Why Your CPA is Busier (and More Expensive) Than Ever: Inside Public Accounting Data Reveals What's Really Happening
Welcome back to the Slash Tax Podcast where we cut through tax complexity and talk about what's really changing in the world of tax, incentives, and advisory, and how that really impacts you as a business owner, as an investor, or if you're a CPA or accounting member, you might find this insightful as well. Today's episode is a little different, and, honestly, I've been really excited about it for a while. So my guest today is Chelsea Summers, who is the executive director of Inside Public Accounting. This is a firm that sits at the center of one of the most important datasets in the accounting profession, with over 600 firms participating in their benchmarking survey. Chelsea oversees the CPA industry survey and the data that thousands of firms rely on for understanding staffing, capacity, billing rates, partner workloads, growth, and their profitability.
Heidi Henderson:Inside public accounting is also part of our broader family of companies under engineered advisory. And so this is a conversation that kinda blends our industry insight with real world strategy. And if you're CPA listening, the episode qualifies for CPE, so we'll be talking directly about firm trends and benchmarking. But if you're a business owner or investor, don't tune out because the data that Chelsea works with explains a lot about what you're probably feeling right now with why it might be harder to get time with your CPA, why costs seem to continue rising, why firms are being more specialized in their focus, and why proactive tax planning just doesn't seem to be something that you can assume is included in your tax services. So Chelsea lives in the data itself, but I live in translating what the data actually means for clients and taxpayers.
Heidi Henderson:And so throughout the conversation, I'll kind of pause us to interpret what these firm level trends mean for you on the other side of this relationship, and whether you're a CPA or relying on one to help you make better financial decisions, the conversation will help you understand where the profession is headed and how to navigate it a bit more effectively. So let's get into it. Hi, Chelsea. I'm so excited. Welcome to the show.
Chelsea Summers:Yeah. I'm so glad we're doing this. Love the crossover.
Heidi Henderson:Absolutely. So just to recap, you live in the data. I live in the strategy and the client impact. And so in this episode, it's gonna be very unique because I think we can go through a lot of numbers, a lot of data as it applies to what we're seeing in the CPA and the accounting space.
Chelsea Summers:Mhmm.
Heidi Henderson:And then I'll pause us to kinda translate a little bit of what that might mean for firms and the people they serve because I'm dealing with a lot of those taxpayers. And so I feel like I have a unique perspective in looking at both sides of how the data is impacting clients themselves and some of these shifts that we see in the market. So with that, let's dive in. Are you ready? I'm excited.
Heidi Henderson:Yes. Okay. How about let's get started with you just providing a high level overview of what is IPA and what exactly are you doing?
Chelsea Summers:Yeah. So inside public accounting surveys the accounting profession. We've been doing surveys since 1987, primarily of The United States and Canada, but we do get some international firms that participate. This past year, we had six zero five firms. So we take that data, we analyze it, we review it, and then we then put out our reports and benchmarking data and analysis of where we see the accounting profession, where it's been and where it's going based on that data that's coming in.
Chelsea Summers:Inside Public Accounting also has thought leadership, like this podcast you're listening to, and other way that we kind of help to express the trends and bring information from what we're seeing in all the data to the accounting firm leaders.
Heidi Henderson:Yeah. It's it's amazing. I mean, the data, isn't it funny that you know, this is an accounting industry. It's all about numbers, data, reporting, all the things. And go figure.
Heidi Henderson:We now have this platform that is doing the data for the data makers. Yeah.
Chelsea Summers:I am their least favorite person when I'm requesting the data, but then their favorite person when I'm providing the information back to them. So
Heidi Henderson:funny how Oh my gosh. That's perfect. That makes so much sense. Okay. So let's dig into some things that I feel like are really pressing, both in the industry as well as clients.
Heidi Henderson:Have you seen, when we look at it from a data perspective, over the last five to seven years, have you seen any shifts of how things maybe look different than what the industry looked like in prior decades?
Chelsea Summers:Yes. I think we would be remiss to have a conversation that didn't involve private equity. So private equity coming into the accounting space has made a lot of changes. And we expect to see a lot more changes from those investments and how the firms are acting differently. I think some other big trends that we're seeing in the profession right now that might be a little bit different is just staffing shortages.
