australia 2018 bookkeeping industry performance report · a australia 2018 bookkeeping industry...

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Australia 2018 Bookkeeping Industry Performance ReportSee how your business measures up and set a course to where you want to get to

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Cover: Debbie Mirisch, Biz Synergy, Maitland | Xero partner This page: Izzi Dymalovski, Luv Ur Skin, Melbourne | Xero customer

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ForewordWe’re very pleased to share with you this 2018 edition of our partner benchmarking

study for Australian bookkeepers and BAS agents. This year’s report sharpens the

focus on forward planning, as partners have told us that the most valuable use

of previous reports was to inform their strategic and annual planning. We’ve also

added significantly more detail on marketing and advisory services, in line with

the feedback.

We produced our first detailed benchmarking reports – for the United Kingdom,

Australia, New Zealand, and the United States – in 2016 and 2017. Over 2000

businesses took part in those studies, and now over 5000 accounting and

bookkeeping businesses globally have participated in providing the rich data

that lets Xero partners compare their operation with others that are similar.

This report includes findings in three new areas.

• It shows results for businesses who’ve taken different approaches to

positioning their business in the market (see tables 3 to 5). It’s evident that

raising these questions helps businesses agree and articulate their strategy

for 2018 and the following three to five years.

• It reveals the composition of advisory services revenue and what partners are

prioritising in 2018. In the ‘what if’ scenario in table 7, we show what the 2017

results would have been for a business with 140 small business clients. This

demonstrates the potential revenue to be gained from advisory services.

• It shows the client and marketing communication methods used by size of

business (pages 24 to 29) and the sources of new clients. This information

can help bookkeepers fine-tune their marketing communications and their

communication methods to attract and serve the types of businesses they

most enjoy serving.

As you read through this report, you’ll see illuminating patterns emerge

in client management, marketing, pricing, billing, employee compensation

and advisory services.

The findings in this report point to opportunities and ways for businesses to

achieve their 2018 goals. We’re here to help you move your business forward and

enjoy the benefits of your efforts, so get in touch with your Xero account manager

for assistance to make it happen. Your account manager can also point you to

more resources to assist your business as we couldn’t fit everything in here.

Please continue to share your questions and feedback with us as we plan for

2019 and beyond. You can reach me directly by email.

Doug LaBahn, Ph.D.

[email protected]

Xero Practice Leadership Team

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We love putting reports like this together to help you plan for the future. Thanks for reading.

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ContentsHighlights ....................................................................................................................... 4

Participant profiles ......................................................................................................... 6

Insights to help your 2018 planning .............................................................................. 7

Marketing, performance and growth .............................................................................. 8

Client metrics for online firms ..................................................................................... 13

Advisory services opportunities .................................................................................. 18

Ingredients for success ................................................................................................ 21

Different size firms: a close-up look ............................................................................ 22

How we can help ........................................................................................................... 30

Closing note .................................................................................................................. 31

These stats are based on an online survey we did of 286 Xero Australian bookkeeping partners. We aim to be as clear and concise as possible with this info, but we can’t promise that it’s free of rounding or other errors. The info and commentary in this report is just a guide and should not be taken as taxation, financial or legal advice – you should always check with an independent expert that what you’re doing is right for you and your business.

List of figuresFigure 1. Sources of new clients

Figure 2. Investment in marketing

Figure 3. Growth in client numbers by age of business

Figure 4. New clients in the last 12 months

Figure 5. Number of clients served per employee

Figure 6. Revenue contribution per employee

Figure 7. Annual revenue per small business client

Figure 8. Increases in employee compensation

Figure 9. Advisory service revenue

Figure 10. Regretted client departures

Figure 11. Comparison of businesses with and without advisory services

List of tablesTable 1. Role and seniority of participants

Table 2. Growth in size and revenue over time

Table 3. Practice approaches

Table 4. Billing options

Table 5. Results for businesses taking different approaches

Table 6. Contribution of advisory services to revenue

Table 7. Most attractive areas for advisory revenue growth

Table 8. Comparison of different size bookkeeping businesses

Table 9. Profile of sole operators

Table 10. Profile of small businesses

Table 11. Profile of midsize and large businesses

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Results across all practices

Highlights

Average revenue growth rate for Xero accounting and bookkeeping practices

in Singapore in the 12 months to December 2017*

Average annual billing per small business client**

Average revenue per employee including contractors

* 139 Singapore accounting and bookkeeping practices in December 2017.

