What the Numbers Are Really Telling Us: Industry Benchmarks Every Accounting Firm Should Know

Mark: Well, hi everyone and welcome to another episode of Accounting Industry Insights with Mark Holton. I hope the last month or so has been good, and we're getting back into 2026.

I'm very fortunate to have Matt Feehan with me today. Matt is from Three Rivers Group and also M2 Academy. I thought there's probably no better way to introduce Matt than to let him do it himself. So good day, Matty, welcome. Would you like to do a quick intro?

Matt: Hi Mark, thanks for having me, happy to. I've been in public practice accounting for coming on 20 years. I've been a partner at a larger firm, and more recently started Three Rivers Group, which is an advisory-first firm, and obviously taking care of compliance, which is a necessary evil for all of us. The focus is really on working closely with clients, wrapping our arms as tightly as we can around them, and helping them grow great businesses that are feeding their life.

And more recently, obviously, joining and co-founding the M2 Academy with yourself, just helping firm owners make sure that they're building businesses and firms that are feeding their lifestyle and are a real asset on their personal balance sheet as well.

Mark: Thanks Matty, and a very warm welcome.

What I want to have a chat about today was a couple of recent reports that have hit the market. In particular the Smithink Partner Crunch Report 2025, and also the Benchmarking Data & Research Accounting Industry Report 2025. Both have brought up a whole host of accounting industry trends and measurement points that I think listeners will get real benefit from when they start thinking about what their firm is doing compared to what's happening out there.

When I started to look through the results from the Crunch Report and focused on key areas such as revenue, it was showing that revenue per partner is now about $1.31 million per annum, and it seems to have gone up a little bit. Have you seen that out there? What are your thoughts?

Matt: Yeah, absolutely. It's certainly crept up well past that million dollar figure per partner. For sole practitioners, that's always sort of been that first goal post, to get to a million dollars. But for partners in other firms it seems to be increasing as well. I think the drivers behind that are interesting. The costs to run a firm are probably increasing, so what you're finding is partners are having to take on a bit more responsibility purely just to make sure that they're making a return on their investment by owning the firm, and all the stress that brings. So there's maybe less space for new entrants into firms as partners. And potentially we've also got an ageing industry where people are trying to push revenue up in preparation for selling their firm and making the most out of that as they go.

Some of the other interesting stats I found in there are revenue per full-time equivalent, which is up to $181K, and revenue per chargeable person, which is up to $225K. Looking at that alongside where salary bands are sitting now, once you factor in superannuation increases, WorkCover and potentially payroll tax on top of that, $225K per chargeable person is actually not a lot of revenue. While the revenue partners have to manage is a lot higher, it doesn't necessarily mean they're getting more profit in their hands, and it's certainly meaning that covering wage overheads is getting tougher and tougher.

Mark: Very true, Matty. And those three numbers, revenue per partner, full-time equivalent and chargeable, have gone up, but not substantially. There's just a little crawl factor. Looking back a couple of years, revenue per partner was about $1.1 million, then it jumped to about $1.2 million, then $1.6 million. It's not game changing stuff. So the real question is how are firms generating more revenue? We might come back to that when we look at the service mix.

Let's move to the one thing that accountants love to do, and that's measure stuff. Let's look at productivity. The Crunch Report was showing that all full-time equivalent productivity was about 46%, with chargeable only, excluding equity partners, at about 60%. Does that concern you at all that the production team across the board, and these are average numbers of course, is sitting at 60%? Do you think we're getting enough out of our billable staff?

Matt: It's shocking. I think most people listening right now will be shocked at that number. If you talk to anyone running a firm, they'll tell you hand on heart they're shooting for 80%, and they will absolutely tell you that their staff are saying they're overcapacity. So to see 60% as the average genuinely chargeable figure for non-equity partners is concerning.

But I think it's also the reality of the compliance world that we live in. It's getting harder and harder to get compliance work done. You have to build in a lot more training time. In the last firm I ran that had around 40 people in it, the amount of training and additional time we had to put in to keep up with tax technical work, as well as soft skills training, had us actually targeting closer to 70% as a realistic measure. 80% was just too hard.