Chelsea Summers:Firms are having a lot of trouble getting staff and getting individuals, especially as the needs of the firms are changing so quickly. A lot of times firms aren't even really sure what individual they're looking for. They just know they can't find them. That's really a big one. And then I don't know that this is maybe different in the last five to seven years, but there's a lot of succession concerns.
Chelsea Summers:And that causes downstream issues and requires sometimes firms to merge. But a lot of issues trying to get leadership and the right people on the bench at firms.
Heidi Henderson:Absolutely. Yeah. All huge points and huge pain points. So to translate that to how it translates to taxpayers and individuals, what that translates to when we look at constrained activity like, we see this feeling that that our CPA firms, accounting firms, are busy but constrained, and it is a staffing shortage. So what we're seeing in the industry is a lot of aging out of our older firm owners and partners in these firms and not as many people graduating out of universities and colleges and coming into this industry per se.
Heidi Henderson:And so what's happening is, of course, there's a huge demand for CPAs because we have an incredibly complicated tax law. Yes. And so there's this heavy, heavy burden on preparing tax returns and financial statements and audited returns and handling businesses and individuals who need support from their CPA or their tax professional. But this kind of disconnect in terms of not only getting things completed, but in the conversation. So the constant thing I'm hearing from taxpayers is I really am looking for a partner firm that is going to help me strategically look at opportunities and be strategic with my tax plan and how I can kind of work through that.
Heidi Henderson:But on the accounting side, we have individuals primarily trained in compliance or accuracy. You know, the data people and and then also constrained by just the pure weight of the workload and not enough staff to support that. So, in the survey, do you have any data that relates to firms focusing or being more aware of the need to offer more advisory services and strategic planning or is it just more primarily about like tax returns?
Chelsea Summers:Yeah, so we do look at the amount of advisory services that a firm is offering. And I think the firms are starting to hear that message and really absorb it from their clients that we need more than just those compliance services. And a lot of the firms that we talked to, they know that their growth is going to come from advisory services, and they're really doubling down on those. Hoping to do this without dead time, but I can't get someone I can't get stuff pulled up fast enough. So in 2025, about 32.2% of total revenue was coming from advisory services.
Chelsea Summers:We look back ten years ago in 2015 that was only 19.2%. So in the last decade the firms have made some notable growth in a lot of areas that includes like what you talked about tax planning, that would also include CAS services, so client advisory services, where they're doing bookkeeping or outsourced CFO. That also includes helping firms with HR or outsource technology, could include wealth management, litigation services. There's a whole laundry list of things that different firms choose to do. But those advisory services are growing.
Chelsea Summers:And that's a trend we're really looking at pretty heavily in the coming years where there's going to be big investments made.
Heidi Henderson:Yeah, that's amazing. That's a huge metric though. I mean, the growth from, what did you, did you say 17% previously and now it's 32%?
Chelsea Summers:19 to 32. Yeah.
Heidi Henderson:19 to 3232% being the current percentage of revenue generated by advisory services. So this is outside of preparing a tax return.
Chelsea Summers:Correct. Or any audit services.
Heidi Henderson:Yeah. Really, really interesting. So there is indeed a pretty big shift in that space. And again, with taxpayers bringing this full circle, I think a lot of individuals are looking for partners, looking for someone to work closely with. Have you also seen and again, I don't know if this is something that's in the survey, but have you seen a shift in terms of firms specializing at all in certain verticals or practice areas rather than being more generalists in a particular city?
Chelsea Summers:Yes, absolutely. They don't have specific numbers on that but that's certainly an area that we coach firms when they when we say, if you want to get involved in advisory services, pick either a niche that you're already working in or pick a service area you have the staff and you have the the knowledge to really work at that. If you've got individuals on your team or in your area that you can add wealth management, then do that if that makes sense but don't just add something on because it's a shiny object that you heard is very profitable. Make sure that you're really prepared and ready. But definitely specializing in a niche, especially for those mid market firms that are really struggling to compete with those larger, maybe private equity backed firms or the big four, and they're struggling to compete with their local mom and pop shops that have all the relationships and they move quickly sometimes.
Chelsea Summers:So, the mid market firms really benefit from specialization.
