2022 HONG KONG

Accounting
Industry Report
A comprehensive collection of industry insights to assist
your practice’s 2022 strategy and plans

FastLane | Hong Kong

Table of contents
Highlights........................................................................................................................................................................5

About this report.............................................................................................................................................................6

Definitions................................................................................................................................................................... 6

Participant profiles.........................................................................................................................................................8

Participants’ role in their practice.............................................................................................................................. 9

Participants by practice type..................................................................................................................................... 9

Managing clients.......................................................................................................................................................... 10

Recommending accounting software to clients.......................................................................................................10

How clients are billed...............................................................................................................................................11

Average annual revenue from each small business client........................................................................................12

Lost clients...............................................................................................................................................................12

Attracting new clients................................................................................................................................................. 14

Marketing and lead generation.................................................................................................................................16

Description of service offering.................................................................................................................................16

Service opportunities.................................................................................................................................................. 20

Compliance services.................................................................................................................................................20

Simple advisory.........................................................................................................................................................22

Complex advisory.....................................................................................................................................................23

Staffing trends............................................................................................................................................................. 24

Client interaction...................................................................................................................................................... 24

Staffing level changes............................................................................................................................................... 24

Compensation...........................................................................................................................................................25

Employee mental health and wellbeing..................................................................................................................... 26

Ways to improve wellbeing.......................................................................................................................................26

External resources.................................................................................................................................................... 27

Industry trends............................................................................................................................................................ 28

Investment in advisory services...............................................................................................................................28

The impact of COVID-19............................................................................................................................................... 29

The positive impact..................................................................................................................................................29

The negative impact.................................................................................................................................................30

Receptiveness to the cloud...................................................................................................................................... 31

Technology dependency........................................................................................................................................... 31

Impact on plans for future growth and/or investment............................................................................................32

Business outlook......................................................................................................................................................33

2
Technology adoption................................................................................................................................................... 34

The use of technology...............................................................................................................................................34

The impact of technology adoption..........................................................................................................................34

Barriers to moving to cloud accounting software....................................................................................................35

Top priorities for the next 12 months......................................................................................................................... 36

How Xero can help........................................................................................................................................................ 38

Tables
Table 1: Role and seniority of participants....................................................................................................................... 9

Table 2: Participants by practice type.............................................................................................................................. 9

Table 3: Approximate number of small business clients served in the last 12 months.................................................10

Table 4: Recommending accounting software................................................................................................................10

Table 5: How clients are billed........................................................................................................................................11

Table 6: Clients who have terminated or significantly reduced work in the last 12 months..........................................12

Table 7: Percentage decrease in clients and staff in the last 12 months ......................................................................13

Table 8: Revenue change in the last 12 months.............................................................................................................13

Table 9: New clients added in the last 12 months..........................................................................................................14

Table 10: Source of new clients.......................................................................................................................................15

Table 11: Description of the services provided by practices.......................................................................................... 17

Table 12: Compliance services utilisation and average revenue....................................................................................21

Table 13: Simple advisory services utilisation and average revenue.............................................................................22

Table 14: Complex advisory services utilisation and average revenue..........................................................................23

Table 15: Approximate frequency of contact with clients.............................................................................................. 24

Table 16: Planned changes in staffing levels in the next 12 months............................................................................. 24

Table 17: Average staff compensation changes in relation to practice revenue changes..............................................25

Table 18: Ways to improve wellbeing that are under consideration...............................................................................26

Table 19: Plans to invest in advisory services in the next one to two years...................................................................28

Table 20: Positive impacts of COVID-19..........................................................................................................................29

Table 21: Negative impacts of COVID-19........................................................................................................................30

Table 22: Receptiveness of practices to moving to the cloud........................................................................................ 31

Table 23: Receptiveness of clients to moving to the cloud............................................................................................ 31

Table 24: Priorities for the next 12 months....................................................................................................................36

3
Figures
Figure 1: Average revenue per small business client in the last 12 months..................................................................12

Figure 2: How new clients were doing the accounts before ...........................................................................................14

Figure 3: Average spend on marketing, events, webinars and promotions in the last 12 months................................16

Figure 4: Description of the services provided...............................................................................................................18

Figure 5: Proportion of revenue across service types ...................................................................................................20

Figure 6: Composition of compliance services revenue.................................................................................................21

Figure 7: Composition of simple advisory revenue.........................................................................................................22

Figure 8: Composition of complex advisory revenue......................................................................................................23

Figure 9: Perceived impact of industry trends in the next year......................................................................................28

Figure 10: Practices’ dependence on technology compared to before COVID-19......................................................... 31

Figure 11: Impact on plans for future growth or investment..........................................................................................32

Figure 12: Business outlook for the next 12 months......................................................................................................33

Figure 13: Business outlook for the next 12 months in relation to change in revenue in the last 12 months..............33

Figure 14: Proportion of clients using accounting methods...........................................................................................34

4
Highlights
1. Accounting is the most widely offered compliance service type and generates the highest share of
compliance revenue ($72,553).

