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Blog: Perfect your accounting firm playbook - 3 easy steps to improve profitability

December 06, 2023

Presented by CPACharge

The accounting profession’s transition into the digital space has been ongoing for decades, but has recently reached exponential speed. Technological advancements improve each year, with new and better ways to boost your business. If you can’t keep up, you risk losing clients, talented staff, and profits.

To thrive, you must adapt. In this blog, we provide strategies for fine-tuning your accounting firm's profitability playbook to ensure a consistent cash flow—regardless of what the future holds.

How to Make Your Accounting Firm Profitable

Step 1. Align With Clients’ Needs and Stay Updated on Trends

Your first step in crafting a strong accounting firm profitability playbook is understanding your clients’ needs and goals. This solidifies your position as a trusted advisor and increases the likelihood that they will turn to you as their demands evolve. Additionally, knowing your clients’ most pressing wishes gives you a starting point for creating specialized services and providing proactive solutions.

Next, keep an eye on the emerging trends and profitability statistics within your specific niche. For example, client services have risen in popularity, particularly for midsize firms. According to Thomson Reuters, 93% of surveyed tax professionals report that their clients are looking for advisory services, which include:

  • Tax strategy (91%)
  • Business consulting (73%)
  • Financial planning (63%)
  • Decision support (46%)

Another significant trend among clients is the desire for convenient payment methods. In 2022, 60% of payments were made with debit, credit, or prepaid cards, per the Federal Reserve. By 2023, Fidelity National Information Services Inc. estimates that 91% of transactions will be digital.

With CPACharge, a leading payment software made for accounting professionals, you can save time by easily accepting digital payments and managing invoices all in one platform.

Step 2. Embrace Upskilling & Expand Services

As your clients’ needs evolve, you can stay attuned to these changes by upskilling and expanding your service offerings. Whether it’s including online payment technology, offering strategic advisory services, or providing comprehensive financial planning, expanding your skill set also allows you to stay aligned with clients as well as increase profitability through new or updated pricing.

There are three key benefits to upskilling and expanding your services:

  1. A competitive edge: Clients will often seek out firms that offer a wide range of services. By diversifying your offerings, you and your firm will be more appealing to potential clients. In addition, you will stay competitive within the market while boosting your profitability year-round.
  2. High-quality talent: A wider variety of services will draw in new and better accounting talent who are looking for firms with high profitability and growth potential. This can lead to a more experienced staff that is able to take on more complex projects and provide unparalleled services to your clients.
  3. Added value: Expanding your services is a mutually beneficial endeavor; it adds value for your clients and increases the market value of your services. Recent reports reveal that 54% of buyers purchase accounting services in bundles or packages. Clients are also willing to pay 50% more for those bundled services. By offering more than tax preparation services, you become a valuable partner in their business and future—which can bolster your relationship.

Step 3. Price Properly

As your firm grows and expands, adjust your pricing to reflect the provided value. While increasing fees can be daunting or awkward, this measure ensures that you are compensated properly for your expertise and hard work. There are two ways to approach this: on your own or with a trusted partner like SmartPath—a pricing engine designed to calculate the ideal price for your services.

On your own, you’ll need to conduct a thorough analysis of the costs associated with all of your services. Calculate time, resources, and value margin for each one. Understanding the true cost allows you to make informed pricing decisions.

Then, you can update your fee schedule to match. Instead of billing solely on hours worked, consider pricing based on the value you deliver. With hourly pricing, it’s easy to answer one-off questions here and there and miss out on billing the time correctly. With bundled pricing, you can guarantee you’re paid for every minute worked.

If such an audit seems overwhelming, consider using a tool like SmartPath—a pricing engine that can help you determine the ideal price for your services. SmartPath can streamline the pricing process, make it easier to communicate the added value to your clients, and justify the increase in price. SmartPath also offers the Perfect Pricing Template, which calculates the ideal fair cost for your clients while improving your accounting firm’s profit margins. Get the proper price in minutes, with the data to back it up.