Heidi Henderson:Yeah, that's real, that's a really good insight. I've seen this both in the accounting space, and I see a huge opportunity in the accounting space and with taxpayers in that we're moving out of this era. I feel more of that older style, what I call the law firm structure of a CPA firm. You know, it's showing up in the office with a stack of paperwork, you know, with your suit and tie and sitting across the desk to go over numbers. We're seeing such a big shift in the world in general, right, with technology and automation, but also using Zoom and being able to work in a more fluid manner with the tools and the resources technology has provided.
Heidi Henderson:What that is doing is allowing, from what I'm seeing, firms to specialize in those verticals, but then be, like, the nation's expert, let's say, in real estate or in, you know, veterinary practices or restaurants or certain areas that are hyperspecialized, allowing taxpayers to find a firm that is hyper specialized, understands their business, which then allows more of that consulting and that guidance in how to be more successful. So if I could provide any, advice to many of the listeners on either side, on the CPA firm side as well as taxpayer side, is connecting those individuals who are understanding the ability and the drive of becoming experts in a very narrow market is really where I'm seeing this really happy landing of connection between taxpayers and CPA firms.
Chelsea Summers:Yes. And I think the virtual and using technology not only does it help find the right clients, but it's helping find the right employees and leaders. Suddenly, you're not just recruiting in your local office, but you're recruiting really nationwide and sometimes even, you know, across the globe. So, it's helping to get those right people on the right seats because suddenly, you have a lot more candidate options.
Heidi Henderson:Yeah. Yeah. That's a great point. Yeah, I didn't even bring that all the way over to the employment side. Which yeah, just it it just it broadens things so much more than having that brick and mortar business model that we used to see.
Heidi Henderson:And so it is evolving, I think, providing a lot of opportunity for firms as well as taxpayers. Yeah. So one question, when you look at the most recent IPA data, what changed, if anything, that's made you say, wow, this just isn't cyclical anymore. This isn't just about tax deadlines.
Chelsea Summers:Yeah, so I would say advisory services, but we already covered that a lot. And I think technology is the other big one where firms are really starting to make some investments. And we just launched our 2026 survey and we've really expanded our data set to look at AI and see how firms are really capitalizing on that, not just are you investing in AI, but how are you investing? What benefits are you seeing? Where's the hang ups?
Chelsea Summers:Where's your return on investment? Do you have training around that? So I think that utilizing technology and firms really wholesale, getting it involved in their firm, and it's not just siloed, where there's a couple people doing really great work, but then not sharing that. I think that's something that we're going to see as time goes on, that it's really going to change efficiency and the types of clients we can bring on. Suddenly, the compliance work can get done a lot quicker.
Chelsea Summers:And the firms can shift into being that trusted advisor that they've been talking about for decades. We're already seeing that with some small firms that are really heavily leaning into technology and doing some amazing things.
Heidi Henderson:Wow. That is so cool. And I I I totally agree. I think that's one thing very exciting. I was at a conference recently, and there was a, you know, so much discussion, I think, everywhere about AI and AI taking over everything and taking over jobs and replacing jobs.
Heidi Henderson:And someone, made a comment that I thought was wonderful, and he said, AI is not going to replace people. AI or people with AI are going to replace people without AI. I thought that was I was like, oh, that's a good one. And I think I do you know, regardless of whether AI begins to actually do tax returns, there's lots of discussion about, you know, can it actually pass the the CPA exam and and pass the test? By the way, apparently, it can and has now passed the CPA But I I'd love to your point that that is really what we see is this shift that firms will have more time to work with clients, to to brainstorm, to advise, to be that trusted partner, and not have to just be in the weeds with filling out forms and completing tax returns.
Heidi Henderson:So the technology will not replace your CPA. I think it will provide more capacity for them to better serve and free up that time to to have more of the connection that I think many of us, at least myself, specifically, I would love to have more of the one on one conversations and planning with my firm.
Chelsea Summers:Yeah. And I think one of the downstream effects of that technology that we're really going to be focusing on in the next couple years is how that affects the staffing at firms. And also with offshoring. So firms are offshoring a lot of that work that they can also use AI to do some of the data entry and billing and things like that. So how does that affect those entry level staff and their ability to understand the work that they're doing and be able to move up on a career path?
Chelsea Summers:So I don't know that many firms have a solution to that, but it's certainly an area that we're looking at, you know, have always been that triangle model. And I think they're going to start looking a lot more diamond shaped or some wonky version of that.