2. Practices have a great deal of influence over which accounting software is used by their clients:
82% of practices almost always or typically recommend software which is then adopted by
the client.

3. Accounting and bookkeeping practices overall have withstood the challenges of COVID-19 relatively
well, with almost three-quarters of practices reporting that revenue has stayed the same (33%) or
increased (42%).

4. Practices who have a higher proportion of their clients using cloud accounting software were more
likely to increase their revenue.

5. Practices added six new clients in the past 12 months and lost five existing clients on average,
resulting in a net increase of one client. This points towards a robust industry despite the challenges
of COVID-19.

6. Practices who have a higher proportion of clients using cloud accounting software lost fewer clients
and staff compared to those who have a lower proportion of clients using cloud
accounting software.

7. Technology has been a positive change to practices. In particular it’s been easier and more efficient
to collaborate, and practices have been able to increase the range of services they offer.

8. COVID-19 has also had a big impact on clients, with 82% of practices reporting that their clients are
either starting to think about or have plans in place to fully move to the cloud.

9. The greatest negative impact of COVID-19 on practices was lack of access to client documents
and books. Practices with a greater proportion of clients in the cloud were less likely to report this
problem (24% vs 43% for practices whose accounting is largely non-cloud based). This underscores
the importance for practices to digitise the clients they serve.

5
About this report
This report is based on the collated responses from an online survey conducted with 256 independent
accountants and bookkeepers across Hong Kong recruited from an online market panel, as well as
Xero partners.

The information and commentary in this report is a guide only and should not be taken as taxation,
financial or legal advice – we recommend you always check with an independent expert that what you’re
doing is right for you and your practice.

Note:

• All amounts referred to in this report are in Hong Kong dollars

• In some tables, percentages may not add up to exactly 100% due to rounding

Definitions

TYPES OF PRACTICES
For the purpose of this study, we defined:

• Sole practitioner as having no employees

• Employing practices as having one or more employees including partners

SMALL BUSINESSES
When we talk about small businesses, we mean those with fewer than 100 employees.

CLOUD ACCOUNTING SOFTWARE USE

When we talk about cloud accounting software use, we mean the proportion of clients who are using
cloud accounting software to manage their books.

• Cloud accounting software use 0–24%

Between 0 and 24% of clients are using cloud accounting software to manage
their books.

• Cloud accounting software use >25%

More than 25% of clients are using cloud accounting software to manage their books.

66
Link-Pro CPA | Hong Kong
7

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Participant profiles
PRACTICE TYPES

The compliance practice

Compliance practices focus on helping clients meet their compliance obligations on time, accurately,
and efficiently. Practices that choose to be compliance practices appreciate being able to deliver a
highly repeatable set of services that are firmly rooted in the laws and regulations set out by governing
agencies. Specific services offered by these practices include accounting, bookkeeping, payroll,
tax preparation, and management of accounts receivable.

They achieve improved practice performance through gains in process efficiency, and by applying their
knowledge of compliance requirements to different types of small businesses.

The simple advisory practice

The simple advisory practice has gained prominence in the last decade. Practices that choose to
provide simple advisory services are leading users of technology who see that their clients need more
than compliance. They also need services like cash flow forecasting, budgeting, and planning at
reasonable prices, which requires both automation and high-quality bookkeeping and accounting data.
An important precondition is that clients have their core accounting information well organised and
available online.

As a result, these types of practices often require their clients to use their bookkeeping services or to
have another capable person maintain their accounts.

Simple advisory practices achieve improved practice performance by using modern accounting
technology and offering services that establish regular, ongoing engagement between clients and
accounting staff. Very often, these practices pride themselves on offering superior client experiences
easily, and efficiently using the latest technology.

The complex advisory practice

The complex advisory practice is common in larger, well-established practices and in boutique practices
that have earned a reputation for being exceptional at steering businesses through the intricacies of
business transactions or complex multi-jurisdictional regulations. These practices appreciate and invest
in experienced specialist advisors who can be called on when needed by anyone within the broad client
base when unusual or complex challenges arise. Specific services offered by these practices include
audit services, HR advisory, succession planning, business performance benchmarking, and capital
raising, as well as business app/software selection, setup, training and maintenance.

