The Development of Accounting Services Industry in the United States - Example

Abstract The accounting services industry is a lucrative, fast-growing field not only in the United States. The recent economic recession has broadened the need for accounting services. Earlier concentration on need for these services was only placed on medium-sized companies and big corporations. However, individuals and small are demanding these services. The only contention is that they cannot afford the high fees charged by big companies. This reports the marketing plan to be taken in establishing an accounting whose main purpose will be to target those in need of low end accounting services. It will highlight the current and future trends in the accounting services industry to create a hindsight of the sector in general. The report will then provide requisite consideration like market competition and the market mix that will be used to promote the business. The services that the business will be offering will also be discussed in the report. Marketing Plan The accounting services industry The accounting services industry comprises of firms that are certified to audit the accounting records of both public and private organizations. In performing this duty, Certified public accountants are supposed to attest compliancy of organizations to generally accounting practices. Certified public accountants perform a variety of accounting services that include: auditing accounting records, preparing financial statements, designing accounting systems, developing budgets and providing professional advice on accounting matters. Demand for accounting service within the United States remained relatively steady during the economic crisis as there was demand for these services from clients who were involved in corporate restructuring and others who were facing bankruptcy. In 2011, the US accountancy market had total revenues of $129.1 billion. This represented a compound growth rate (CAGR) of 1.3% between 2007 and 2011 (Companies and Markets, 2012). Krabeepetcharat (2013) points out that the subprime mortgage crisis and the subsequent economic meltdown really slowed growth for the accounting services industry. IBISWorld, a market research organization that specializes in forecasting of industries and the United States business environment, estimates that in the years leading to 2013, the revenue from the accounting services industry will increase at an annual rate of 1.5% to reach $72.9 billion. Today, the US accounting services industry comprises of about 100,000 firms whose combined annual revenue is approximately $129 billion (Companies and Markets, 2013). The decline in revenue in the industry as reported by Krabeepetcharat (2013) can be attributed to the decline in demand for deal-related services during the economic recession. Some of these deal-related services included initial public offerings (IPOs), mergers and acquisitions. Today, most business, whether large or small, are outsourcing accounting services to cut on costs and other factors. There are many firms out there which businesses can outsource accounting services from. A full accounting firm is a good example of accounting services providers that businesses can engage. Businesses have realized that they need to concentrate more on the core business aspects of their ventures rather than spend a lot of time managing accounting works. Outsourcing accounting services has also enabled businesses to save on time required in preparing accounting works (Sagarika, 2013). These are the key driving forces in the accounting service industry. Full service accounting firms provide multiple services to business owners across multiple industries. IBISWorld estimates that in 2013, the Big Four accounting firms represent 35.5% of the accounting services market share (Krabeepetcharat, 2013). This indicates that there is a relatively low level of concentration in market share by these companies. Generally, the accounting services industry has been experiencing consolidation over the years. In the 1980s for instance, Krabeepetcharat (2013) reports that there were 8 large accounting firms in the United States. The Enron scandal which led to the collapse of Arthur Anderson made the industry’s largest players to get even bigger. However, medium sized firms have gained substantial ground in market share especially since the recession. This is because businesses are continuing to consider the benefits of cutting costs and avoiding the high fees that are attributed with big name firms. The demand for low end accounting services by most businesses today forms the basis for this market plan. Most accounting services providers have also forgotten that there is an increasing number of small businesses and individuals who cannot afford to hire big name accounting firms. The next decade will also be a period which the accounting profession will experience rapid changes. The industry will definitely require new levels of business flexibility and agility. Competition will also be on the rife as new industry entrants will be trying to secure themselves. According to Intuit 2020 Report, outsourcing and automation in the next decade will