Heidi Henderson:Yeah, I think you're right. I mean, on that note, when we talk about staffing and capacity demographics and we talk about, you know, what's happening in the industry, let's back a little bit into some of the data because that's what you have. And I think it is insightful in helping not only CPA firms and accounting firms understand what's happening in the industry, but, again, taxpayers understanding why they're feeling some of the things they're feeling when they're working with a firm. So looking at really specific CPA focused questions in terms of those firms, can you share some of the data about the trends that we see with the average firm age and partner age and then declines in new accounting graduates and if that's tracked in the survey at all?
Chelsea Summers:So we do track the average partner age, which in the last decade has declined from 52.9 to 51.6.
Heidi Henderson:Okay.
Chelsea Summers:So I think firms are bringing on partners at a younger age than they have been traditionally. So instead of waiting till 45 or 50 to become a partner, we've got a lot of 30 equity partners at firms. I think that's helping to lower the age. We still have a lot of baby boomers that are going to retire and have retired in the last decade. So that is causing some of those gaps in leadership, which then leads to mergers and succession issues.
Chelsea Summers:And that there is a decline pretty steadily as well. And in accounting graduates from 2000 to 2012, we saw an increase every year of graduates in accounting. But after 2012, we've seen a decline every year after that. So last year was a 3.3% decline in graduates with an accounting degree. So we're not filling those roles.
Chelsea Summers:And some of that is leading to firms being more creative with their hiring, especially as they get more into advisory. They may not need as many individuals with a CPA license or an accounting background. If they're doing a lot of technology work, they're bringing in people with technology backgrounds. They're doing HR work for clients, they're bringing in individuals with those backgrounds. That shift to advisory pairs well with that decline in graduates, because we will still always need CPAs.
Chelsea Summers:The firms just may not need as many and there aren't as many to be had.
Heidi Henderson:Yeah. Well, right. And then, shifting that into partners and the workload, you know, big thing with the CPA firm model, typically in a traditional model is they charge hourly. And so they're doing certain work. They're going to send an invoice to their client for the hours worked on prepping that tax return, which converts to billable hours that is reflected at the CPA firm level.
Heidi Henderson:What are what are the numbers? Like, you know, this is, again, both for CPAs, but also for taxpayers. How is that sort of structured in a CPA firm and how CPA firms kind of analyze billable hours? And and you might have to dumb it down a little bit for some of us that are, you know, not in that space directly.
Chelsea Summers:Yeah, so most of the work, about two thirds of the work that's being done at a firm is still done on a billable hour basis. We're going to see that decline, hopefully, fingers crossed. There's a lot of people in the profession that are pushing really hard for that. But with technology making some of that, you know, your tax return become more efficient, we're no longer going to be able to use available hour. So other models could be some value pricing.
Chelsea Summers:So a standard tax return is this amount of money, or fixed fee pricing, or a lot of firms, some firms are doing what's subscription based pricing. So you pay a monthly fee to have access to those advisory services all year. And there's some small boutique firms that are having a lot of success with models like that similar to a concierge doctor. So that's a model we're starting to see as well. As far as the actual hours that are being worked inside the firm, really, I did a deep dive from a decade ago to now, and they're barely changing, which is interesting.
Chelsea Summers:I keep thinking nothing is changing and you would think that it would. So in 2015, Equity Partners averaged ten seventy four billable hours a year. And in 2025, it was 1,008. So yeah, we dropped 60 something hours, but that doesn't seem like much. And we typically suggest that equity partners have less billable hours.
Chelsea Summers:You need to be working on your client development and making sure that you're leading your firm and pushing down that work to your other staff.
Heidi Henderson:Yeah.
Chelsea Summers:From the level, we're not seeing those numbers change that much either.
Heidi Henderson:Yeah. Interesting. Yeah. That is interesting because we're seeing that shift a little bit as well kind of moving a bit away from the hourly billing. Have you seen any increases in billing rates?
Heidi Henderson:Do like, does the survey show what is like a retail billable rate or is it more like cost to the firm?
Chelsea Summers:We do look at billable rates. So, I got a good statistic for you. Okay. Partner billable rates. So, for an equity partner, 2015, it was $333 on average.
Chelsea Summers:Now, it's $448 And I thought, that's a big increase.
Heidi Henderson:Yeah.
Chelsea Summers:So then I overlaid inflation on top of that. And I said, a decade ago, what would $333 be worth today? $4.51. Oh. Yes, we've raised our rates, but $4.51 is what it should have been, but based on inflation, and now we're $4.48.