So it's a challenge, particularly in a climate of a real crunch on capacity and staff availability. If you take that 60% efficiency figure alongside the $225K per full-time chargeable, are we actually getting any benefit out of our staff? I think that's where you're seeing a lot of firms exploring private equity models, looking to sell out, or looking to scale back and go back to being a smaller firm.

I'm not surprised at the all full-time equivalent figure being at 46%, with equity partners at 40%. The reality of taking care of the admin of running a business, making sure the team are happy and working efficiently, making sure they're in a safe space, that takes up a lot more time on the partner's desk these days. Certainly in my experience it did. That was one of my biggest challenges, keeping good relationships with clients, managing that $1.3 million in fees, and making sure the team had the right space to be as efficient as they could be.

I think people are also just more conscious, post-COVID perhaps, of what work means as part of their life. That's not a bad thing, and it's important that people are able to speak their mind. But what it is doing is taking time off the partner's desk to engage clients and do high-level work, and dropping their productivity below 50%.

Mark: That is a concern, Matty, isn't it. That 80% figure has always been where we're aiming, but maybe it just doesn't suit the current staff mix, client mix and practice mix. Speaking of which, let's move to team profile and what the Crunch Report was telling us there.

Staff leverage per partner is now at 6.1. Interestingly, a couple of years ago that was five. And there's a pretty direct correlation between increased leverage per partner and profit per partner, so it seems to be one of the key trigger points.

Something else we saw was the staff ratio of chargeable to non-chargeable at about 3.7, which was very consistent. And something that probably doesn't surprise anyone is that the use of offshore accounting staff is now at 47% across the survey. Does that surprise you at all, Matty?

Matt: No, I think that's about right. I think everyone's realised that it's just a necessary part of running firms these days. There are really three camps. People who are absolutely comfortable with it and have used it in their business for a long time. A percentage of people who are begrudgingly using offshoring because they simply couldn't find onshore accountants. And then those who aren't wanting to engage with it at all. There are valid reasons for all three positions.

It also breaks down interestingly in terms of what's being offshored. In my experience, the SMSF side of things is a lot easier to plug and play offshore. When you step into business services there's a lot more training and handholding involved. But the reality is, with fewer and fewer graduates coming through domestically, if you want to look after clients the way you want to look after them, you have to find other options.

The number I really want to highlight though is that chargeable to non-chargeable ratio of 3.7. I think we're missing an opportunity with our administration staff, really making sure they're a much more valuable member of the team, training them up and getting them to take on more of the work the accounting team are currently doing, so the accounting team can stay focused on the work at hand.

What I mean by that is making sure the processes between the accounting team and the administration team are clearly defined and as efficient as they can be. Have the chargeable team members working on accounts as much as possible, and build a really good relationship between the client, the admin team and the chargeable team so there's no confusion around communication. If there are queries to be followed up, either we're doing that through software or through the admin team making the contact, as long as clients are comfortable with who they're dealing with.

A lot of firms are finding issues with too many people contacting the client. You need to define clearly who's doing what, what they're chasing, and what work they should be focused on. From there, there's an opportunity to bring the admin side into that flow and even have them become quasi-chargeable as they learn and grow into the role. Let's not keep them as two separate divisions inside a business. Make it end-to-end, everyone knows their role, and the information flow back and forth is seamless.

Mark: Good stuff Matty. Let's push forward and jump to profitability, the reason we're in business.

The Crunch Report and the Accounting Industry Report both use a notional partner salary of around $200K. A question worth asking the audience is whether you're actually pulling $200K out as a partner. The net profit after notional partner salaries of $200K is about 23%. Profit per partner before partner salaries is about $485K. And the other thing we noticed, and this is as broad as anything can be between the top 25 and the bottom 25, is that the average fee per client is roughly $5,000.

The real questions there are: are you getting the salary out that you should be? Are we earning enough per partner before we pay the partner? And is $5,000 a good yield for all the effort that goes in? Appreciate your thoughts on that one, Matt.

Matt: I'll start with the partner salary question. Purely from a compliance perspective, we should be looking at that because of the ATO's professional services rulings around what constitutes fair market value for an accounting partner. If you're not taking that out of the business and you're leaving retained earnings and profits sitting in there, you potentially have an ATO issue. So that's something to look at from your own compliance point of view.