Successful Solutions for a More Profitable Accounting Firm

Increasing your accounting firm's profitability is easier when you have a strategic plan in place. By aligning with your clients' needs and goals, keeping current with the latest trends, upskilling and expanding your services, and pricing accordingly, you can achieve sustainable profitability every year.

And remember: You don’t have to implement that plan on your own. Embrace solutions like CPACharge and SmartPath to support your revenue growth. With the right technology in place, your firm can flourish in any future.

Schedule a demo today and learn how CPACharge can empower your team to improve profitabilityBy Merchant Advocate

Credit card surcharging and the related programs have been a hot topic over the last few years and are only growing hotter. Some see the practice as a way of offsetting the cost of doing business with credit cards, while others consider it an undue toll levied on loyal customers and clients. The guidelines and laws surrounding these programs are unclear, ever-changing and vary by state and area. Regardless of geographic location, there are important tax implications, so it is critical that you are aware which of your clients are surcharging and receive the required paperwork to avoid an audit.

Traditional Surcharge Program

A traditional surcharge program adds a fee to all credit card transactions — excluding debit. The first challenge here is how to distinguish debit from credit. Some busi­nesses assume that a debit card is any card processed with a personal identification number (PIN). That is not the case. PIN or not, a debit card is any card that takes money directly from a consumer’s bank account. This represents around 50% of all transactions.

The consumer may tell the merchant to run their debit card “as a credit card” without the PIN — regardless, it’s debit and illegal to surcharge under the Durbin Act. The only way to run a true surcharge-compliant program is to use a credit card machine or point of sale system that determines if the card is debit or credit before applying the fee. To complicate the issue further, some industries are tied to specific point of sale (POS) systems that do not have this ability. This is particularly true for those in the restaurant and hospitality sectors.

Cash Discount Program

Cash discount programs were originally designed as a way for processors to creatively add a service fee to all card transactions and then offer a discount for those paying by cash. Essentially, they changed the name of the program from “surcharge” to “cash discount” and added a fee, just to take the fee off. This is really a surcharge program in different packaging, which means it’s also illegal to offer a cash discount on a debit card. A true compliant cash discount program lists the actual price and takes a discount off the listed price if the customer pays with cash. 

Compliance Regulations and Tax Implications

The practice of surcharging has an interesting track record in the state of Florida. Though a statute disallows surcharging on credit card transactions, this ban was found to be unconstitutional and unenforceable nearly a decade ago hinging on language finding surcharges to be analogous with discounts.

However, when implementing a surcharge program within Florida, proper protocol is compulsory. This includes the retailer registering the surcharge and disclosing it to customers in the form of signage, and on their receipts. And, like many other jurisdictions, the Sunshine State prohibits businesses from charging more than their processing costs (usually 3-4%).

To compound the confusion, the tax implications are also a bit fuzzy. Companies must let their merchant acquirer and relevant card networks know they are planning to start a surcharge program — and they will need 1099K paperwork from their processor come tax season. If the money accrued from surcharging isn’t reported correctly, there’s a good chance it will come up as a red flag as a possible mismatch. The 1099-K usually includes the surcharge amount, which never really made it to the merchant’s bank account. It needs to be reported and then deducted as an expense, so everything matches. The nuances become even hazier if a Florida-based company does out-of-state business or has locations in other states.

Best Practices

The safest way for a merchant to participate in a surcharge program is to use a true cash discount. There is zero need to involve a processor, and all a business needs to implement a true cash discount program is a well-priced merchant account.

It is vital to become more familiar with monthly statements — particularly potential hidden or junk fees — and use these data points to negotiate lower fees. This can happen through more vigilant auditing on a company’s part or working with an expert who can help decipher these confusing statements. 

As your client’s accounting expert, it helps to consult with one of Merchant Advocate’s skilled analysists to ensure any surcharging program they choose is deployed correctly. Contact us for a FREE, no-obligation call to start the process.