Chelsea Summers:So partners are raising their rates, but not at an inflationary level. So, costs are going up but everything is going up right now.
Heidi Henderson:Yeah. Absolutely. Yeah, the cost of everything. I mean, that is really, really interesting. That's interesting data.
Heidi Henderson:So, for taxpayers, average billable rate for a partner in a firm is just roughly around the $450 an hour rate. So I think that's interesting. I always hear, oh my gosh. It was so expensive. My CPA charged me so much money.
Heidi Henderson:And, you know, it's it's difficult. The the the knowledge, the education requirements, the time it takes to become a CPA and to really become well versed in the tax preparation space is really, really crazy. It is it is intensive. So, you know, kudos to every CPA and accounting firm out there who's built this and built a firm. But, yes, I also feel the pressures on the taxpayer side of of increased billable rates with everything that's increasing across the board.
Heidi Henderson:Yeah. Absolutely. Amazing. So when when firms increase their billable hours, I think I know the answer to this, but are they actually becoming more profitable? Are they just keeping up with their increased cost of staffing?
Chelsea Summers:Yeah. So, we say the the best ways to increase your profitability are to raise your billing rates or to leverage work better. So, have more staff per partner. Those are the two biggest drivers to increase profitability. Yeah.
Chelsea Summers:And really those firms that have partners working more than that 1,000, maybe 1,500 charge hours. They're not any more profitable than those firms who are really good at leveraging their work.
Heidi Henderson:Yeah. Okay. Yeah. That's good. That's good to know.
Heidi Henderson:That's interesting.
Chelsea Summers:Is that is that what you're saying? Is that the answer you were expecting?
Heidi Henderson:Yeah. Yeah. I kind of figured, I mean, like, we see it too with our staff. I mean, wages, everything has gotten more expensive. You know, we're paying more.
Heidi Henderson:Our cost for everything is high. Insurance is high. Everything's more expensive. So, yeah, billable hours are higher, but all the costs are higher. So it's just it's it's interesting time.
Heidi Henderson:But let's talk a little bit because this does also shift into the m and a discussion, the mergers and acquisitions, and private equity, but not just private equity. There is a really interesting thing happening in the CPA space. Maybe it's always happened. It just feels like it's more it just feels like there's more movement, you know, but maybe not. Do you guys keep metrics on mergers and acquisitions and, like, the rates and and shifts that are happening over time with that?
Chelsea Summers:We do and I've just had a conversation about this recently because somebody came to me and they said, we feel like the middle tier of firms, those those mid sized firms, they're shrinking. They're going away. They're being acquired.
Heidi Henderson:Yeah.
Chelsea Summers:Said, over the last five years, the number of deals is really less than it was a couple of years ago. Like we stay fairly consistent. Just feels like a lot. Think one, because firms are getting a lot better at talking about what they're doing. There's a lot of press releases.
Chelsea Summers:We're all on LinkedIn and seeing all of that. So it's more visible. And I think there are some more high profile deals. Those have happened along the way, but it seems like there's a couple more of them happening now. And those private equity backed firms are doing a lot of the mergers and acquisitions.
Chelsea Summers:So the number of firms being acquired isn't changing too much. But I think the firms that are doing the acquiring, there's a smaller number. So they're acquiring a lot more firms. Does that make sense?
Heidi Henderson:Yep. Yep. That makes a lot of sense. You know, I'll I'll use an example or a correlation that that may or may not apply, but this is another question to see if you have metrics on this. But, you know, another area that's really heavy with private equity is the veterinary space.
Heidi Henderson:So it's been an area where private equity is coming in and just scooping up all of the veterinary firms, small and large animal. I am an animal person, so this hits me directly when I see the cost of things. It's just mind blowing. Service goes down, costs go up in almost every case that I have seen. And I was recently reading some metrics on the percentages of firms that are still independently owned, and it is shockingly low because there's been so much acquisition and then bundling of these groups.
Heidi Henderson:And, this is veterinarian space specifically. Just happened to do a deep dive for whatever reason. But what what is the impact that you see if the data is available with private equity? Do you see changes in what we call NPS scores, you know, the the the client happiness rating. Do you see increases in billable hours or cost to consumers?