** Small businesses are defined as businesses with up to 100 employees.

$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600

12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%

$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300

$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200

22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%

$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000

Results across all bookkeeping businesses

Highlights

Average revenue growth for BAS agents and bookkeeping

businesses in Australia in the 12 months to December 2017*

Average advisory service revenue**


* 286 Australian bookkeeping businesses in December 2017

** Average for bookkeeping businesses that provide advisory services to customers

5

$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600$113,600

12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%12.1%

$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300$66,300

$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200$192,200

22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%22.1%

$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000$153,000

Results for pacesetting bookkeeping businesses*

Average revenue growth for BAS agents and bookkeeping

businesses Australia in the 12 months to December 2017**

Average advisory service revenue***


* Pacesetting businesses are those with the largest number of clients (300+) using online

accounting software

** 286 Australian bookkeeping businesses in December 2017

*** Average for bookkeeping businesses that provide advisory services to customers

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Number of participants

Owner/Managing

partner/Partner/CEO

Practice manager / team

leader BookkeeperNot

disclosed Total

Not disclosed 43 5% 0% 0% 95% 100%

Sole operators 122 100% 0% 0% 0% 100%

Small businesses 114 98% 1% 0% 1% 100%

Midsize & large

businesses7 71% 29% 0% 0% 100%

Average 83% 2% 0% 15% 100%

Table 1. Role and seniority of participants

Participant profilesDefinitions

TYPES OF BUSINESSES

For the purposes of this study, we defined:

• sole operators as having no employees other than the owner

• small businesses as having 2 to 9 employees including the owner

• midsize and large businesses as having 10 or more employees including

partners

Where there are instances of only a few responses, we’ve omitted the results from

this report.

SMALL BUSINESSES/SMBS

When we talk about small businesses or SMBs, we mean those with up to

20 employees.

Participants’ role in their firm

This table shows the role and seniority of the 286 survey participants in their

business. By and large, they were the owner or most senior manager of the

bookkeeping business.

7

Insights to help your 2018 planning

Debbie Mirisch, Biz Synergy, Maitland | Xero partner

8

Other

5%

32%

41%

22%

Switched from another business

Were doing it on their own

Startups

Marketing, performance and growthThis page shows the sources of new clients for businesses in 2017. We were impressed

by the large number of small businesses (estimated to be around 55,000 in Australia in

2017) that decided to take on a bookkeeper or BAS agent instead of doing it all themselves.

Bookkeepers and BAS agents can tap into this large market by showing how they can

reduce the hassle and complexities that businesses encounter when they try to do their

bookkeeping, GST, payroll and compliance themselves.

Sources of new clients

Small businesses seeking to stop doing bookkeeping or accounting on their own were the

source of most new clients, followed closely by businesses switching bookkeepers or BAS

agents. This was followed by new business startups that look to bookkeepers to help their

new businesses get off to a solid start.

Figure 1. Sources of new clients

9

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$2,000

$1,000

$4,000

$3,000

$5,000

$6,000

Midsize & largebusinesses

Small businesses Sole operator

2017

2016

2015

2014

2013

2010

-12

200

5-0

9

200

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4

Bef

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1999

250

200

150

100

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Year the practice was formed

All firms Best group: top 15% in each age cohort

Investment in marketing

Most businesses – except for the larger ones, which generally have staff dedicated to

marketing and client development activities – appear reluctant to invest in marketing.

Figure 2. Average investment in marketing in the last 12 months

Growth in client numbers by age of business

The graph shows growth curves for average and best group (the top 15%) of Australian

bookkeeping businesses in our survey. It compares the number of small business clients

across all respondents with the averages for the best group. These details can help you set

revenue, staff and client goals for 2018 by knowing what the top and average businesses

similar in age to yours have achieved.

