More fundamentally, however, increasing per capita income in Australia, more and more individuals and businesses are turning to the experts for advice on how best to manage their wealth and taxation. A recovering Australian economy has also helped accounting firms, with high levels of investment in natural resources followed by an uptick in merger and acquisition activity between the 2010 and 2012 financial years requiring due diligence, advisory and audit services.
And now there is the just-signed Free Trade Agreement with China which delivered more on facilitating trade in services like accounting than most expected. Indeed services is one of the 'four pillars' of the agreement.
This improved position for accounting has not been without headwinds however, as recent research to emerge from the ANZ Client Insights and Solutions team reveals.
Revenue growth for the top quartile of firms grew from rates of 10 per cent in fiscal 2010 to a high of over 25 per cent in fiscal 2011; returning to just below 10 per cent in fiscal 2014. For the lowest quartile of firms, a negative rate of growth in 2010 was turned around to rates of around 1 per cent in fiscal 2014.
Increased uncertainty about the economic environment has also meant large accounting firms have faced deteriorating working capital. Clients have held on to their cash for as long as they can, using it for their own operating purposes while extending payment terms.
Despite these complexities, accounting firms have increased operating margins from around 10 per cent to 15 per cent between fiscal 2010-14. This includes a slight dip in profit from 2013 to 2014 as mid-tier firms have started to place an increased amount of pressure price-wise on the ‘Big 4’ – PwC, KPMG, Deloitte and EY.