Heidi Henderson:What are some of the big shifts that happen when there is an acquisition by private equity?
Chelsea Summers:So, it's still very new for a lot of the firms, there's been a lot of investment that's been made in the last two to three years. And because our survey is rear facing, our last data set was on year 2024. So I don't, a lot of the data hasn't really fleshed out yet. We saw a little bit of differences and I did separate those private equity backed firms versus those that weren't didn't see a lot of changes. I mean, they're they're a little bit more profitable.
Chelsea Summers:They grew a little bit faster but nothing that was really like, oh my gosh, this is working or oh my gosh, this is completely failing. Everything was going as it always was going. If a firm was successful prior, it just became a little more successful. If a firm was average, it became a little bit better than average. But nothing earth shattering yet.
Chelsea Summers:I know that there has been some conversations and I'm hearing murmuring about individuals leaving those private equity backed firms. So, I I think that we'll start seeing some entrepreneurial younger firms start up that just said, you know, I joined this firm, and this isn't really what I was looking for. And I can use technology and do all these things myself. And so I'm excited to see these new these new startups and see what they can do from it. I'm hesitant to think that the accounting professional ever get to where the veterinary spaces, just because there are so many firms who are very steadfast in their independence.
Chelsea Summers:And I think from a partnership model that the accounting firms are used to, I think a lot of them naturally say no, no, no, either I built this or, you know, I know the founders who built this, and we want to keep this running as it always has. We tell those firms, look at what those private equity backed firms are doing and take some of the the things that they're doing well. There's some changes in governance models or you know, the way that their partnership structures are set up but don't take it all. Don't take what doesn't work for you. Take the pieces that do and learn from it and then remain independent.
Heidi Henderson:That's huge. Yeah, because we're seeing firms that do that. They they kind of sell out and there is a big shift. And the consensus that I've heard time and time again with partners who have sold is that it was very difficult for them with what happened with the clients. Because a lot of these CPAs, kudos to all of our accountants out there, who thoroughly enjoy what they do and love to take care of clients and build the relationships and build rapport and provide, you know, the best service out there.
Heidi Henderson:So when there is a sale or a liquidation and they're selling off to private equity, oftentimes, it's it's out of survival. And because you've mentioned succession planning, so, you know, for our laypersons, listeners, you know, it's essentially there used to be this model that you have you have partners growing up in a firm. They build a firm. And maybe they started it themselves or they came in as a a tax manager and they've worked up and become a partner. The model has always been to have those people under them continue to grow up in the firm and eventually, they become the partner and essentially, they're buying out the partners and so, it becomes, it's the succession model in the CPA firm is you have sort of this rollover where the younger partners are coming up.
Heidi Henderson:They're buying out the book of business, and essentially, that is the retirement plan for the partners that are aging out, and there's kind of a timeline, and there's sort of things set up in that process. But what we've been seeing, which is really interesting and and maybe a little sad, but one, you know, I was chatting with a dear friend of mine I've worked with for over fifteen years, and he said, I just did not spend enough time cultivating the teams coming up underneath me, and I don't have anybody who even wants to take over my firm. And so it threw him into a situation of survival that essentially that was his retirement plan, And that retirement plan doesn't work if you don't have staff that wants to now become a partner and buy you out.
Chelsea Summers:Right. And one of the things we talk a lot about is just making sure that those leaders are transparent about what partnership looks like. And I think so many of them are very close to the chest on their compensation or what the buying and buyout structure is or what their day to day work even looks like. Staff see the stress of a partner and see the hours that they're working, but they don't see the upside. They don't see that client relationship and the joy in what they do.
Chelsea Summers:So we're really trying to get those leaders to share more and be more open with your staff because you do need them and you want them. You want them to enjoy their work as well.
Heidi Henderson:Yep. When you hit on something a second ago that I wanted to roll back to, and that was we're seeing a lot of younger firms then spin out and start their own companies. And that has been another one for entrepreneurship where, you know, this may be this is just a feeling. I have no data back this. But my my sense is that it has become easier now to build a firm with AI, with technology, with innovation, with the not being bound by a brick and mortar business in a town and competing with someone that's been there for ages.
Heidi Henderson:You now have, like, the, you know, the world is your oyster in terms of being able to market and to be able to serve clients across the country. So we are am seeing a lot more of those entrepreneurial, entrepreneurial younger partners really jumping out there and building these more innovative firms. Do you have any data on, like, new far firm startups and, you know, any anything like that? Because I really don't have it, but I think it'd be fascinating.
