FIRM ADMINISTRATION REPORT

EXCERPTED IN PART ONLINE ONLY THE INSIDE PUBLIC ACCOUNTING FIRM ADMINISTRATION REPORT 2015 i P age

THE ANNUAL INSIDE PUBLIC ACCOUNTING FIRM ADMINISTRATION REPORT 2015 survey and analysis conducted by: The Platt Group / INSIDE Public Accounting The Independent Gold Standard of Accounting Firm Benchmarking Since 1990 Published by: The Platt Group / INSIDE Public Accounting 4000 West 106 th Street, Suite 125-197 Carmel, IN 46032 (317) 733-1920 P (317) 663-1030 F www.insidepublicaccounting.com 2015 PRICING $379 (PDF Copy) $899 (Package PDF) Firm Administration, Human Resources and Information Technology Authorization to photocopy information, tables or graphs contained in this report is expressly prohibited without written consent of The Platt Group / INSIDE Public Accounting. For customized reprints of tables, graphs or analysis within this report, please contact The Platt Group / INSIDE Public Accounting. The Platt Group / INSIDE Public Accounting 4000 W. 106 th St., Suite 125-197, Carmel, IN 46032-7730 Phone: (317) 733-1920 Fax: (317) 663-1030 Web: www.insidepublicaccounting.com E-mail: survey@plattgroupllc.com ii P age

THE 2015 INSIDE PUBLIC ACCOUNTING FIRM ADMINISTRATION REPORT SPONSORED BY

TABLE OF CONTENTS Page PREFACE... i HIGHLIGHTS... iv MEMBERSHIP Member of Association for Accounting Administration... 1 GOVERNANCE Firm Structure... 2 Firm Management... 2 Partnership Agreements... 3 Succession Planning... 4 PROFESSIONAL LIABILITY Premiums... 5 Coverage... 5 Gross Billings... 5 Limits... 5 Deductibles... 5 Costs as a Percentage of Firm Net Revenue... 5 EMPLOYMENT PRACTICE LIABILITY Premiums... 6 Coverage... 6 INTERNAL ACCOUNTING DEPARTMENT STAFFING, COMPENSATION, BONUSES, MERIT INCREASES CFO... 7 Controller... 7 Payroll Specialists... 8 Accounting Staff... 8 Administrative and Support Staff... 9 FIRM ADMINISTRATION STAFFING, COMPENSATION, BONUSES, MERIT INCREASES Firm Administrator... 10 COO... 10 CEO... 11 Administrative and Support Staff... 12 HUMAN RESOURCES STAFFING, COMPENSATION, BONUSES, MERIT INCREASES Human Resources Director... 13 Recruiter... 13 Training Director... 14 Benefits Administrator... 14 Administrative and Support Staff... 15 MARKETING STAFFING, COMPENSATION, BONUSES, MERIT INCREASES Marketing Director... 16 Marketing Coordinator... 16 Social Media Staff... 17 Administrative and Support Staff... 17 iii P age