But I come back to how we should be engaging with our clients, and we should hold the mirror up to ourselves first. I've been in the thick of running a firm and making sure we're remunerating ourselves properly, and I always think of it as wearing two hats.

The first hat is as the person in the business, as the employee of the business. You need to be paying yourself at least market rates, for two reasons. One is reward for effort. But two, if you intend to sell your firm down the track, that's the add-back you're going to be dealing with. If you're not building that into your planning now, it's going to hurt you at sale time.

I can speak wholeheartedly to that. As you know Mark, I went through a kidney transplant four years ago where I had to stop completely. I couldn't answer a single email for three months. I was fortunate to have a great partnership around me and a great team that we'd built. But health concerns come out of the blue, and you want to make sure you've got coverage in place so that you can survive that without putting your family or your business in jeopardy. Building a really robust business is about making sure you're actually taking out what you should be taking out as a market salary.

The second hat is as the investor in the business. The sleepless nights, the director responsibilities, the potential litigation from litigious clients. You need to make sure you're also getting a return on your investment. That's where the 23% comes in.

Now this metric is the broadest of all. If you broke it down between sole practitioners and multi-partner firms, multi-city firms, regional firms, there are just going to be wild swings. What I'd encourage everyone to do is put themselves through the next round of the Crunch Report to see where they actually measure up, because you can cut that report up a lot more specifically if your data is in it, and find real comparisons to your own business rather than just the broader metrics we're discussing today.

At the very least, go and have a look at your numbers and see if you're getting $200K out, and if you are, check whether you're also getting 23%. As an old boss of mine used to say, the average is also just the cream of the crap. There are obviously people doing a lot better than 23%, so shooting for average may not be enough. You can do better than that, so hold yourself to it.

Mark: That's great advice, Matty. And there's probably no greater example of that than when you look at profitability and move to the next critical area for any business, which is cash flow.

This is overwhelmingly my area of concern in any professional services firm, whether it's accountants, lawyers, architects, whatever the case may be, and that's lockup days. The Crunch Report was showing an average lockup of 76 days, made up of debtors of about 53 days and WIP of 23 days.

But when you start to look at the detail, the smaller practices have WIP well above 23 days. The bigger firms with more resources and better systems and processes are achieving that number and driving it down. The bottom 25 are nowhere near it.

Either way, 76 days is still a concern. We're waiting almost two and a half months to bring cash through the door. I'd encourage everyone to have a look at the 2025 Crunch Report and get involved in the 2026 one. Get your firm in there, measure your results against industry averages. I think everything we do has to be focused on driving lockup down.

WIP is your inventory. It's the work you should have billed and collected. If it's still sitting there rolling into the next year, there are inefficiencies there that are really dragging on performance and limiting your ability to generate strong cash flow.

Something I also wanted to discuss was write-ups and write-downs. The gross write-down average was about 9%, and while that has come down a little in previous years, it hasn't moved much. On its own 9% doesn't look too bad, but when you mix in the small and large, the top 25 and bottom 25, it's mostly double that at around 18%. Does it concern you that 18% of work done and wages paid is largely being sacrificed at the billing point?

Matt: If you take that 60% efficiency figure we discussed earlier and then take an 18% write-off at billing, there's not a lot of margin left to cover overheads, insurance costs or your dealings with the tax office. You have to measure it, manage it, be realistic about it and have honest conversations with your clients.

On WIP, an old boss of mine used to say no one can eat WIP. It's so true. It's great that time is going on the clock, but if you're not being disciplined about it and you're just letting it build up rather than pushing jobs in and out the door and knocking WIP on the head, it's just a discipline issue. It's the unglamorous part of running a good business, but it matters.

On debtor days, I think it comes down to two things. One is clients going through genuine cash flow pressure. The second is that we're relying on email statements to do the chasing, and email statements get deleted. My best example of strong debtor management is a lady in her sixties who is the friendliest person you've ever met. But if you are one day overdue, you will be very sick of seeing her name on your phone. You can't ignore voicemails and phone calls the way you can delete a statement email and put it off until tomorrow.