Chelsea Summers:I don't. And, unfortunately, you know, I people ask me that all the time, like, do you know how many firms were founded last year? That's such a hard metric to come across. It's all anecdotal. But I think going back to what you said at the very beginning of the conversation that AI isn't going to replace the staff, it's going to be the staff are gonna be replaced by people who know AI.
Chelsea Summers:It's the same thing with the firms. The firms that are accepting all that technology are gonna leapfrog ahead of a traditional firm. And I think we're already starting to see some of that.
Heidi Henderson:Yeah. Yep. Absolutely. Yeah. Absolutely.
Heidi Henderson:Okay. So shifting a little bit, we talked a little bit about firms also moving more into advisory and trying to find more time to serve clients. Let's talk really forward facing. Like, when we're forward looking, you know, what trends do you see that feel locked in and that are compelling?
Chelsea Summers:We think the shift to advisory services, I think technology is going to make compliance services a lot easier and quicker. And so firms are going to do a lot more advisory services. I think that firms are really needing to consider what their training and their upscaling of their current staff look like in order to develop those leaders in this new model. So I think that advisory services are really what we see. And I think also the shift to fixed fee pricing or value based pricing is that's got to come soon.
Chelsea Summers:So I think that's another one that we're really keeping our eye on and looking towards in the coming years.
Heidi Henderson:Yeah, that's going to be interesting because that's what I've been waiting for forever. I would much rather just say, tell me what it's going to cost. That's the price and then I know instead of just getting some random invoice I didn't expect, you know, once the. So Clients
Chelsea Summers:are asking for it. The staff is asking for it. The technology is making the work more efficient. Like, we can't take this up much longer.
Heidi Henderson:Yeah. Right. Huge shift in also, I I feel like very new, very new been the last four, five years, is is using offshore labor which I don't think prior to four or five years ago was really done hardly ever and now, there are tremendous resources with firms being able to use labor that is a little bit less expensive and yet highly educated and understanding they actually train in The US tax code. Do you have metrics on the shift of firms moving to using offshore labor for some of their back end office work?
Chelsea Summers:Yes. So we only started asking about it about five or six years ago.
Heidi Henderson:Mhmm.
Chelsea Summers:Because prior to that, like the big four outsource some of their tax returns, but really nobody else did. Mhmm. We had this past year 47% of our firms had offshore FTE and 36% of firms offshore tax returns or outsource tax returns. So they're sending them to a third party company. What we're seeing right now is the shift from firms using those offshore staff through a third party to firms really investing in offices.
Chelsea Summers:Whether that's in The Philippines or India, or we're starting to see a lot more through Latin America and Central America. We're seeing firms really double down and say, no, these people aren't, you know, third party resources. They're really part of our organization and so, we're going to bring them here. We're going to go visit them. We're going to do cross training and that's really where we see firms the most success have the most success with it is when they really look at them as employees and not just as a as an offshore resource.
Heidi Henderson:Yeah. I've actually I've seen that quite a bit. I have worked with some firms that started to use some kind of third party providers, but have actually seen a number of firms, even surprisingly enough, and it may surprise many of our just individual taxpayers or business owners here, that there are a lot of firms that have built these offshore offices. They are actually full time employees. They become part of the firm, but they just live and operate offshore.
Heidi Henderson:It has been something that's been a really fascinating shift because, yeah, I think prior to five years ago, none of the firms that I worked with had any of that and were highly reluctant to it as well. I don't really have a gauge or a sense of how taxpayers feel about it, but I know for my sense, it doesn't really give me that much pause. Certainly, I think, again, allowing and freeing up partners to focus more on advisory and being able to serve clients better is I would rather that than having a partner having to actually work on directly preparing a tax return.
Chelsea Summers:Yeah and even those firms that held out initially because I said, oh, we don't think our clients are going to like this. A lot of them have started offshoring and outsourcing and are not seeing much client pushback.
Heidi Henderson:Yep. Absolutely. Yeah. As we kind of wind down a little bit, any other points or data that you'd like to share with us? I'd love to know what other data you've seen in their report and in your conversations that is really leading the charge here with our CPA firms.
