• Guest Author

Creating a Common Language to Measure Success in CAS

What does it mean to be successful in a client accounting advisory practice? The CAS service line has been a solid growth story for the accounting profession over the past decade, as technology and practice innovation have created powerful advisory engagements that demonstrate high value for clients. That’s not to say there haven’t been growing pains. One problem, for example, has been the lack of a systematic way for firms to measure growth and benchmark performance against peers. Simply put, the tried-and-true metrics for traditional tax or audit practices don’t always accurately capture the dynamics we see in CAS.

To help solve this, CPA.com and the American Institute of CPAs’ Private Companies Practice Section (PCPS) embarked on research last year to develop comparative data and identify baseline metrics for CAS offerings. We surveyed 119 firms of varying size and configuration (for example, standalone CAS practices, multi-service line firms, and firms with a focus on wealth management or other specialties), and one thing that became clear is firms often use different calculations and terms when they measure CAS. A commonly understood, core set of definitions and metrics is needed.

The good news is we’re creating that common language as we evolve the CPA.com/PCPS CAS Benchmarking Survey. With participating firms’ help, future surveys will continue to add precision to the way CAS practices assess themselves and their performance versus peers. This is a role we feel CPA.com can uniquely serve, since our mission is to “drive the transformation of practice areas, advance the technology ecosystem for the profession, and lead technology research and innovation efforts for practitioners.”

While future refinement of the survey is exciting, there are positive findings, too, from the 2018 results, which are based on fiscal 2017 data. We found CAS practices grew at a 12 percent rate, or more than double the median CPA firm growth rate of just under five percent, as reported in the 2018 AICPA PCPS/CPA.com Management of an Accounting Practice (MAP) Survey. Standalone CAS practices are growing at an even faster rate of 20 percent.

We identified top-performing firms, or those in the upper 25 percent of CAS practices, using the metric of net client fees per professional (NCFPP). In the latest MAP Survey, the median NCFPP for all firm services and segments is $164,323. The CAS Benchmarking Survey found the median NCFPP for all CAS practices is $94,118 but rises to $180,000 for top performers. The below chart shows some of the organizational investment choices by top performers versus the entire pool of survey respondents.

The benchmark survey also shows areas where CAS practices need work. While CAS practices typically report high profit margins, the survey data in this area was unusually high, which suggests firms need to track revenue and expenses more systematically. On an operational level, 39 percent of CAS practices still do not have all their data assets in the cloud, a key to maximizing efficiency, automation and higher-order analytics and reporting capabilities.

We look forward to working with firms to refine future versions of the survey. Better data will inform best practices – and help all CAS firms grow. To see the full CAS Benchmark Survey results, please visit https://www.cpa.com/cas-benchmark-survey.