Figure 3. Growth in small business client numbers by age of business

10

All respondents Best group*

Year the business was started

No. of businesses

No. of business clients

New clients in the last 12 months

Revenue in the last 12 months

Average no. of employees

% of regretted staff departures

No. of business clients

Revenue in the last 12 months

No. of employees

2017 12 20 11 $169,000 1.8 0.0% 48 $459,000 2.3

2016 20 28 15 $221,000 1.9 3.5% 100 $647,000 4.3

2015 18 24 9 $152,000 1.6 0.0% 73 $399,000 2.3

2014 16 47 14 $257,000 3.8 13.3% 125 $349,000 8.3

2013 11 67 16 $356,000 4.5 6.1% 100 $361,000 7.0

2010-2012 50 43 11 $235,000 2.4 16.0% 160 $720,000 6.2

2005-2009 55 50 9 $361,000 3.3 14.9% 250 $833,000 5.0

2000-2004 36 53 9 $360,000 4.0 2.4% 215 $1,122,000 13.4

Before 1999 26 42 8 $227,000 3.5 5.8% 112 $421,000 5.5

Average 44 11 $277,000 3.0 9.1% 141 $638,000 6.4

* Top 15% in each age cohort

Table 2. Average growth in size and revenue over time

Growth in bookkeeping businesses over time

These figures can help you set revenue, staff and client goals for 2018 by knowing what the

top and average businesses have achieved.

11

Approach Description

Holistic health centreWe provide great bookkeeping (fitness) and holistic business

coaching services (nutrition and lifestyle).

All-inclusive ‘Amazon’ shopping centreWe provide a full set of services that cover virtually every business

need.

Personal fitness trainer/coachWe provide a regime that helps businesses and business owners

excel at work and in life.

Specialised surgeonWe provide the highest level of expertise on a select number of

important areas. We deliver exceptional service in a few areas.

Business mentor/counsellor

We provide the wise, experienced advice and counselling that helps

businesses navigate the best path forward for their business –

both now and far into the future.

WeWork shared community, talent, team

We provide services as if we are employees or members of their

team with all the experience and benefits (and without the high

costs and effort) of hiring full-time employees.

Fast and effective service centreWe provide great value and service to businesses that want to get

the job done quickly and economically.

Tech-loving bookkeepersOur business is filled with qualified accountants who are also tech

geeks or front-runners.

Urgent care centreWe provide high quality service when businesses get stuck or

are in too deep and need fast, smart resolution of their issues.

Table 3. Practice approaches

Practice performance based on approach

PRACTICE APPROACHES

We asked participants to select the best fit for their bookkeeping business from the options

below, then looked at the performance of the businesses taking each approach.

BILLING OPTIONS

We also asked participants about the different ways they billed clients and what proportion

of clients they billed by each method. The options were:

Billing option Description

Service planClients are on a fixed-fee monthly or quarterly service plan and the agreed rate is

automatically collected.

Service plan

plus projectsClients are on a monthly service plan and they expect to pay for additional project work.

Bill for projectClients are quoted a fixed amount for the service (eg, tax return, general ledger setup)

and billed when the work is complete.

Bill for time Clients are billed for the number of hours (and partial hours) of service provided.

Table 4. Billing options

12

% of clients on each billing option*

Best fit for the

business

Annual revenue

per client

Revenue growth

in the last 12

months

Popularity of the

approach

No. of small

business clients

Service plan

Service plan plus

projectsBill by

projectBill for

time

% of employees required to

complete timesheets

Holistic health

centre$7,920 14.0% 7% 44 23% 12% 10% 49% 70%

All-inclusive

‘Amazon’ shopping

centre

$6,550 9.9% 11% 41 19% 11% 5% 65% 50%

Personal fitness

trainer/coach$6,470 9.9% 8% 45 27% 3% 7% 63% 45%

Specialised

surgeon$6,200 12.8% 13% 64 27% 6% 8% 58% 57%

Business mentor/

counsellor$5,740 14.0% 11% 46 17% 8% 6% 60% 47%

WeWork shared

community, talent,

team

$5,480 13.4% 29% 50 15% 6% 10% 67% 56%

Fast and effective

service centre$4,840 10.5% 15% 28 22% 4% 11% 63% 38%

Tech-loving

bookkeepers$3,810 5.3% 2% 47 30% 5% 8% 58% 26%

Urgent care

centre $3,530 12.8% 4% 31 8% 40% 18% 35% 25%

Average $5,780 12.1% 46 20% 8% 9% 61% 50%

RESULTS FOR BUSINESSES TAKING DIFFERENT APPROACHES

See how businesses taking different approaches performed and the billing options used to support

each strategy.