replace accounting and tax professionals especially in routine and low-value services (Intuit 2020 Report, 2011). Target market and services to be provided From small business accounting firms to the Big Four which are Deloitte, PricewaterhousCoopers, KPMG and Ernst & Young, the main services offered by these firms are auditing and accounting. Essentially, the firm will provide consulting services on the financial health of small businesses and individuals, tracking revenues and expenses and produce financial records. The reason why I have decided to start a small low end accounting service firm is because despite the small size, such a practice has considerable advantages given that their size gives them a competitive edge in terms of recruiting, retention, client services among many others (Metzler, 2008). Bookkeeping services Every business needs to keep track of all its income and expenses. This is also the case for individuals who have income and expenses and would like to keep track of them. As earlier established, the future trend for most small businesses and individuals is the outsourcing of accounting services. This means that in house-bookkeepers are being replaced by outsourced service providers. The services that will be provided in relation to bookkeeping will include: accounts receivable, accounts payable, credit sales reconciliation, bank reconciliation, financial statement preparation, and preparation of accounting write ups, among many others. Even though bookkeeping firms are not required to obtain any certification, this business will seek certification to instill confidence to our clients on the services provided. Tax Preparation Filing of taxes is an essential civic duty required by all citizens in the United States to keep the country running. It is an obligation that everyone has to fulfill by April 15thn of every year. In as much as filing of taxes by businesses and individual is a compulsory duty, it is a very tedious, and to some extent a technical process. There exists a market niche of individuals and small business that are demanding low end tax preparation services. This demand has risen in the years following the recession (Doin, 2012). Revenue from tax preparation services in the United States stood at 21% of the total revenue of $129.1 billion raked by the accountancy market (Companies and Markets, 2012). As of 2007, there were an estimated 139 million tax payers in the United states with 52.9% of them being sdiad to have used tax prepares to file their tax returns (Dascalescu, 2009). There also many individuals and small business that cannot afford the high costs and fees that are charged by big name firms for tax preparation services. Auditing Services Auditing is essentially the systematic process of obtaining and evaluating evidence related to assertions on economic transactions. The purpose of this process is to ascertain the degree of correspondence between those assertions and the criteria used in communicating results of the transactions. An audit in accounting is a verification and examination of financial and accounting records and other relevant supporting documents. Auditing of financial reports and other documents is mostly done by a person who is independent of an organization or business. Our auditing services will be exceptional. Our main focus will be on clients who cannot afford the fees charged by large firms. The firm will be providing consistent audits to individuals and businesses that address complex issues. This will be achieved through the use of global methodology and deployment of latest, high quality tools and techniques in auditing. Benefits of the services offered From a client perspective, the biggest advantage of accounting services that are provided by as small firm is the involvement of management in all decision making and processes. In small firms, there are typically at least two types of people involved with a client, one of who stakeholder, plus a manager or another member of staff in the firm. The clients often deal directly with the decision makers in the firm. According to Metzler (2008), a common complaint that features in big firms is that clients are often not sure of who is in charge of their account(s). Its hard for them to know the best contact person supposed they need help—the senior manager, partner or someone else. Most f the clients to our firm will comprise cottage industries, family businesses. In most circumstances, such clients usually want to know they have a familiar person at a firm as a contact when they want to reach out. Potential Competitors The accounting profession market for many years has cried out for alternatives to the big four. This business and many others that have already been established are aimed at coming up with structures that can feel the void left by those who cannot afford the services of the Big Four. Local businesses and individuals form part of this niche. Below are some of the potential competitors that will offer my business a challenge in service provision Baker Tilly USA Barker Tilly USA is an accounting firm comprised of a national network of 22 mid-size accounting firms across the United States. This firm is marketing itself as one entity to draw business away from the Big Four. In as much as its target is the customers of the Big Four, Barker Tilly USA also posses as a potential thread to other medium and small sized accounting firms due to its national network. Baker Tilly USA, opened its offices for business in October 2006 and offers tax, audit and consulting services under one brand name. Baker Tilly International on the other hand is a worldwide consortium of 125 firms. Three other networks that represent mid-size regional firms — Moores Rowland North America, the Leading Edge Alliance and Moore Stephens North America — are also planning to market themselves as an alternative to the Big Four, the Post continued. The accounting services industry has a ‘name-brand effect.’ Accounting firms in alliances, such as Baker Tilly USA have a better chance of competing with the second-tier firms," which include RSM McGladrey Inc., Grant Thornton LLP and BDO Seidman LLP. In the post-Sarbanes Oxley (SOX) environment, the Big Four firms have been overwhelmed with work to help public companies comply with the stricter internal control requirements. Regional firms have found it difficult to break into the Big Four market, in part because some of the biggest clients require the international reach and specific industry knowledge offered by the Big Four — Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP. RSM McGladrey According to Hoovers (2013), RSM McGladrey is a firm that provides accounting services to individuals, small businesses and midsized company. The accounting firm which was created in 1999 when H&R Block acquired it from McGladrey & Pullen, has some 90 offices in about 25 states. It is trans-state network that posses as a big challenges to the services that we are about to offer. RSM McGladrey offers accounting services such as tax consulting, investment banking, retirement planning, wealth management, and international business services to clients in industries including construction, health care, and manufacturing. Grant Thornton LLP Grant Thornton LLP is an accounting services firm headquartered in Chicago. The firm has three service lines which are: audit, tax, and advisory services. Its specific advisory services and areas of expertise include: Sarbanes-Oxley compliance, mergers and acquisitions advice, tax, and business valuations. The target industries for the firm are financial services, construction, consumer products, not-for-profit, government contracting, public sector and quasi governmental organizations, health care, and technology businesses. Even though the firm is not a Big Four, many medium sized businesses are opting for its services. Small scale businesses and individuals seeking accounting services often rely on referrals made by medium sized competitors and this poses a great challenge to entry level service providers. BDO Seidman, LLP. BDO Seidman, LLP, is a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For many years, BDO has provided quality accounting services through the active involvement of experienced and committed professionals. The firm serves clients through 37 offices and more than 400 independent alliance firm locations in the United States. This national outlook in terms of resources and expertise will poses a great challenge to any entry level accounting firm. Niche Market That niche for the business will be to provide small and medium-sized companies with due diligence, merger, acquisition, divestiture and employee benefits audit consulting services and other collateral services that medium-sized and the Big Four accounting firms have largely ignored in the wake of the last few years of corporate governance upheavals. Our niche market will be comprised of small businesses and individuals that require low end financial services. Unlike the general assumption that is there in the industry, this niche has not been well explored by most accounting practitioners. Even though it’s considered as counter-intuitive to think about a smaller specialty area, a true micro-niche makes our business unique because of the expertise in that more narrowly defined area (Wiff, 2014). Marketing Mix Prices The firm will seek to provide premium product line of services at premium prices that offer the best overall value to our clients. Our intention for our clients is that they should realize more wealth due to their ability to optimize profitability and minimize their tax obligations (Katruyla, 2012). The client billing rate will reflect the level of expertise required to perform the work. The firm will also work to bill more of our services on a fixed-fee basis. This will be particularly on the services that can better utilize computerized capabilities that the firm endows. The fees will also be based on the value offered to the client, and not the time required to complete the task. Promotion We will promote the firm through various critical marketing techniques. One will involve leverage referrals from professional contacts and individual clients that I personally have acquire in my current practice. Another one will involve the enhancement of our profile within the targeted industries and sectors of specialization by