This week the Accountants industry report from Business Fitness New Zealand – The Good, the Bad and the Ugly – was released. It is not good nor bad but it sure is UGLY what is happening to the NZ Accounting profession. You can buy your copy here. I was asked to write the opening remarks for this years report. My summary says it all.

In 2001 I wrote the very first edition of the Good, the Bad and the Ugly of the Accounting profession. Back then 105 (Australian and New Zealand) firms submitted their numbers and the average profit per partner was around $160,000. Since then businessfitness was formed and my original work has been carried on in New Zealand for 11 consecutive years.

I am thrilled that I have been asked to write the opening remarks this year. It makes me proud that the commentary and analysis has continued. However, it does not make me proud what is going on in the New Zealand Accounting profession. In short, it’s going backwards.

All you have to do is take a look at my profit per partner analysis below of the last 11 years. In 2004 the actual median profit per partner was $176,163. In 2014 the actual median profit per partner is $190,409. Not only has the actual profit per partner declined in the past 8 years (from a high of $229,646 in 2007) but when you apply ‘CPI plus a bit’ of just 5% to each year since 2004 the then the 2014 comparison results are staggering.

The other numbers of WIP, Receivables, Write offs, Average Hourly Rate and Productivity have gone up, down and sideways. At the end of the day it’s the profit per partner that matters.

Every expense in a firm is increasing. Salaries and overheads are increasing and you should be running a better firm each year so applying 5% per year profit growth is a very conservative growth target. Based on 5% the median profit per partner in 2014 should be $286,951. Alas, this year it’s only $190,409. That’s almost a $100,000 difference per partner!


On $190k how can partners afford private school education, decent cars, reasonable holidays and still give back to the community? Most can’t.

And to make matters worse isn’t the Accounting profession supposed to be “The Trusted Advisor” – the primary business adviser? Most partners are making less than their clients yet they are advising them of business success! Hmmm.

So why is this happening? I think there are 3 primary reasons:

  1.  Cloud accounting technology is driving efficiencies in the firm and the profession has been forced to reduce prices.
  2. Savvy clients have more information than ever before and they are asking more ‘price’ and ‘value’ related questions
  3. Nimble Accounting firms are promoting bundled and cheaper prices than ever before and thus ‘commoditising’ compliance.

There is more of this to come as well. To counteract these market forces the profession has not acted fast enough in marketing, value pricing and delivering business advisory services.

As the old saying goes “if nothing changes, nothing changes.” What that means is if you do nothing (strategy, process, tools etc.) then nothing changes. In this case doing nothing means everything changes. And a sharp decline in profit should be enough to motivate the industry to change.

I think there are 7 key things the profession needs to do to remain relevant and stop the leakage.

  1. Improve client service. One of the key reasons clients leave because of poor ‘service’. Adding value to what you are currently doing is critical.
  2. Train your team. Gone are the days when an Accountant who ‘processes’ compliance work can command the salaries they do. They must get new skills and add value to what work they are doing – otherwise the technology and off shore labour will replace them.
  3. Marketing every day. The profession has a lot to offer yet no one knows about the cool work you can do. Marketing is a must.
  4. Service offerings need to be increased. Just offering compliance or ad-hoc advisory is not enough. The profession needs to get involved in ‘financial coaching’ a structured way whilst staying close to the numbers.
  5. Pricing differently. Charging by the hour (especially in arrears) is so last century. You need to price in advance and preferably based on the value you create for the client.
  6. Sales skills. With increased competition and new services to sell the profession needs to learn how to sell.
  7. Cloud promotion. Due to social behaviour and technology companies driving change you cannot stop it. So join it. Promote cloud accounting & use modern tools to capitalise on it.

It’s not all doom and gloom. However if the profession does not do something different then who knows what the next 10 years will look like.

The graph below tells the story. I urge you to pass this onto every Accountant you know and let’s stop the decline. On January 20 2015 I will be doing a webinar in NZ to help stop the rot.

NZ Accountants