* Some respondents use billing methods other than the four shown, which is why the billing option percentages

(reading across) don’t add up to the full 100%.

Table 5. Results for businesses taking different approaches

Partners often ask us what small businesses are seeking in an advisor when they search for a bookkeeper.

These results show that bookkeeping businesses that provide holistic services, all-inclusive services

and personal coaching are realising the highest revenue per client ($7,920, $6,550 and $6,470), which

is consistent with the substantial value bookkeepers provide to small businesses through bookkeeping,

coaching and mentoring. However, bookkeepers who provide all-inclusive services and those who offer

personal coaching have slower revenue growth than the others.

The approaches attracting the fastest growth are holistic, business mentor/counsellor and shared

community/team. These approaches provide small business with the bookkeeping services they need plus

the coaching, mentoring, and community support to help them prosper and thrive. It’s also interesting

to note the bookkeepers pursuing a holistic approach are achieving the highest rate of growth (14%) and

revenue per client ($7,920), make good use of service plans for billing (23% and 12%) and lead in requiring

employees to complete timesheets (70%). These are areas we’ll be watching closely this year.

It’s clear that bookkeeping businesses and BAS agents can achieve success pursuing different approaches.

We encourage them to align their pricing and employee strategies to support the approach they determine

is best for them.

13

Client metrics for online firmsNew clients in the last 12 months

Firms with larger numbers of online accounting clients are adding more new clients.

The factors that contribute to their success are the value they provide to clients,

and using simple but powerful accounting software. Our observations, supported by

the findings in figure 1 and table 5, indicate that when choosing a new bookkeeper,

businesses are placing a priority on being able to work in the cloud and have an online

relationship with their new bookkeeper or BAS agent.

Figure 4. Average number of new clients in the last 12 months

0 10 20 30 40 50

Average number of new clients in the last 12 months

Num

ber

of o

nlin

e cl

ient

s

100–299

300+

36–99

6–35

0–5

14

0 2010 30

Average number of clients per employee

Num

ber

of o

nlin

e cl

ient

s

300+

100–299

36–99

6–35

0-5

$0 $30,000 $60,000 $90,000 $120,000

Average revenue contribution per employee

Num

ber

of o

nlin

e cl

ient

s

300+

100–299

36–99

6–35

0-5

Number of clients served per employee

This chart shows the substantial increase in the ability of bookkeepers to serve clients

efficiently as the number of online clients increases.

Figure 5. Average number of clients served per customer

Revenue contribution per employee

This chart shows the substantial increase in revenue per employee that's achieved as the

number of online clients increases as a consequence of greater employee efficiency (figure

5) and higher advisory service revenue (figure 9). The results show a noticeable dip for

businesses with 300 or more online clients which is at least partially explained by the lower

revenue per clients realised by these businesses (figure 7).

Figure 6. Average revenue contribution per employee

15

Annual revenue per small business client

This figure shows that revenue per client trends downward as the size of the bookkeeping

businesses increases. Small business clients may be enjoying equal or improved quality of

service at a lower cost. This trend would be worrisome if it were not for the fact that these

larger online businesses are generally achieving higher revenue per employee (figure 6),

faster client growth (figure 4), and better client retention (figure 10). Taken together, these

findings suggest that both small businesses and bookkeeping businesses are enjoying the

benefits of being online.

Figure 7. Average annual revenue per small business client

Increases in employee compensation

With the exception of firms with very large numbers of online clients (300+), businesses

report an increase in employee compensation as the number of online clients increases -

illustrating how the benefits of greater revenue per employee flow on to staff. It’s also

encouraging to see that employees – in addition to SMBs and businesses – are enjoying the

rewards of building online businesses.

