How Does Your Firm Compare?
In 1999, the U.S. Census Bureau published detailed information on CPA firms for the first time.
Statistics indicated that a total of 53,651 CPA firm offices nationwide employed more than 389,340 people, generated total revenues of over $38.6 billion, and supported an annual payroll of over $15.1 billion.
The individual reports provide detailed information for each state and metropolitan area and for many larger counties and cities.
According to national statistics, the average CPA firm office possesses the following characteristics:
- 7.26 employees.
- Annual receipts of slightly less than $720,000.
- Annual payroll of approximately $282,700.
- The average employee in this average firm earned slightly less than $40,000. The payroll amount includes the wages and salaries of employees but not the income distributed to sole proprietors or partners; the proprietors and partners are not included in the number of employees.
CPAs from State to State
- The top five states accounting for more than 40% of all public accounting jobs are, in order of employment: California, New York, Texas, Florida, and Illinois.
- Six other states have at least 10,000 public accounting employees each: Pennsylvania, Ohio, Michigan, New Jersey, Massachusetts, and Georgia.
- These top 11 states represent almost 62% of all public accounting employment in the nation.
- Perhaps more significantly, although the firms located in these 11 states represent only about 58% of the CPA firms nationwide, they generate more than 67% of the receipts and more than 65% of the payroll.
Concentration in Major Metropolitan Areas
The 40 most populous areas as defined by the U.S. Bureau of Economic Analysis (BEA) range in size from Los Angeles, New York, and Chicago (more than 7 million people) to Fort Lauderdale, Orlando, and Milwaukee (under 1.5 million people).
- In total, these 40 areas account for almost 44% of the total national population and for slightly more than 50% of all economic activity measured by total personal income. Approximately 51% of all CPA firm offices are located in the largest metropolitan areas, but these firms employ more than 60% of all accounting personnel.
- More significantly, the major metropolitan area firms generate over 69% of all CPA firm receipts, and their employees receive almost 68% of the national public accounting payroll.
- Although Los Angeles is now the nation's most populous metropolitan area, New York and Chicago continue to generate greater total economic activity and remain the capitals of public accounting.
- CPA firms in each of the top five metropolitan areas (New York, Chicago, Los Angeles, Washington, and Boston) employ more than 10,000 people.
- New York metropolitan area CPA firm employees generate an average of nearly $152,000 in firm receipts, the highest in the nation, and their average compensation of about $50,100 is exceeded only by the employees of San Francisco firms, who earn about $51,000 but generate less than $144,000 in receipts.
- High productivity is found in most major metropolitan area firms.
- The average firm receipts per CPA firm employee is about $113,700 in the top 40 metropolitan areas, greater than the $99,100 national average.
- The average firm employee in the major metropolitan areas generates about 14% more revenue than the national average and takes home about 12% more compensation ($43,700 versus $39,000 nationwide).
- Public accounting activity is even more geographically concentrated than the metropolitan area data indicate. While current population and employment trends indicate a migration to suburban areas, most public accounting activity remains concentrated in the central cities. In most major metropolitan areas, smaller firms are located in suburban areas, but larger firms remain in the central cities, primarily in downtown locations.
A detailed examination of the five largest metropolitan areas makes this point.
- Only 3,033 of the 8,104 CPA firms (37%) in the five major metropolitan areas are located in the central cities, but the central city firms have 66% of the employees, generate 75% of the receipts, and provide almost 70% of the payroll.
- The only one of the top five metropolitan areas in which central city firms do not dominate the employment and total receipts statistics is Washington D.C. The majority of employees in this area work in the suburban areas of Maryland and Virginia, and these firms generate 60% of the Washington metro area receipts.
- In the other major metropolitan areas, however, the suburban firms tend to be small with the suburban firms in the top five metropolitan areas combined (including Washington) being actually smaller and less productive than the national average. Whereas the national average CPA firm has 7.26 employees generating an average of $99,100 in receipts, the average suburban firm in the large metropolitan area has only 5.77 employees and average receipts of less than $95,600 per employee (Exhibit 4 presents details for the top five metropolitan areas). The pattern of central city dominance in public accounting is not unique to large metropolitan areas but is repeated across the nation.
Changing with the Times?
The Census Bureau reports raise some issues about how the accounting profession is positioned in the economy.
- The profession is more concentrated in regions identified with the "old" economy than those identified with the "new" economy. Cities such as New York and Chicago were the undisputed capitals of the old economy and remain the leading centers of public accounting. Will companies in Redmond, Washington, Silicon Valley, California, and Austin, Texas continue to look to New York and Chicago for their accounting services?
- Furthermore, will the accounting profession follow its clients to the suburbs? The move to suburban locations began with homeowners who were soon followed by small and-medium sized consumer businesses. In recent years, even large corporate headquarters have migrated to the suburbs. Quite a few significant accounting clients are headquartered in places like Schaumburg, Illinois, White Plains, New York, and Plano, Texas; more will follow. Where there is a critical mass in smaller metropolitan and suburban areas, CPA firms may move away from the central cities to service them.
This article was written with permission of the New York State Society of CPAs' CPA Journal and based on their feature article from February 2001, "How Does Your Firm Compare."