The average private company that provides either accounting, tax preparation, bookkeeping, or payroll services increased sales by a 12 percent annual rate last year, a higher growth rate than private companies overall, according to a new report by financial information provider Sageworks.
In 2014, the average sales rate for private companies in the financial sector was 9.5 percent; the rate for the last five years was 7.6 percent.
Net profit margins for the average company in the accounting category rose to 22 percent in 2015, up from 18 percent in 2014. Over the past five years, the margin was 16.2 percent. Profit growth, however, dropped to 19.5 percent from 2014’s 23.8 percent. But 2015’s profit growth indicated improvement over the 17.6 percent overall average for the last five years.
While accounting firms typically have higher margins than other private company industry sectors, last year’s results are particularly strong, according to the report. Along with accounting, bookkeeping firms also are outpacing private companies in growth, Sageworks reports.
Sageworks analyst James Noe noted that, overall, the average private company is growing revenues at a solid rate, but the growth rate is lower than in prior years.
“We expect that accounting and bookkeeping professionals have the expertise to manage and maintain their finances in an adequate manner,” Natasha Closs, director of consulting services at Sageworks, said in a blog post about the results. “However, these figures seem to show that these financial professionals are seeing higher demand for their services than in previous years, reflected in their stellar growth figures and greater-than-usual net margins.”
One reason why: The offering of business advisory services. “Many firms are coming to the understanding that they want to be considered as something more than tax preparers,” Closs said. “By offering these types of tier 2 services, they can truly play the role of ‘advisor’ to their business clients.”
Sageworks compiled its date from its proprietary platform ProfitCents.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.