8
They achieve improved practice performance by developing streamlined processes and a strong market
reputation. This ensures a steady flow of complex, interesting and often related cases where clients
value and rely on deep accounting and business knowledge. These practices know that finding, nurturing
and retaining experts is the key to their success.

Participants’ role in their practice

Partner + Owner
Number of + Director/
Practice type participants Managing Partner Manager Staff accountant

Sole practitioners 69 100% 0% 0%

Employing practices 187 71% 13% 2%

All practices 256 85% 13% 2%

Table 1: Role and seniority of participants

Participants by practice type

Total % of Partner + Owner

practices offering + Director/
Practice type service Managing Partner Manager Staff accountant

Compliance 96% 82% 12% 2%

Simple advisory 53% 45% 6% 2%

Complex advisory 85% 74% 10% 1%

All practices 256 85% 13% 2%

Table 2: Participants by practice type

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Managing clients
Practices serve 19 small business clients on average.

Sole practitioners have the smallest client base, as would be expected. They mostly have
under 50 clients, with an average of 10 clients.

75% of employing practices, however, still mostly have under 50 clients, and serve an average
of 33 clients.

No. of small business clients All practices Sole practitioner Employing practice

1–19 70% 94% 39%

20–49 21% 6% 36%

50–99 9% 0% 17%

100+ 1% 0% 9%

Average number of small business

17 10 33
clients per practice

Table 3: Approximate number of small business clients served in the last 12 months

Recommending accounting software to clients

Practices have a great deal of influence over which accounting software is used by their clients: 82% of
practices almost always or typically recommend software which is then adopted by the client.

In 12% of practices, where the client is using different software to what the practice prefers, the
practice tries to persuade the client to switch, but adapts to the client’s preferred software if not.
Other Xero market research found that 77% of small business owners are influenced by their accountant
or bookkeeper in their choice of accounting software. The same research also cited ‘progressiveness’ as
one of the top factors (32%) for small businesses when choosing an accountant or bookkeeper.

Practice approach to recommending software % of practices

We almost always recommend software that they then adopt 58%

We typically recommend software that they then adopt 24%

When our clients have software they use but we would prefer another, we try to get them to
12%
switch but will adapt to what they have if they don’t switch

Our clients typically have software they already use and we just use whatever they already have 6%

Our clients almost always have software they already use and we use that with them 1%

Table 4: Recommending accounting software

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Considering the level of trust clients have in their accountant and the level of influence accountants
have on their small business clients’ choice of accounting software, we recommend that accountants
play the role of an advisor in recommending a small and select suite of software to clients, as opposed
to simply taking on board a client’s choice.

This will also help the practice reduce the load on internal software training and streamline workflow.

How clients are billed

Practices tend to have a combination of service payment plans depending on their clients’ needs.

• On average, just over one-quarter of clients are quoted and billed a fixed amount for the
services rendered

• A quarter of clients are billed based on an hourly rate

• 23% are on a monthly or quarterly service plan

• 23% of clients pay a monthly plan retainer and then pay in addition for
particular projects

Billing method % of practices

Clients are on a fixed fee monthly or quarterly service plan and the agreed rate is
27%
automatically collected

Clients are quoted a fixed amount for the service (eg , tax return, general ledger setup) and
23%
billed when the work has been completed or paid in stages

Clients are on BOTH a monthly service plan AND they expect to pay for additional project work 23%

Clients are billed for the number of hours (and partial hours) of service provided 23%

Other 3%

Table 5: How clients are billed

Fixed fee billing means a practice can continue to charge based on the value delivered, as opposed to
time spent on the accounts.

This means that owing to increased efficiency with cloud technology, a practice can continue to charge
equivalent or even higher fees for offering services of the same value while decreasing time spent on
these services, and use these time savings to service even more clients.

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Average annual revenue from each small business client

Practices earn on average $31,451 per small business client. Employing practices earn 77% more per
client than sole practitioners.

40000
$39,105.00
35000

30000 $31,451.00

25000

20000 $22,078.00

15000

10000

5000

0
All practices Sole practitioner Employing practice

Figure 1: Average revenue per small business client in the last 12 months

Lost clients

The impact of COVID-19 has been felt by practices, with an average loss of five clients over the
last 12 months.

• Sole practitioners lost two clients on average, and employing practices lost eight clients.

