Accounting practices typically measure success by profitability and efficiency in their operations. In this article, we will examine the profitability and efficiency of accounting practices on Syft by using the Net Profit Margin and assessing this metric across US firms for Q2 2024.

Syft’s Benchmark feature gathers data from businesses across various sectors to compare trends across regions. The data is an aggregation of anonymized data from Syft entities.

The Net Profit Margin provides insight into overall profitability after all expenses have been accounted for, which is vital for understanding the financial health of service-based businesses.

Accounting firms typically hope to achieve at least a 25% Net Profit Margin. Let's examine the data to see how the firms on Syft fared over the past quarter.

For most accounting practices on Syft, the top 25% exceed the goal of 25%. However, the middle 50% struggles to reach this margin, especially in South Africa, where the average NPM for the middle 50% was 16%. Australian accounting firms in the middle 50% also particularly struggled in the month of June. This variance between months suggests that these practices are working on once-off jobs rather than recurring packages with clients. So, they may want to consider offering monthly packages to clients to achieve a more consistent NPM.

And overall, the bottom 25% of firms struggle to turn a profit across all regions. The lower quartile of practices is spending more money than they are making, suggesting that they may need to investigate their expenses, assess where they can cut down costs, and consider more profitable business models, such as offering more advisory services to clients.

The South African Institute of Professional Accountants (SAIPA) notes that the trends in the accountancy landscape in 2024 include a continued emphasis on digitalization, which can improve corporate reporting, decision-making, and the optimization of business resources. Thus, digitalization provides the opportunity for accounting firms to use their resources more efficiently and manage their operations with lower operating costs.

We would not expect the Net Profit Margin for accounting firms to vary significantly month on month as most accountants earn a fixed fee every month and have recurring revenue. In addition, clients don't tend to change accountants frequently. However, for those accountants who are not charging a fixed fee every month but are rather offering once off jobs, this may be negatively impacting their NPM and causing serious variances between months.

To improve their Net Profit Margin, these practices could consider the following:

Benchmarking serves as a crucial tool for top companies, enabling them to identify areas where they lag behind and develop strategies to catch up, or to recognize areas of strength and enhance their processes further. Analyzing the past quarter's data on Syft reveals a diverse landscape: while some restaurants and accounting practices are thriving, many others could benefit from reevaluating their processes and pricing strategies. By leveraging these insights, businesses can make informed decisions to drive improvement and sustain growth.