [small to midsize firms] are making specialty and niche services a part of their strategic plan, rather than the ‘gold rush’ stampede that occurred in the roaring nineties,” the analysis found.

This sustainable shift toward niche accounting highlights the value of developing employees’ specialized skills and the need to retain and develop staff.

The leaders of young and old firms alike will also need to examine their approach to firm management. The uncertainty of the past few years has shed new light on the importance of responsible leadership, as smaller firms push for strategic, planned growth and development in the next few years.

Statistical support for these conclusions, drawn from the responses of the 135 firms that participated in the survey, is printed in a supplemental report, also in AOMAR’s December issue.