It's about having a really strong process around debt collection. There's no reason our clients should be paying us at 53 days. Who are the bad payers? Get an upfront from them, because if they're taking months and months to pay you, getting the work done isn't actually serving you. And if they walk, you're not that much worse off, because the reality is they weren't paying you properly anyway, so you never had that cash to put into your business or your pocket.

The same applies to managing write-offs and scope creep. How often do we do work that's clearly out of scope and then quietly write it off to avoid an uncomfortable conversation? You have to put your big-person pants on and make the call. The client will appreciate the conversation. What they won't appreciate is an invoice they didn't see coming.

And here's the thing. When you do take the step into those disciplines, everyone talks about wanting to deliver advisory services. If you're not holding yourself accountable to these things, it's very difficult to speak honestly to your clients about how they should be running their business. But if you can put your hand on your heart and say you identified these things in your own firm and took the steps to fix them, that is the best type of engagement you'll ever get from a client. They'll believe you, they'll respect you, and they'll want your help doing the same.

Mark: Couldn't agree more, Matty. Let's finish on what I think is the most important strategic question, and that's what firms are doing when it comes to services and revenue diversification.

The Crunch Report showed that compliance, tax and accounting work, our own bread and butter, still represents about 85% of revenue earned in accounting firms. SMSF adds another 5%. Then all other non-compliance services, which could include anything from business advisory to IT support to tax planning to HR services, represents about 10%.

Are we diversifying well enough in this industry, or are we falling into the same trap we warn our own clients about, having all our eggs in one basket?

Matt: We're very fortunate, and I've heard you say this many times, that ours is the only industry where clients essentially have to come and get their compliance work done, or someone official is going to come knocking. That's the easy work to engage. But the problem is the more we lean into that, the more exposed we are to price competition.

And if you double that 85% with the average revenue per client of around $2,200, and the fact that only 10% of clients are paying over $5,000 in fees, taking on more compliance work is actually going to limit your scalability and the profit you can generate.

I'm a big believer that compliance might be the reason you have the conversation with the client, and it's a necessary part of the job. But taking on more compliance clients is not necessarily going to help you grow your business or make you more resistant to clients shopping you around on price.

Look at the clients already in your base, especially the ones who love what you do, pay on time and work really well with you. Ask how else you can help them. With the startups I work with, I genuinely believe that if you put the time in to help them grow a good business, they're going to need you more, their fees are going to grow, and you don't have to go and find new clients.

My benchmark is an average client fee above $7,000. That's what I'm targeting. And the way to get there is going deeper with the right clients. Help them grow bigger, better businesses. If that's what they want to do, your compliance fees grow with them, and your non-compliance revenue grows even faster.

Don't get me wrong, compliance is still the core of my business. But my mix is sitting closer to 60/40 now. And clients who aren't open to that advisory conversation? I'm comfortable referring them to an accountant I know who loves compliance work and wants to keep doing it. You need to know what kind of firm you want to run, make sure you're charging fair value for it, and build from there.

Mark: Fantastic, Matty. We could talk all day, but we've run out of time. Matt, thank you so much for your time and for sharing your wisdom with listeners today, I really appreciate it.

Guys, we didn't get to cover things like client profile, charge rates, or overheads today. What is a good overhead ratio in the industry when it comes to labour, occupancy and so on? Get onto the Crunch Report and find out.

And I'd encourage everyone to put your firm's data into the 2026 report. To do so, head to benchmarking.com.au/accounting-industry-report. You'll find a 50% discount off the normal submission price, and at least that way you can measure your firm's specific results against the industry, look at trend analysis and get into the benchmarking detail. Clients love benchmarking. They love being able to see how they compare to their peers, and we should be doing the same for our own firms.

The other thing I'd encourage you to do is take your top 20% of clients and love them to death. It will lift their ability to run better, smarter, more valuable businesses, it will cement your relationship with them, and it will certainly help you drive your own numbers in the right direction.

With those thoughts in mind, thank you for listening. Keep your eyes and ears open for our next episode, and in the meantime, have a fantastic month. Thanks again everyone, and thanks again Matt.

Matt: Thanks Mark, great to be here.

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