• 43% of employing practices lost five or more clients

The most common reasons cited were:

• client cutting costs (59%)

• closure of the client’s business (56%)

• clients moving their accounts to another practice (39%)

• clients now doing the accounts themselves (23%)

No. of clients lost All practices Sole practitioner Employing practice

0 25% 29% 21%

1–4 47% 58% 36%

5–9 14% 12% 17%

10–19 7% 2% 12%

20+ 7% 0% 14%

Average client loss per practice 5 2 8

Table 6: Clients who have terminated or significantly reduced work in the last 12 months

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Practices who have a higher proportion of clients using cloud accounting software lost fewer clients and
staff compared to those who have a lower proportion of clients using cloud accounting software.

Clients using cloud accounting software

Decreases % of practices 0–24% of clients >25% of clients

Decrease in clients 18% 14% 6%

Decrease in staff 21% 17% 10%

Table 7: Percentage decrease in clients and staff in the last 12 months

Changes in revenue

Practices overall have withstood the challenges of COVID-19 relatively well, with almost three-quarters
of practices reporting that revenue has stayed the same (33%) or increased (42%).

This is perhaps due to the nature of the services offered, in that clients who have stayed in business still
need their accounting or bookkeeping services as an essential part of running their business. In addition,
new customers may be turning to practices to assist with digitising their accounts and adopting ways of
working remotely.

Practices who have a higher proportion of their clients using cloud accounting software were more likely
to increase their revenue.

Clients using cloud accounting software

Sole Employing
Revenue All practices 0–24% of clients >25% of clients
practitioner practice

Decreased 25% 25% 27% 27% 23%

Stayed the
33% 38% 28% 35% 27%
same

Increased 42% 38% 45% 39% 50%

Table 8: Revenue change in the last 12 months

Practices that have revenue growth in the last 12 months are earning more in these service lines:

• Sustainability reporting and consulting

• Compliance work (eg, tax preparation, unaudited financial statements, other compliance work)

• Accounts receivable / control services

• Valuation services

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Attracting new clients
Practices have added six new clients in the past 12 months and have lost five existing clients on average,
resulting in a net increase of one client. This steadiness points towards a robust industry despite the
challenges of COVID-19.

It equates to approximately $31,451 in additional revenue in the last 12 months based on average
revenue per client.

33% of new clients are new businesses are start-ups, 30% switched from doing their own books,
and 30% switched from another practice. These trends are consistent across sole practitioners and
employing practices.

New clients All practices Sole practitioner Employing practice

0 8% 10% 6%

1–4 48% 68% 28%

5–9 18% 9% 28%

10–19 16% 13% 16%

20–49 7% 0% 15%

50+ 3% 0% 7%

Average number 6 4 10

Table 9: New clients added in the last 12 months

Other

7.0%
New business startups
They switched
from another 33.0%
30.0%

They were doing

30.0% their own books

Figure 2: How new clients were doing the accounts before

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Marketing and lead generation

One-quarter of new clients are sourced via word of mouth or referrals (25%). The next biggest source of
new clients is online marketing (19%).

Source % of practice

Word of mouth/referrals 25%

Online marketing 19%

Partnerships 19%

Traditional marketing 19%

Events/webinars 17%

Other 1%

Table 10: Sources of new clients

Marketing spend

Practices on average spent $53,572 on marketing in the last year.

• Employing practices spent significantly more ($79,130) than sole practitioners ($27,814).

• Practices that reported increased revenue spent significantly more ($77,768) than the average.

Marketing spend by cloud accounting client base

Practices with a greater proportion of clients using cloud accounting software on average spent
$66,439 on marketing compared with those with fewer clients using cloud accounting software ($49,115).

The proportion of clients sourced from online marketing was roughly consistent across both sole
practitioner and employing practices.

Practices with fewer clients using cloud accounting software were more likely to source their clients via
traditional marketing.

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 $79,130.40 $77,767.80
80000

$66,438.60
70000

60000
$53,472.39
$49,114.96
50000

40000 $36,702.31 $35,786.23

$27,814.38
30000

20000

10000

0
All practices Sole Employing Decreased Revenue Increased Cloud Cloud
practitioner practice revenue stayed about revenue accounting accounting
the same software software
use 0-24% use >25%

Figure 3: Average spend on marketing, events, webinars and promotions in the last 12 months

“Xero means I can store all my data in the cloud. The costs are minimal and I
can work anywhere, anytime as long as I have internet access. This mobility
has been a key feature in helping us develop our overseas market as potential
clients can search for advisors with location and industry filters using Xero’s
advisor directory. We’re now featured as a platinum partner, and this has
already led to more opportunities for us, with no geographical limits.”

Matthew Li, Nova CPA

Description of service offering

The bulk of practices considered themselves to be specialised service providers (38%) or one-stop
shops (36%). 14% saw themselves as fast and effective.