BUSINESS DEVELOPMENT STAFFING, COMPENSATION, BONUSES, MERIT INCREASES Business Development Director... 18 Sales Staff... 18 Administrative and Support Staff... 19 INTERNAL INFORMATION TECHNOLOGY STAFFING, COMPENSATION, BONUSES, MERIT INCREASES IT Director... 20 CTO / CIO... 20 Systems / Network Administrator... 21 Help Desk... 21 Administrative and Support Staff... 22 PARTNERSHIP ISSUES Equity Partner Ownership... 23 Equity Partner Demographics... 24 Other Partner Ownership... 24 Total Male / Female Equity Over the Age of 50... 24 Equity Partner Compensation Distribution... 25 Non-Equity Partner Compensation Distribution... 26 PARTNER RETREATS Retreat Information... 27-30 FIRMWIDE CHARGE HOURS CHARGE HOUR BUDGET, ACTUAL CHARGE HOURS, HOURS WORKED Equity Partners... 31 Non-Equity Partner... 31 All Other Professional Staff... 32-34 PROFESSIONAL STAFF UTILIZATION Tax Department... 35 Audit Department... 36 All Other Practice Areas... 37 BUSINESS DEVELOPMENT INCENTIVES Offer Incentives New Clients... 38 Offer Incentives New and Existing Clients... 39 Distribution and Duration of Incentives for New Clients... 40 Distribution and Duration of Incentives for Existing Clients... 41 Effectiveness of Incentive Program... 42 Primary Reasons for Increase in Revenue... 43 Secondary Reasons for Increase in Revenue... 44 FIRMWIDE METRICS AND PROFITABILITY Profit Margin Metrics Tracked... 45 Profit Metrics Shared Within the Firm. Net Revenue... 46 Profit Margin... 47 Utilization... 48-49 Net Revenue per Hour... 50 Firmwide Net Income... 51 Realization... 52 CLIENTS / WORKFLOW / ACCOUNTS RECEIVABLES Formal Client Acceptance Process... 53 Formal Client Classification Process... 53 Client Value... 53 iv P age

Percentage of Revenue in the Pipeline... 53 Standard Hourly Billing Rate Multiple... 54 Client Fees... 55 Process for Client A/R Collections... 56 Sell-Off and Credit Card Payment... 57 Interest Charged... 57 TAX RETURN PROCESSING Offer Guaranteed Turnaround... 58 Outsourcing... 58 FEEDBACK AND OPINIONS Firm View of the Economy... 59 Clients View of the Economy... 59 Staffing Outlook... 60 Key Strategies for New Business Development... 61 THANK YOU TO CPA FIRM MANAGEMENT ASSOCIATION FOR SPONSORING THE 2015 REPORT v P age

THE 2015 FIRM ADMINISTRATION REPORT The annual INSIDE Public Accounting Firm Administration Report is an independent, up-to-date set of economic and management statistics available about the accounting profession. If you want to work with people, then you have to know how to administrate, that is to organize them and lead them. Sunday Adelaja IPA s Methodology: Each survey is reviewed and examined. If data appears to be incorrect or questionable, we resolve issues with the reporting firm. While we do everything possible to ensure accuracy, the participating firms bear the ultimate responsibility for providing accurate data. Throughout this report, all tables are presented by revenue bands and geographic regions. IPA does not provide data on any individual firm. TERMS AND DEFINITIONS Non-Big 4: This category includes all participating firms and includes all national firms, but excludes Big 4 firms. Averages: The averages included in this report are averages of data supplied by survey participants. In some instances, the averages may not appear to total correctly; this is a function of rounding. All data excludes the Big 4. SPONSORED BY CPA FIRM MANAGEMENT ASSOCIATION vi P age

We wish to extend our gratitude to the more than 121 firms that participated in the 5th annual Firm Administration survey. Managing partners, firm administrators, controllers, office managers and others all played a part in gathering the required data for the survey. We appreciate your efforts and flexibility, your input and suggestions for improvement, and your willing cooperation in ensuring accurate and timely submissions. Maintaining confidentiality is a responsibility we at INSIDE Public Accounting take very seriously. That uncompromising commitment is the foundation of our business, and we appreciate the trust you have placed in our company. We hope you will find value in this report. Please remember IPA can also serve as a resource to you as you gather your management team to review benchmarking and performance improvement opportunities. Consider inviting IPA to make a customized presentation at your next partner retreat. IPA can delve deeper into the trends and provide detailed information on specific areas of interest. We look forward to continuing to serve you and the profession, and we encourage you to always expect better in the future. Please feel free to contact us at mplatt@plattgroupllc.com or kplatt@plattgroupllc.com to see how the lessons learned from hundreds of firms can be used to improve performance at your firm. Mike & Kelly Platt vii P age