Figure 8. Average employee compensation (excluding partners) increase in latest review cycle in 2017

0%

2%

4%

6%

Number of online clients

Ave

rage

em

ploy

ee c

ompe

nsat

ion

incr

ease

100–299 300+36–996–350–5

$0 $2,000 $4,000 $6,000 $8,000

Num

ber

of o

nlin

e cl

ient

s

Average revenue per small business client

300+

100–299

36–99

6–35

0-5

17

Figure 9. Average number of regretted client departures in the last 12 months

$0 $50,000 $100,000 $150,000

Average advisory service revenue in the last 12 months

Num

ber

of o

nlin

e cl

ient

s

300+

100-299

6-35

36-99

0-5

Regretted client departures

Bookkeeping businesses with fewer numbers of online accounting clients have high rates

of regretted client departures. Their ability to retain desirable clients appears to be much

weaker than for businesses with larger numbers of online clients. This is one of several

indicators that we see of clients moving to advisors using cloud technology and away from

businesses who are using older-style software. Another indicator is the number of new

clients who switched to a Xero partner from another business (see figure 1).

Figure 10. Regretted client departures in the last 12 months as a percent of total clients

Figure 9. Average number of regretted client departures in the last 12 months

0% 5% 10% 15% 20%

Percentage of regretted client departures on average

Num

ber

of o

nlin

e cl

ient

s

300+

100–299

36–99

6–35

0-5

Advisory service revenue

This chart shows that as advisors get closer to their clients due to the use of online

accounting, numerous opportunities for advisory services become apparent, easier to

sell, and simpler to deliver. The jump shown for partners with 300 or more clients is very

noticeable and suggests that the scale of the online practice facilitates the uptake and

delivery of advisory services.

Figure 9. Average advisory service revenue in the last 12 month

18

Figure 11. Comparison of average revenue per client for businesses with and without advisory services

Advisor services revenue Compliance revenue

$0

$2,000

$4,000

$6,000

$8,000

$10,000

Ave

rage

rev

enue

per

clie

nt

Compliance-only businesses

Compliance + advisory businesses

$6,200 $5,500

$2,700

Advisory services opportunitiesThis section explores the 2017 revenue of partners to provide clarity on the often debated

notion of what advisory services include, and to assist with your 2018 planning.

Comparison of firms with and without advisory revenue

Practices that offer advisory services reported higher overall revenue per client but lower

compliance revenue. When we asked partners about it, they explained that there’s a shift

towards charging clients separately for advisory services instead of just simply giving away

these services to justify higher compliance billing.

19

Contribution of advisory services to revenue

We’ve extrapolated the revenue reported by participants to show the contribution of

nine different advisory services to 2017 revenue and how this would look for a business

with 140 clients.

Service

Share of advisory revenue

What revenue would look like with 140

clients

Advisory services, eg, budgeting, cash flow forecasting,

business planning21% $78,000

App/software (other than accounting) setup, configuration and support

services18% $69,000

For-fee implementations of accounting software for businesses that are

unlikely to become long-term clients15% $55,000

Virtual or outsourced CFO services 13% $48,000

Startup mentoring, advice, and networking or assistance with business

development12% $45,000

HR advisory services, eg, assistance setting employee compensation,

planning to add/reduce employees12% $45,000

Business performance benchmarking 6% $23,000

Capital-raising/assistance moving to better interest, terms or financing

options2% $9,000

Succession planning services 2% $7,000

Total $379,000

Table 6. Contribution of advisory services to revenue

20

Most attractive areas for business revenue growth

This table shows the areas rated most attractive for advisory services revenue

growth in 2018.

The top opportunity is commonly known as ‘compliance plus services’. The second service –

app/software setup, configuration and support – is showing great promise for bookkeepers

as an important differentiator, something that small businesses are looking for, and a

potentially large advisory revenue opportunity. It’s also the service that bookkeepers

are uniquely positioned to provide given their close relationship with clients including

operational insights on where apps could benefit their clients.

The third and fourth services – startup mentoring and implementation – show what a

central role bookkeepers can play helping businesses who are starting up or changing

their accounting method.