raising our reputation for possessing unique expertise in these areas. We will emphasise on the of use of current technological advancements such as the use of accounting software. Others technology appliances at our disposal include in-house computer capabilities and a website that we will develop soon. These two possess incredible potential for future differentiation in an increasingly competitive market. We will focus on getting referrals from: major banks credit unions major law firms brokerage firms current clients Advertising We will opt to advertise mostly in the local newspapers and trade magazines. This is because we want to attract local clients first. Honestly, we are not big, and resourced enough to spend money on national advertising in national magazines. We will also advertise on online portals. This will ensure that people always find the firm when they are looking for an accounting and finance firm in the area. Our website will clearly communicate our brand and positioning so that when we drive traffic to it -- it results in leads into our office. Since we have considered online marketing landscape as one of our advertising strategies, it is important to note that many elements make up this new marketing mix. This will complicate the process of developing a strong brand. Additionally, the new marketing mix must address both human and non-human online search ways of prioritizing information. Reputation and credibility are critical in attracting, engaging and nurturing prospects. The days of mass marketing with broad messages are being replaced by targeted marketing with specific messages delivered to very specific audiences. This intersection of technology, word of mouth, and information consumption by humans and non-humans is making the world of marketing more complex than ever. Proposed Promotional Budget Advertising Start Date End Date Budget Print Ad 7/1/2013 12/1/2013 $1,000 Brochures 7/1/2013 12/1/2013 $1,000 Total Advertising Budget     $2,000 PR Start Date End Date Budget Press Kit 7/1/2013 12/1/2013 $900 Press Releases 7/1/2013 12/1/2013 $1,000 Total PR Budget     $1,900 Direct Marketing Start Date End Date Budget Newsletter 7/1/2013 12/1/2013 $10,000 Tax Brochure 7/1/2013 12/1/2013 $2,000 Financial Planning Brochure 7/1/2013 12/1/2013 $2,000 Total Direct Marketing Budget     $14,000 Web Development Start Date End Date Budget Secure Client Log-in 7/1/2013 12/1/2013 $3,000 Updated Content 7/1/2013 12/1/2013 $1,000 Newsletter Capability 7/1/2013 12/1/2013 $1,000 Total Web Development Budget     $7,000 ______________________________________________________________________ Total $ 24, 900 Feasibility of the idea The accounting services industry a lucrative, fast-growing field not only in the United States. The recent economic recession has broadened the need for accounting services. Earlier concentration on need for these services was only placed on medium-sized companies and big corporations. However, small individuals and small are demanding these services. The only contention is that they cannot afford the high fees charged by big companies. References Companies and Markets (2012). US accountancy services markets dominated by the ‘Big Four’. Company and Markets – Finance and Banking. Retrieved from http://www.companiesandmarkets.com/News/Finance-and-Banking/US-accountancy-services-market-dominated-by-the-Big-Four/NI6300 Dascalescu D. (April 12th, 2009). How much does it cost to pay taxes – The brutal cost of paying taxes. Dascalescu Wiki. Retrieved from http://wiki.dandascalescu.com/essays/how_much_does_it_cost_to_pay_taxes Doin G. (2012). Tax preparation services. American Debt Help Organization. Retrieved from http://www.debt.org/tax/services/ Hoovers (2013). RSM McGladrey Inc. Hoovers D&B Company. Retrieved from http://www.hoovers.com/company-information/cs/company-profile.RSM_McGladrey_Inc.341f2ff5756865b9.html Intuit 2020 Report (February, 2011). Future of the Accounting Profession – A new mindset and model for thriving in a connected world. Intuit 2020 Report. Pp 9 – 14. Retrieved from https://blog.accountants.intuit.com/wp-content/uploads/2011/02/intuit_corp_vision2020_0111.v51.pdf Katruyla J. (September 13th, 2012). Three steps to pricing your services, Part 1. Accounting Web. Retrieved from http://www.accountingweb.com/article/three-steps-pricing-your-services-part-1/219847 Krabeepetcharat (March, 2013). Accounting Services in the US. IBISWorld Industry Report 54121c. pp 2-36. Retrieved from http://www.eksh.com/repository/Documents/Articles/IBIS%20Accounting%20Industry%20Report%202013.pdf Metzler J. S. C. (July, 2008). The Small Size Firm Advantage. Journal of Accountancy. Retrieved from http://www.journalofaccountancy.com/Issues/2006/Jul/TheSmallFirmAdvantage.htm Sagarika, (March 11th, 2013). Accounting services for small Business – Keeping business owners in a profitable zone!. Books2taxes. Retrieved from http://books2taxes.com/blog/2013/03/accounting-services-for-small-business-keeping-business-owners-in-a-profitable-zone/ Wiff S. (2014). New Accounting firm targets niche market. Dallas Business Journal. Retrieved from http://www.bizjournals.com/dallas/stories/2004/01/12/story7.html?page=all Read More