SUMMARY HIGHLIGHTS Publishers Note: Unless otherwise noted, all commentary relates to non-big 4 firms, but includes all participating national firms. Not all firms chose to answer all questions. Percentages cited in the following pages/tables are based on firms that answered those specific questions. OVERVIEW The universe of firms that participated in the IPA Firm Administration survey this year includes the following: 51- Firms above $20 Million 47- Firms $10 Million - $20 Million 10- Firms $5 Million - $10 Million 13- Firms under $5 Million A few observations are worth noting as you review this IPA Firm Administration Report, which drew participation from 121 U.S. firms. REVENUE GROWTH There are many reasons for changes in revenue, which this year averaged 5.3% (organic growth) and 7.2% (including mergers) across all firms that participated in the IPA survey. Primary reasons attributed by participants for their growth include: 64% Organic growth 15% Economic Conditions 9% Mergers / Acquisitions 7% New Service or Niche Launched 3% Addition of New Partner(s) Lateral Hires viii P age

CLIENTS / WORKFLOW / ACCOUNTS RECEIVABLE Less than 1% of participating firms guarantee a specific turnaround time for tax returns. This could present an opportunity to differentiate your firm. Credit cards are acceptable for payment by 84% of firms. Sixty-one percent of participating firms charge interest on overdue accounts receivables, with the average charging 1.24% monthly. Less than 1 in 13 firms report outsourcing some portion of tax return processing work, with the majority of those coming from firms greater than $30 million in revenue. Eighty percent of participating firms have a formal client acceptance process. If yours is one of the firms that doesn t, consider adding one and sticking to it. Less than one-third of participating firms do not have a process to prevent further work for a client(s) that has an overdue AR balance. If you do not have one, it would be worth considering. Only 2% of firms sell receivables to a third party this is a practice that is certainly not common in the profession, and maybe for a good reason. Forty-nine percent of firms do not know or do not track their percentage of annual revenue in the pipeline at any given time. Of those that do track, 42% say that it s between 0% and 5% of their annual revenue. FIRMWIDE METRICS / PROFITABILITY Measuring your firm s profitability beyond the firmwide number can identify strengths and weaknesses. Consider the following percentage of firms and their means of tracking profit margin: 69% By Office 62% By Department 56% By Client(s) 39% By Staff ix P age

Philosophical differences exist among many firms on what information should be shared with staff. Fifty-seven percent of firms share top-line numbers firmwide. Firmwide utilization is shared with all staff in 36% of participating firms. Realization is shared with all staff in 35% of all participating firms. Net income is shared with all staff in only one in 10 firms. PARTNERSHIP ISSUES Only 8% of participating firms offer equity ownership to administrative (C-Suite) personnel. This area could be a differentiating factor for firms. As the talent war becomes more crucial to the success of firms, IPA will be keeping an eye on this number to see if it trends upward or downward. PARTNER RETREATS Partner retreats are alive and well, according to the IPA firm administration survey. Eighty-one percent of firms report that they conduct annual retreats. Of those that hold retreats, 18% report they conduct them every six months, and 73% conduct them annually. Of the firms that indicate they hold partner retreats, 45% of these firms travel 50 miles or more from the office. Fifty-three percent are held locally, off-site. More than 50% of all participating firms include a formal survey of the partner group to gather information prior to developing the retreat agenda. A mere 29% of participating firms solicit feedback from clients / non-partners within the firm. This is a great opportunity to consider for your next partner retreat. A healthy 70% of participating firms include the firm administrator in the retreat. Less than one-in-five participating firms invite/include guests from outside the firm (advisory board members, clients, etc.) x P age