Service

Rated as top

area

Rated as one of top three

Rated as one of top

five

Advisory services, eg, budgeting, cash flow forecasting, business planning 38% 83% 96%

App/software (other than accounting) setup, configuration and support services 26% 67% 85%

Startup mentoring, advice, and networking or assistance with business

development16% 59% 86%

For-fee implementations of accounting software for businesses that are unlikely

to become long-term clients11% 51% 73%

Business performance benchmarking 1% 38% 70%

Virtual or outsourced CFO services 3% 37% 52%

HR advisory services, eg, assistance setting employee compensation,

planning to add/reduce employees4% 36% 59%

Capital-raising/assistance moving to better interest, terms or financing options 1% 27% 35%

Succession planning services 0% 23% 32%

Table 7. Most attractive areas for business revenue growth

21

Ingredients for successThe survey results suggest four factors that lead to

positive outcomes and higher growth for bookkeeping

businesses.

Businesses that have larger numbers of online accounting clients grow faster and have an easier time signing on new clients.

Businesses that take a holistic approach stand out for having both rapid growth and high revenue per client.

Businesses that provide advisory services earn considerably more revenue per client than businesses that offer only compliance.

Businesses with the most clients online show higher rates of client retention clients and greater advisory revenue.

22

Different size businesses: a close-up lookIn this section, we profile different size bookkeeping businesses as measured

by the number of employees and contractors they employ.

Comparison of different size businesses

This table compares businesses of different sizes, allowing you to see things like how

your operations, marketing and performance stack up against those of your peers.

Size of business

Number of respondents

Revenue growth in

the last 12 months

No. of small businesses*

served in the last 12 months

% of clients already

using online accounting

No. of new clients in

the last 12 months

Revenue in the last 12

months

Not disclosed 43 10.0% 20 82% 10 $185,000

Sole operators 122 8.2% 22 86% 6 $134,000

Small

businesses114 17.0% 60 91% 15 $384,000

Midsize & large

businesses7 14.4% 165 93% 32 $1,071,000

Average 12.1% 44 88% 11 $278,000

* Businesses with up to 20 employees

Table 8. Comparison of different size bookkeeping businesses

23

Jason Robinson, RBK Advisory, Melbourne | Xero partner

24

Profile of sole operators

This table profiles sole operators according to their number of online business clients. It

shows averages for the businesses in each group.

Businesses by number of business

clients using online accounting

0-5 6-35 36-99

Business profile

Number of businesses participating 45 66 8

Revenue growth in the last 12 months 6.8% 8.8% 11%

Annual revenue per small business client $7,739 $4,520 $2,594

% of business clients using online accounting today 81% 90% 88%

Number of small business clients served in the last 12 months 6 25 75

People performance and management

Practice revenue $91,800 $148,400 $270,800

Timesheets completed for any purpose 23% 24% 6%

Timesheets completed for billing clients 24% 25% 1%

Number of clients talked to or chatted with online on a typical day 1.8 2.1 2.6

% of businesses actively looking to add staff 24% 32% 43%

Clients and marketing

Number of new clients in the last 12 months 4 6 11

Regretted client departures in the last 12 months (as a % of total clients) 16.8% 6.8% 1.1%

Average marketing investment or spend in the last 12 months $600 $800 $2,000

Average advisory revenue in the last 12 months (all types of advisory) $42,000 $55,000 $92,000

Pricing and billing (% of clients)

Bill for the number of hours (and partial hours) of service provided 67% 65% 45%

Quote a fixed amount for the service and bill when the work is complete 15% 8% 8%

Fixed-fee monthly or quarterly service plan and automatic payment 10% 15% 34%

Monthly service plan and clients pay for additional project work 6% 9% 13%

Another method of billing 1% 3% 1%

25



0-5 6-35 36-99

Marketing and client communications

Number of methods used, excluding word of mouth 0.9 0.9 1.1

Word of mouth 73% 68% 88%

Social media: Facebook 33% 21% 25%

Website and/or blog using search engine optimisation (SEO) 22% 21% 25%

Other social media: Twitter, LinkedIn, Instagram, etc 9% 11% 13%

Online advertising / Google search engine marketing (SEM) 7% 9% 13%

Print advertising 2% 3% 13%

TV or radio advertising 0% 3% 13%

Industry event/award sponsorship 2% 6% 0%

Newsletters 2% 2% 0%

Podcasts 0% 0% 0%

Other 4% 11% 13%

None of the above 4% 5% 0%


Were doing it on their own 38% 41% 32%

Switched from another business 32% 30% 37%

New business startups 22% 25% 31%

Other 7% 4% 0%

Biggest issues in the year ahead

Staying up to date with new technology 42% 61% 88%

Finding new clients 73% 45% 38%

Upskilling myself 31% 41% 63%

Hiring and retaining staff 11% 12% 13%

Tough competition in the area 16% 15% 0%

Other 2% 5% 0%

Table 9. Profile of sole operators

26

Profile of small businesses

This table profiles small businesses (those with 2 to 9 employees including the owner)

according to their number of online business clients. It shows averages for the businesses in

each group.