Chelsea Summers:Yeah, I think the profession is just at a very interesting inflection point. There's so many different trends converging on one another and crisscrossing private equity, the offshoring, the AI and technology, and then what firms are doing with further training and upskilling and just getting the right people in their firm. And I think we're seeing all of those come together. And we're seeing some firms really take on the challenge and say, you know, we're really going to accept all this change and move forward and make choices and be the firm that we think we want to be. And we're seeing some firms that are really paralyzed by all this change, and saying, let's just keep doing what we're doing for the next three to five years until I get my retirement.
Chelsea Summers:And then you guys figure it out. And that's a successful model for the firm, for their staff who are looking at them saying, what are we going to do with all of this? And it is overwhelming. It's overwhelming to have so much change being thrown at you in a career that has felt very stable through their whole lives. But I'm excited to see where all of these trends converge and where they go.
Chelsea Summers:And somebody asked me two years ago, I don't even remember what metric it was, but where do you see this going in ten years? I said, it's either going to go really up or really down. Can't tell you what, but I think this is the point we're going to circle and say, here's where everything changed. And I think that was last year, you know, I think we're starting to see a lot of things change. And jury's still out on what it's going to look like or how it's going to affect the numbers.
Chelsea Summers:But I think it is. And I'm excited to lead the charge of inside public accounting and bring everybody the data and help inform where everybody's going.
Heidi Henderson:Absolutely. Yeah. Well, it's, I mean, it's so neat. You know, IPA is part of our family of companies. And it's amazing to work with brilliant, intelligent, smart people who are understanding and diving into the industry and diving in to support our clients, as taxpayers as well as the CPA accounting industry.
Heidi Henderson:And one of the things that we love and why we've continued to evolve as well is a lot of what we see with the firms is wanting to better serve clients. And for us, we've had many of the services we provide on the tax, the specialty tax side or tax incentive side, and this just continues to serve our accounting partners and also shows the metrics that being able to expand services and make sure that these kinds of key areas, advisory and tax credits and opportunities, are more at the forefront of the conversation with our accounting firms and the way that they're serving their clients. And that ultimately, especially as we are in an environment that's very expensive, tax is the highest burden for really any business owner. And these are things that many businesses are struggling to survive and to be profitable and to do well and to grow. And a lot of that comes with looking at every opportunity for growth and cost cutting and strategic mindset.
Heidi Henderson:So I know that we have harped on that for many years in our business, and IPA has been part of having the data to help support that for the CPA industry as well and for taxpayers.
Chelsea Summers:Yeah. Think you hit the nail on the head. Having the clients at the forefront of that conversation is really going to guide the firm in the right direction.
Heidi Henderson:Absolutely. Yeah. Well, Chelsea, thank you so much for the conversation and the data. It's always wonderful. And we'll share all the information in show notes, and we'll wrap up.
Heidi Henderson:Thank you so
Chelsea Summers:much for being here. Well,
Heidi Henderson:Chelsea, this has been an awesome, valuable conversation, and thank you so much for joining. What I really hope that listeners take away from all of this is what's happening in the CPA industry isn't really random, and it isn't just about higher fees or slower response times. It's really driven by real structural changes, which include staffing shortages, aging workforce, capacity constraints, and a massive shift towards advisory work. For business owners and investors who are listening, the big takeaway is this. The best results don't come from expecting your CPA to do more for less.
Heidi Henderson:They come from understanding how the profession is changing and then choosing to work with firms that are built for proactive planning, collaboration, and strategy. We have more opportunities than ever before to find a firm that is hyper specialized in your business or in an area that is most relevant to you. And so for CPAs, they can also earn CPE in this conversation today. Chelsea's Chelsea's data makes one thing very clear. Firms that adapt intentionally around pricing, staffing, specialization, and client selection, they are the ones that stay profitable and sustainable.
Heidi Henderson:If you want to deep dive into the benchmarking data that Chelsea shared today or you're a firm leader looking to understand how you stack up against your peers and other firms, I highly recommend check out Inside Public Accounting. And if you're a business owner or investor who wants to be more proactive about tax planning, incentives, and long term strategy, you can learn more about what we do at Engineered Tax Services and Engineered Advisory. As always, this is the Slash Tax Podcast where we don't just talk about taxes, but we talk about how the system is changing, how to use that knowledge to make smarter decisions. Thank you for listening, and we'll see you next time.