Top accounting firms have reported that strong pressure to reduce their fees is impacting on their profitability, according to a survey.
CaseWare, accounting and financial reporting software firm, says that according to a survey of its clients, up to 80% reported that strong fee pressure continues while 81% reported they would ultimately lower their rates or provide more services rather than lose the client.
Of the 2,281 respondents 45% were from the top 20 accounting practices; 28% were in the top 21-50 practices and 25% were in the top 51-100 practices.
Only 9% would stand their ground and risk the client, although 13% reported that they had been successful in raising their rates.
CaseWare said that its survey showed that only 18% reporting this is 'rarely' or 'never' the outcome when clients request audit fee reductions.
Simon Warren, managing director at CaseWare said that in the current economic environment, clients are in an incredibly strong position to push fees down as there are lots of rival accountancy firms hungry for their work.
'In the first instance, accountancy firms should resist. But if they don't want to lose the client then they need to negotiate so that any fee reduction is at least offset. The most common outcome is for the client to take steps to reduce the amount of time the audit team needs to spend doing the job. Other approaches include reducing the scope of the audit and reducing the seniority of the team.
'Our research found that, nonetheless, 60% reported that reduced fees rarely or never led to a reduction in the scope of the audit. With such strong fee pressure likely to continue, and limited room for manoeuvre, accounting firms need to think strategically about reducing their costs to restore profitability.
'It is not about continually seeking to cut the cost of their existing approach. Instead, firms need to take new approaches, such as embracing automation and doing moving away from labour intensive manual or Excel-based approaches so that audits can still be delivered at a high quality but at a much lower cost,' said Warren.
A full copy of the research can be downloaded free from, HERE