Businesses by number of business clients


0-5 6-35 36-99 100-299

Business profile

Number of bookkeeping businesses/BAS agents

participating8 64 28 11

Number of employees including contractors 3 3.4 4.3 5.2

Revenue growth in the last 12 months 11.0% 16.2% 19.0% 22.0%

Annual revenue per small business client $8,563 $6,758 $4,495 $4,636

% of business clients using online accounting today 83% 90% 92% 96%

Number of small business clients served in the last 12

months6 31 75 150


Revenue per employee including contractors $33,300 $87,500 $97,700 $167,700

Number of small business clients per employee 2.1 9.6 20.3 34.3

Increase in employee compensation in most recent

cycle, excluding partners0.5% 3.1% 3% 6.5%

Regretted staff departures in the last 12 months

(as a % of total employees)8.3% 10.8% 11.9% 12.1%

Employees required to complete timesheets for any

purpose39% 79% 80% 99%

Employees required to complete timesheets for billing

clients49% 76% 74% 90%

Number of clients talked to or chatted with online with

on a typical day2.9 2.7 4.1 5.9

Businesses actively looking to add staff 45% 70% 71% 87%


Number of new clients in the last 12 months 5 11 18 34

New clients per employee 1.7 3.2 4.7 8.2

Regretted client departures in the last 12 months

(as a % of total clients)7.5% 5.3% 3.9% 2.3%

Marketing investment or spend in the last 12 months $2,000 $1,400 $2,200 $3,800

Advisory revenue in the last 12 months

(all types of advisory)$57,000 $91,000 $91,000 $104,000

27

Businessess by number of business clients


0-5 6-35 36-99 100-299


Bill for the number of hours (and partial hours)

of service provided41% 63% 52% 37%

Quote a fixed amount for the service and bill when the

work is complete8% 8% 7% 24%

Fixed-fee monthly or quarterly service plan and

automatic payment36% 18% 26% 23%

Monthly service plan and clients pay for additional

project work3% 9% 13% 16%

Another method of billing 13% 0% 2% 0%


Number of methods used, excluding word of mouth 1.4 0.9 1 0.5

Word of mouth 75% 72% 79% 73%

Website and/or blog using search engine optimisation

(SEO)63% 23% 21% 9%

Social media: Facebook 38% 33% 25% 18%

Print advertising 13% 6% 11% 0%

Other social media: Twitter, LinkedIn, Instagram, etc 0% 11% 11% 0%

Industry event/award sponsorship 0% 3% 11% 0%

Online advertising / Google search engine marketing

(SEM)0% 2% 11% 0%

TV or radio advertising 13% 0% 0% 0%

Newsletters 0% 3% 4% 0%

Podcasts 0% 0% 0% 0%

Other 13% 8% 7% 18%

None of the above 0% 5% 0% 0%


Were doing it on their own 46% 43% 40% 51%

Switched from another business 16% 34% 33% 31%

New business startups 17% 19% 20% 19%

Other 22% 4% 7% 0%


Staying up to date with new technology 38% 52% 68% 64%

Hiring and retaining staff 13% 38% 54% 64%

Finding new clients 63% 38% 18% 18%

Upskilling myself and my staff 13% 30% 39% 36%

Tough competition in the area 0% 11% 0% 0%

Other 0% 9% 7% 0%

Table 10. Profile of small businesses

28

Profile of midsize and large businesses

This table profiles midsize and large businesses (those with more than 10 employees

including the partners) according to their number of online business clients. It shows

averages for the businesses in each group.

As there were very few responses from midsize and large bookkeeping businesses

with between 36 and 99 online clients, we’ve omitted the results from this table.