Almost half of sole practitioners tended to see themselves as one-stop shops (48%) compared to
one-quarter of employing practices (25%).

Employing practices tended to see themselves more as specialised service providers (47%).

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 Services offered All practices Sole practitioner Employing practice

Specialised services: Our practice

provides the highest level of expertise
in a specific number of important 38% 30% 47%
areas We deliver exceptional service
in a few areas

One-stop service centre:

Our practice provides a full set of
36% 48% 25%
services that cover virtually every
business need

Fast and effective service centre:

Our practice provides great value and
service to businesses that want to get 14% 12% 16%
the job done – get in and get out
– quickly and economically

‘WeWork’ shared community, shared

talent and virtual team: Our practice
provides services as if we are
members/employees of their team 3% 3% 4%
with all the experience and benefits
(and without the high costs and effort
of hiring full time employees)

Business mentor/counsellor:
Our practice provides the wise,
experienced advice and counselling
6% 4% 7%
that helps businesses navigate the
best path forward for their business,
both now and far into the future

Tech-loving accountants: Our practice

is filled with qualified accountants 3% 3% 2%
who are also tech geeks/front-runner

Table 11: Description of the services provided by practices

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 Tech-loving accountants

Business mentor/counsellor
2.5%
5.6%
‘WeWork’ shared community Specialised services
3.3%
13.6%
38.5%
Fast and effective
service centre

36.5%
One-stop service centre

Figure 4: Description of the services provided

The Hong Kong Companies Ordinance requires all incorporated companies in Hong Kong, regardless
of size, to have their financial statements audited by a Hong Kong-practising Certified Public
Accountant (CPA).

This presents an opportunity for audit practices to introduce additional service offerings and upsell
or cross-sell services to increase revenue.

“It was clear from the outset that smaller businesses had very different
needs, and in many cases had not even gotten the basics right. We felt the
need to increase the value we offered to clients through strategic advisory,
more than just preparing financial statements for year-end statutory
reporting. Xero has helped us build a multi-disciplinary professional and
advisory firm to meet the needs of our clients.”

Alex So, FastLane

18
T O Yip & Co | Hong Kong

19
Service opportunities
Compliance is the most offered service type (96%), followed by complex advisory (85%) and simple
advisory (53%). However on average, practices are utilising only one-third of total service lines across
all categories (6 out of 19 services lines).

Complex advisory revenue

34.4%

Compliance revenue
53.3%

Simple advisory revenue 12.3%

Figure 5: Proportion of revenue across service types

Compliance services

Accounting is the most widely offered service line (68%) and generates the largest share of compliance
revenue ($72,553).

On average, three out of seven compliance services lines are offered by practices. There is still
opportunity to tap into compliance work as a service line (eg, tax preparation, unaudited financial
statements, other compliance work). Although it’s the highest revenue earning service line ($85,901),
only about a quarter of practices offer compliance work as a service, which makes it the least offered
service across the category.

Payroll services is the lowest revenue-gathering service line in compliance ( $41,487.44).

Bookkeeping is the second most offered service line, however it’s the fifth-lowest-earning service line.

20
 Service line % of practices offering service Average revenue

Compliance work (eg, tax preparation,

unaudited financial statements, other 24% $85,901.66
compliance work)

Accounting 68% $72,553.85

Corporate secretarial / Company

33% $71,216.76
secretary services

Accounts receivable / Control services 36% $63,256.96

Tax preparation services 44% $61,789.51

Bookkeeping 64% $59,827.48

Payroll services 39% $41,487.44

Table 12: Compliance services utilisation and average revenue

Accounts receivable / Control services

11.5%
Accounting
25.0%
Compliance work
10.3%

Corporate secretarial 11.9%

Bookkeeping
19.3%
Tax preparation services
13.9%
8.2%
Payroll services

Figure 6: Composition of compliance services revenue

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Simple advisory

Simple advisory is the least offered service type (53%).

Startup mentoring, advice and networking/assistance with business development is the highest
revenue-earning service line ($73,048.37) but one of the least offered services (20% of all practices).

Implementations of accounting software for businesses that were unlikely to become long-term clients
is the lowest revenue-earning service line ($54,827.29) and least offered (20%).

Service line % of practices offering service Average revenue

Startup mentoring, advice and networking/

20% $73,048.37
assistance with business development

Advisory services (eg, budgeting, cash flow

29% $66,886.03
forecasting, business planning)

Implementations of accounting software for

businesses that were unlikely to become 20% $54,827.29
long-term client of your practice

Table 13: Simple advisory services utilisation and average revenue

Implementations of
accounting software
24.4%

Advisory services
43.0%

Startup mentoring,
business development
32.6%

Figure 7: Composition of simple advisory revenue

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Complex advisory

Complex advisory services are offered by 85% of practices.