Hot Topics for Partner Retreats Strategic planning, business development and practice development initiatives dominate, with 96%, 93% and 91% of firms, respectively, indicating that these areas are discussed. Less frequent discussions are succession planning (83%) and partner issues (63%). FIRM GOVERNANCE Fifty percent of participating firms report that their structure is more like a corporation than a partnership. A full 85% have updated partnership agreements within the past three years with 26% of those doing so within the past year. Only 42% of participating firms have a written / formal succession plan in place for all equity partners. This continues to be one of the greatest challenges in the profession. One in 14 firms have a succession plan for their high level (C-Suite) administrative staff. BUSINESS DEVELOPMENT INCENTIVES Most firms acknowledge that they need staff looking for new business opportunities, whether new clients or adding services to existing clients. Philosophically, many may argue that business development is the responsibility of all partners, and is part of the compensation expectations, and admittance into partnership. Some argue that new business development initiatives as part of the compensation formula incentivizes partners to do the jobs they are supposed to do. This is an opportunity to define the rainmakers, the workers and those who can cross-over. Seventy-two percent of firms offer incentives to 6- to 8-year staff. In 70% of those firms, incentives are provided for only new business development. IPA asks, Why wouldn t you incentivize staff for new business from current clients as well? (Note: The No. 1 strategy identified by all participating firms for generating new business is Increase value-added opportunities with existing clients. ) Less than a third of firms that have an incentive plan compensate staff for the first year of the new client. Some are more generous, with 29% compensating for two years and 9% for the life of the newly acquired client(s). xi P age

Less than half of participating firms rate their incentive program as good or excellent, and 22% believe their program is fair or poor. The other 30% consider their program average. Offering an excellent incentive program could be a differentiator for your firm. LIABILITY INSURANCE COVERAGE An aggregate of $26 million is spent annually in professional liability insurance coverage by the 121 participating firms. The average premium increase was 4.7%. A total of $1.5 million more is spent in premiums for liability coverage of employment practices, with the average premium increase rising 5.4%. xii P age

FIRM MEMBERSHIPS FIRM SIZE (Net Revenues) No. of Responses Member of Association for Accounting Administration (AAA)? If yes, do you find value in your membership? All Non-Big 4 121 64% 92% >$75 Million 9 56% 80% $50-$75 Million 11 55% 100% $30-$50 Million 12 67% 88% $20-$30 Million 19 74% 93% $15-$20 Million 20 70% 100% $10-$15 Million 27 67% 89% $5-$10 Million 10 60% 100% $3-$5 Million 6 67% 75% < $3 Million 7 29% 100% REGIONAL DATA Southeast 31 61% 100% Great Lakes 19 68% 85% Northeast 21 62% 92% Great Plains 22 77% 94% West 28 54% 87% 1 P age The 2015 IPA Firm Administration Benchmarking Report / Copyright 2015 INSIDE Public Accounting / www.insidepublicaccounting.com

GOVERNANCE Firm Structure Management by Managing Partner Management by Executive Committee Management by Full/Majority Partnership Firm Structured like Partnership Firm Structured like Corporation FIRM SIZE (Net Revenues) All Non-Big 4 20% 70% 10% 50% 50% >$75 Million 0% 100% 0% 55% 45% $50-$75 Million 9% 91% 0% 36% 64% $30-$50 Million 23% 77% 0% 38% 62% $20-$30 Million 20% 80% 0% 35% 65% $15-$20 Million 10% 80% 10% 70% 30% $10-$15 Million 32% 50% 18% 44% 56% $5-$10 Million 10% 60% 30% 67% 33% $3-$5 Million 17% 50% 33% 100% 0% < $3 Million 57% 29% 14% 29% 71% REGIONAL DATA Southeast 19% 75% 6% 35% 65% Great Lakes 16% 79% 5% 47% 53% Northeast 25% 67% 8% 61% 39% Great Plains 18% 64% 18% 50% 50% West 21% 66% 14% 59% 41% 2 P age The 2015 IPA Firm Administration Benchmarking Report / Copyright 2015 INSIDE Public Accounting / www.insidepublicaccounting.com