100-299+

Firm profile

Number of bookkeeping businesses/BAS agents participating 4

Number of employees including contractors 20

Revenue growth in the last 12 months 20%

Annual revenue per small business client $4,500

% of business clients using online accounting today 92%

Number of small business clients served in the last 12 months 250


Revenue per employee including contractors $53,200

Number of small business clients per employee 13.3

Increase in employee compensation in most recent cycle,

excluding partners3.5%

Regretted staff departures in the last 12 months (% of total employees) 8.3%

Employees required to complete timesheets for any purpose 92%

Employees required to complete timesheets for billing clients 80%

Number of clients talked to or chatted with online with on a typical day 3

Businesses actively looking to add staff 100%


Number of new clients in the last 12 months 45

New clients per employee 2.3

Regretted client departures in the last 12 months (as a % of total clients) 3.1%

Marketing investment or spend in the last 12 months $5,200

Advisory revenue in the last 12 months (all types of advisory) $213,000

29



100-299+


Bill for the number of hours (and partial hours) of service provided 44%

Quote a fixed amount for the service and bill when the work is complete 7%

Fixed-fee monthly or quarterly service plan and automatic payment 40%

Monthly service plan and clients pay for additional project work 9%

Another method of billing 0%


Number of methods used, excluding word of mouth 2.5

Word of mouth 100%

Social media: Facebook 50%

Website and/or blog using search engine optimisation (SEO) 50%

Other social media: Twitter, LinkedIn, Instagram, etc 50%

Newsletters 50%

Online advertising / Google search engine marketing (SEM) 25%

Industry event/award sponsorship 25%

Print advertising 0%

TV or radio advertising 0%

Podcasts 0%

Other 0%

None of the above 0%


Switched from another business 40%

New business startups 13%

Were doing it on their own 35%

Other 13%


Hiring and retaining staff 75%

Upskilling myself and my staff 50%

Staying up to date with new technology 75%

Tough competition in the area 50%

Finding new clients 0%

Other 0%

Table 11. Profile of midsize and large businesses

30

How we can helpOnce you’ve decided that Xero is the way forward for your business, a Xero account

manager is the perfect person to help you get going. It’s their job to help you with

every aspect of the transition to Xero, and be there for you every step of the way.

If you’re not already a Xero partner, sign up to the Xero partner programme at

xero.com/partners or get in touch by emailing [email protected]

Once you’ve become a Xero partner, getting yourself and your team certified is

key to ensuring your business understands Xero and how it can help your clients.

Our most successful partners are the ones who are certified and where everyone

is singing from the same sheet. This quickly becomes productive, as certified staff

are much more effective when helping clients or working on Xero-related tasks in

the business.

We understand that making a significant change within your business isn’t easy,

which is why we’ve launched migration certification. Migration certification is

perfect for the person at your business responsible for converting a large number

of your client accounts to Xero, and is filled with guidance, resources and tools to

support the switch.

Of course, you need to keep your books current when you’re changing software,

and we have several really good options to help you, including our partnership

with Jet Convert.

Talk to a Xero account manager today

We’re here to help, with Xero account managers and partner consultants standing

by ready to help you create a business plan for moving your business forward in

2018 and beyond.

31

Closing noteThe Australian bookkeeping profession is in an incredibly exciting time

right now. The opportunity to create a business that can help many other

businesses transform is greater than ever before.

As practising BAS agents, the shift in mindset that has been taking

place over the last few years, from having a job to having a scalable and

profitable business, has been phenomenal. This shift has seen many of

us come off the tools, so to speak, and into the driver’s seat, allowing us

to form, grow and nurture our teams, focus on business development,

and most importantly, on the client, and create even closer stickier client

relationships.

It’s all about the human connection.

Technology will continue to be our friend and will be the central platform

that allows us to deliver effective solutions.

This report is the culmination of feedback from our community and shows

directly the progressiveness of what some of our bookkeepers are doing in

the marketplace.

This is just the beginning of the journey really – there is much more to come

in a profession that is so important to small business owners.

Melanie Power

Head of Bookkeeping – Australia

Global Head of Partner Community

australia 2018 bookkeeping industry performance report · a australia 2018 bookkeeping industry...

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