This type of practice offers the lowest average number of service lines, with only two of the services
typically being offered by any one practice. The most commonly offered service line is audit and other
assurance services including agreed upon procedures.

Sustainability reporting consulting is the highest revenue-earning service line.

Service line % of practices offering service Average revenue

Sustainability reporting consulting 21% $85,867.21

Virtual/outsourced CFO services 23% $67,590.94

Audit and other assurance services including agreed

34% $64,824.47
upon procedures

Succession planning services 20% $64,296.12

Valuation services 20% $61,229.47

HR advisory: Assistance setting employee

compensation, planning to add/reduce employees, 28% $60,270.95
or other people-centric services

Capital-raising / Assistance moving to better

18% $60,052.07
interest terms or financing options

App/software (other than accounting) setup,

18% $51,200.91
configuration and support services

Business performance benchmarking 20% $50,075.24

Table 14: Complex advisory services utilisation and average revenue

Sustainability reporting consulting

Audit and assurance services
13.9% 17.5%
Business app setup,
Valuation services
9.7% configuration and support
7.4%
Succession planning
services Capital raising
9.9% 8.3%
Business performance
7.8% benchmarking
13.2%
HR advisory services 12.3%
Virtual/outsourced CFO services

Figure 8: Composition of complex advisory revenue

23
Staffing trends
Employing practices on average had 56 employees. Practices that had increased revenue in the last
12 months tended to be employing practices with 50 to 99 staff.

Client interaction

The average staff member talks to or otherwise interacts with (e.g, by text, WhatsApp, WeChat, instant
messaging) an average of four clients a day.

Employing practices interact with more clients per day, which reflects their larger client base compared
to sole practitioners.

Client interaction per day All practices Sole practitioners Employing practices

1 to 2 clients 29% 50% 9%

3 to 4 clients 38% 41% 35%

5 to 8 clients 23% 9% 36%

9 to 16 clients 8% 0% 16%

17 or more clients 2% 0% 4%

Average number of client interactions

4 3 6
per day

Table 15: Approximate frequency of contact with clients

Staffing level changes

64% of sole practitioners and 55% of employing practices plan to increase staff over the next 12 months.
Those planning on increasing staff have robust expectations, looking to increase staff by 12 members
over the next 12 months. Practices that saw a decrease in their revenue are more likely to reduce their
staffing level.

Staffing level plans All practices Sole practitioners Employing practices

We plan on adding staff 59% 64% 55%

We plan on reducing the number

8% 3% 14%
of staff

Not sure at the moment 21% 19% 23%

We don’t plan on changing our

12% 14% 9%
staff levels

Table 16: Planned changes in staffing levels in the next 12 months

24
On average, since January 2021, employing practices have lost seven staff members who they had wished
to retain. The top three reasons employing practices lost staff they would have liked to retain were that the
staff member:

1. moved to another practice (45%)

2. started their own practice (45%)

3. progressed their career elsewhere (42%)

Staff loss due to moving to another practice or for career progression could be reduced by practices
continuously expanding their service lines and using up-to-date technology so they’re well placed to offer
growth opportunities to their employees.

Compensation
30% of employing practices either decreased, did not change, or increased average employee
compensation by under 1% during the last salary review cycle. However, at the other end of the spectrum,
30% of employing practices increased average compensation by 5% or more.

Compensation increases were largely carried out by practices who experienced an increase in revenue
in the last 12 months and were able pass on these increases to staff. 42% increased compensation
by 5% or more.

% of practices with change in

compensation (last 12 months)

% of all % of practices
% of % of practices % of practices
in which
Staff compensation change practices in which in which
employing revenue
(last 12 months) including sole revenue revenue
practices stayed about
practitioners decreased increased
the same

Slight decrease, average

compensation per employee
1% 2% 3% 1% 0%
was down on some components
of total compensation

No change, average
compensation remained 24% 22% 24% 40% 12%
the same

Less than 1%
8% 6% 13% 13% 2%
average increase

1 to 2% average increase 21% 17% 34% 24% 11%

3 to 4% average increase 23% 23% 18% 15% 33%

5 to 6% average increase 12% 17% 6% 2% 23%

7 to 9% average increase 7% 9% 2% 2% 14%

10 to 19% average increase 2% 3% 0% 2% 4%

20% or more
1% 1% 0% 0% 1%
average increase

Table 17: Average staff compensation changes in relation to practice revenue changes