GOVERNANCE When was the last time your partnership agreements were updated? FIRM SIZE (Net Revenues) Less than 1 Year ago 1-3 Years ago 3-5 Years ago 5-10 Years ago More than 10 Years ago All Non-Big 4 26% 46% 13% 11% 0% 2% >$75 Million 30% 40% 20% 10% 0% 0% $50-$75 Million 18% 64% 9% 9% 0% 0% $30-$50 Million 23% 38% 31% 8% 0% 0% $20-$30 Million 25% 55% 5% 10% 5% 0% $15-$20 Million 25% 40% 20% 15% 0% 0% $10-$15 Million 26% 52% 7% 15% 0% 0% $5-$10 Million 30% 30% 10% 10% 20% 0% $3-$5 Million 50% 50% 0% 0% 0% 0% Never Updated < $3 Million 20% 20% 20% 0% 0% 40% REGIONAL DATA Southeast 16% 55% 3% 19% 6% 0% Great Lakes 17% 56% 28% 0% 0% 0% Northeast 30% 43% 9% 9% 4% 4% Great Plains 36% 36% 18% 5% 0% 5% West 32% 39% 14% 14% 0% 0% 3 P age The 2015 IPA Firm Administration Benchmarking Report / Copyright 2015 INSIDE Public Accounting / www.insidepublicaccounting.com

GOVERNANCE Succession Plan Succession Plan in Place for MP/CEO If yes, the entire Partner Group is Aware of the Plan Succession Plan for ALL Equity Partners Succession Plan for ALL High-Level Administrative Staff FIRM SIZE (Net Revenues) All Non-Big 4 43% 94% 42% 7% >$75 Million 90% 89% 30% 10% $50-$75 Million 55% 100% 36% 0% $30-$50 Million 54% 86% 77% 15% $20-$30 Million 32% 100% 35% 5% $15-$20 Million 30% 100% 40% 11% $10-$15 Million 44% 92% 48% 8% $5-$10 Million 30% 100% 20% 0% $3-$5 Million 60% 100% 60% 0% < $3 Million 14% 100% 14% 0% REGIONAL DATA Southeast 45% 93% 38% 3% Great Lakes 22% 75% 37% 6% Northeast 57% 92% 50% 10% Great Plains 48% 100% 43% 11% West 41% 100% 41% 7% 4 P age The 2015 IPA Firm Administration Benchmarking Report / Copyright 2015 INSIDE Public Accounting / www.insidepublicaccounting.com

INTERNAL ACCOUNTING STAFF FIRM SIZE (Net Revenues) HAVE A CFO? Average Compensation Were Bonuses Paid? Most Recent Merit Increase HAVE A CONTROLLER? Average Compensation Were Bonuses Paid? Most Recent Merit Increase All Non-Big 4 25% $175,049 79.4% 3.7% 51% $96,405 71.0% 3.9% >$75 Million 50% $216,917 83.3% 4.5% 67% $141,481 100.0% 3.7% $50-$75 Million 58% $153,700 85.7% 4.4% 58% $109,686 85.7% 4.4% $30-$50 Million 36% $223,750 80.0% 1.2% 64% $98,562 77.8% 3.7% $20-$30 Million 24% $130,567 60.0% 4.5% 67% $89,745 71.4% 4.3% $15-$20 Million 14% $135,848 100.0% 6.7% 43% $91,312 55.6% 4.7% $10-$15 Million 24% $156,261 71.4% 3.1% 62% $82,057 61.1% 3.7% $5-$10 Million 9% $350,000 100.0% 0.0% 18% $105,934 50.0% 1.8% $3-$5 Million 0% 14% $65,000 100.0% 3.0% < $3 Million 0% 13% $66,000 0.0% 3.5% REGIONAL DATA Southeast 33% $163,205 81.8% 4.6% 48% $90,950 75.0% 3.9% Great Lakes 35% $175,496 100.0% 3.7% 50% $90,597 80.0% 2.7% Northeast 28% $220,286 85.7% 3.0% 64% $112,885 87.5% 3.6% Great Plains 4% $91,545 100.0% 3.0% 52% $91,081 50.0% 4.4% West 28% $159,905 50.0% 3.3% 52% $91,799 60.0% 4.7% 7 P age The 2015 IPA Firm Administration Benchmarking Report / Copyright 2015 INSIDE Public Accounting / www.insidepublicaccounting.com

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