The typical Canadian accountant sole practitioner
2019 K2E Canada survey reveals CPA practice demographics, business details
TORONTO, May 14, 2019 – Ask your average Canadian what your typical accountant looks like and the answer comes in clichés — the beancounter who does my taxes, Bob in the finance department, math savant Ben Affleck in The Accountant. The typical accountant is always male, always middle-aged and usually runs his own accounting practice. A sole practitioner, in other words.
The reality is a little more complex, according to the 2019 Accounting and Bookkeeping Operations and Technology Survey, from Alan Salmon and K2E Canada. The annual survey is the best source of data on sole practitioners and small accounting firms and is shared exclusively prior to publication with Canadian Accountant.
Women account for four out of every 10 sole practitioners in the accounting profession but eight out 10 sole practitioners in the bookkeeping profession. Three of 10 sole practitioners are aged 55-64. One out of every four sole practitioners is over the age of 65. Less than 15 per cent are under the age of 45. As reported previously by Canadian Accountant, these numbers point to a demographic crisis in the accounting profession, which is not replacing its retiring sole practitioners.
More than half have been in business for more than 20 years. Just one-quarter have run their own practice for less than 10 years. That kind of longevity suggests both comfort and success with the lifestyle of “being your own boss,” despite the frenetic pace of tax season.
No plans to retire, no succession plans
Perhaps it comes as no surprise that sole practitioners have no plans to retire. Fully three-quarters of sole practitioners either have no plans or no immediate plans to retire. Running your own accounting practice is a career that has no retirement age; some accountants practise into their 80s. That said, the number planning to retire in the near future rose over the last year, from 16.8 per cent to 21.3 per cent.
Somewhat distressing, given the age of most sole practitioners, is the news that 75 per cent have no formal succession plan. The larger the firm, the more likely it has planned for succession. Roughly half of all small-sized firms have a plan; three-quarters of firms with 10 or more partners have a plan.
The price of tax returns
Of course, tax returns are the bread and butter of the sole practitioner, which are not the same as long-term audit relationships. As reported by Canadian Accountant, 2018 was a very good year for T1 and T2 tax preparation, with the typical sole practitioner offering accounting, tax preparation and even bookkeeping services. Very few sole practitioners offer financial planning or wealth management services, or niche services such as forensic accounting, business valuation or outsourced CFO services.
While 2018 was a lucrative year for sole practitioners, the bonanza was due to volume rather than price. Eight of 10 accountants (83.5%) prepare personal tax returns for typically less than $250: $51-$100 (26.1%), $101-$150 ($33.5%), $151-$250 (23.9%).
But excluding personal tax clients, the typical sole practitioner has fewer than 100 clients, with 21.9 per cent of respondents having 11-25 clients. Roughly 15 per cent of sole practitioners claim to service more than 250 clients annually, excluding personal tax clients.
As for corporate tax returns, seven of 10 accountants (76.8%) will prepare a T1 return for between $150 and $750: $150-$250 (21.3%), $251-$500 (38.6%), and $501-$750 (16.9%).
Sole practitioners take CPD seriously
Chartered professional accountants have a mandatory continuing professional development program and a number of hours to fulfil annually and they take CPD seriously. Fully three-quarters of sole practitioners spend more than 21 hours per year on CPD, with 64.5 per cent taking reporting over 30 hours.
Notably, webinars have become the most popular form of professional development, though classroom seminars and publications still rank highly. Less than 10 per cent of sole practitioners reported viewing videos on YouTube. Roughly six out of 10 sole practitioners spend more than a $1,000 per year. A quarter spend over $2,000 annually.
Alan Salmon’s 2019 Accounting and Bookkeeping Operations and Technology Survey contains a remarkable amount of data on sole practitioners. At Canadian Accountant, we look forward to further crunching the numbers, and analyzing the trends in future articles on the survey results.
Colin Ellis is the editor of Canadian Accountant at canadian-accountant.com. The 2019 Accounting and Bookkeeping Operations and Technology Survey can be purchased here.