25
Employee mental health
and wellbeing
Ways to improve wellbeing

Many practices are considering offering flexible working arrangements as a way of improving employee
wellbeing (52%). Other top considerations were:

• offering more career support and mentoring (52%)

• building a culture that allows employees to talk openly about stress and other factors (51%)

• improving access to benefits such as fitness facilities and additional leave days (47%)

Practices that reported an increase in revenue in the last 12 months were more open to offering more
career support and mentoring such as internal secondment or job rotation opportunities or through engaging
external consultants (64% vs 42% of those reporting a decrease in revenue), but less open to offering
flexible working arrangements (44% vs 62%). They were also less inclined to reduce workloads (15% vs 30%).

Actions being considered in relation to practice

revenue change in the last 12 months

Stayed about
Actions being considered By all practices Decreased Increased
the same

Improve staff welfare benefits 47% 49% 45% 48%

Build a culture that allows employees

to talk about stress and other wellbeing 51% 48% 48% 55%
factors openly

Offer flexible working arrangements 52% 62% 55% 44%

Offer more career support and mentoring 52% 42% 43% 64%

Reduce workload 25% 30% 34% 15%

Introduce forums to encourage social

35% 28% 35% 38%
relationships between staff

Disseminate surveys to check on staff

25% 19% 33% 21%
wellbeing periodically

Making employee wellbeing a key priority

that is discussed at the leadership level,
17% 23% 13% 17%
including its benefits and risks to
the business

Employee wellbeing is not a priority for us

8% 2% 11% 8%
at this stage

Table 18: Ways to improve wellbeing that are under consideration

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 Cornerstone | Hong Kong

External resources

86% of practices will consider investing in external resources such as coaching, videos, webinars,
mobile apps to support employee wellbeing. The top resources are:

• mobile applications (59%)

• events and training (57%)

• online resources such as articles, short videos or webinars (54%)

• one-to-one coaching (45%)

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Industry trends
Over half of respondents think that the shifting trends, attitudes and mindsets as a result of COVID-19
(53%), and the shift in the accountant’s role from compliance into advisory services (52%) will have
a significant impact on the accounting industry. Sole practitioners in particular anticipate that these
shifts will have a big impact.

No impact Large impact

The shifting trends, attitudes and mindsets as a result

4% 11% 13% 19% 37% 16%
of COVID-19

The shift of the accountant's role from accounting compliance

into advisory services like data analytics and valuation, 5% 9% 14% 20% 35% 17%
forecasting, budgeting and planning

The challenge of managing the change of process, staff training 5% 9% 16% 25% 32% 13%
and advising clients on cloud software

The risks of increasing automation and distruptive technologies

4% 6% 12% 29% 33% 15%
such as artificial intelligence, machine learning and blockchain

Talent shortage in the accountancy sector 5% 9% 13% 24% 31% 18%

0 20 40 60 80 100

Figure 9: Perceived impact of industry trends in the next year

Investment in advisory services

Just over two-thirds of respondents expect to be investing more time and resources to increase their
advisory services in the next one to two years. Sole practitioners are more likely to have this under
control, whereas employing practices need help.

Do you expect to invest in

advisory services? All practices Sole practitioners Employing practices

Yes, and we would like help 44% 39% 49%

Yes, and we have it under control 32% 42% 22%

Maybe, not sure 10% 16% 25%

No, we have solid investments in

place and we’re happy with our 2% 0% 4%
results and progress

No, we don’t see advisory services as

an investment priority for our practice 2% 3% 1%
at this time

Table 19: Plans to invest in advisory services in the next one to two years

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The impact of COVID-19
The positive impact

Technology adoption has been the biggest positive to come out of COVID-19, with practices encouraged
to embrace new ways of working including adopting digital tools (43%). There are opportunities for
practices to utilise technology to digitise their business while guiding their clients to do the same.

Practices were also able to take advantage of clients’ changed attitudes to help them to implement
new technology (42%).

Practices who had a decrease in revenue over the last 12 months are saving time by not commuting and
are servicing more clients, whereas practices who had an increase in revenue have been able to focus
on helping their clients implement new technologies and workflows.

Positive impacts of COVID-19 % of practices

It helped us embrace new ways of working, including adopting digital tools 43%

Our clients have changed their attitude towards technological adoption and we have
42%
been able to assist, including helping them implement new technologies and workflows

Now that business is conducted online, we have saved time by not commuting and
40%
service even more clients

We have been able to add value to clients by providing business planning and financial
39%
forecasting services

We have been able to look beyond our local borders and provide services to
36%
overseas clients

We have opened up new service lines such as helping clients apply for government
36%
grants and financial loans

We were able to market our practice online and win new clients 35%

There has been no positive impact 6%

Table 20: Positive impacts of COVID-19

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The negative impact

The greatest negative impact of COVID-19 on practices was lack of access to client documents and
books. Practices with a greater proportion of clients using cloud accounting software were less likely
to report this problem (24% vs 43% for practices whose accounting is largely non-cloud based.

The next biggest negative impact was loss of clients due to foreclosures or cost-costing (35%).

12% of practices reported no negative impact from COVID-19 at all, indicating to some extent the
robustness of the industry in its provision of vital services to clients.

Client use of cloud accounting software

Negative impacts of COVID-19 All practices 0–24% of clients >25% of clients

Our staff don’t have access to client

38% 43% 24%
documents and books

We have lost clients due to business

35% 35% 32%
foreclosures or cost-cutting

Our staff are not motivated when working

30% 32% 22%
from home

We have had to cut costs 28% 29% 24%

Our clients are defaulting on our invoices 28% 29% 25%

We have had to apply for loans or grants 26% 27% 24%

We have had to downsize our workforce,

25% 25% 25%
pause hiring or reduce wages

We don’t have the right tools and setup to

23% 22% 26%
service our clients remotely

There has been no negative impact 12% 12% 15%

Other 1% 0% 3%

Table 21: Negative impacts of COVID-19

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Receptiveness to the cloud

COVID-19 has greatly changed the receptiveness of many practices to the cloud, with 84% starting to
think about, or already putting in place plans to fully move to the cloud.

Degree of practice receptiveness % of practices

We have put plans in place to fully move to the cloud in the next 12 months or we are
84%
starting to think about it

No change, we were always receptive 15%

No change, we are still not receptive 1%

Table 22: Receptiveness of practices to moving to the cloud

COVID-19 has also had a great impact on clients, with 82% reporting that their clients are either starting
to think about or have plans in place to fully move to the cloud.

Degree of client receptiveness % of practices

They have put plans in place to fully move to the cloud in the next 12 months or they are
82%
starting to think about it

No change, they were always receptive 15%

No change, they are still not receptive 3%

Table 23: Receptiveness of clients to moving to the cloud

Technology dependency

83% of respondents are more dependent on technology compared to before COVID-19, and employing
practices are much more dependent on it.

Much more Slightly more Not changed Slightly less

1% 0%
100 3%
16% 16%
16%

80

48%
60 56%
64%

40

20 36%
27%
17%

0
All practices Sole practitioners Employing practices

Figure 10: Practices’ dependence on technology compared to before COVID-19

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Impact on plans for growth and/or investment

The plans of 57% of all practices for growth or investment haven’t been impacted by COVID-19. 74% of
sole practitioners report no impact but the plans of 44% of employing practices have been affected.
The most common theme is having to be more cautious about investments, mainly driven by the loss,
or potential loss, of clients.

“The epidemic has had a great impact on the cash flow of my customers,
and it has also had a great impact on my business and limited our ability
to expand our business.”

Sole practitioner Employing practice

120
16% 16%

100 40%

80
48%
56%
60

40 44% 74%

20
16%
19%
7%
0
Yes, impacted No not impacted Not sure

Figure 11: Impact on plans for future growth or investment

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Business outlook

53% of respondents were positive about the outlook for their business in the next 12 months.

Sole practitioners had a greater level of uncertainty about the future (52% not sure) compared to 39%
of employing practices.

Positive Neutral - Unsure Negative

All practices 53% 46% 1%

Sole practitioner 48% 52% 0%

Employing practices 59% 39% 2%

0 20 40 60 80 100

Figure 12: Business outlook for the next 12 months

Practices who had an increase in revenue in the last 12 months were much more likely to be positive
about their business outlook.

Positive Neutral - Unsure Negative

Decreased revenue 40% 57% 3%

Revenue stayed 36% 63% 1%

about the same

Increased revenue 75% 25% 0%

0 20 40 60 80 100

Figure 13: Business outlook for the next 12 months in relation to change in revenue in the last 12 months

33
Technology adoption
The use of technology

Spreadsheets (21%) are the most common tool for maintaining books, followed by cloud accounting
software (20%), and desktop accounting software (18%).

30% of clients are still keeping their books using written, paper-based tools (12% of clients are using
written records or journals, 10% are using boxes of receipts, and 8% are using paper and pen).

Other

ERP Written records/journals

1.0%

11.0% 12.0%
Paper and pen
Desktop accounting 9.0%
software 17.0%
Bag/boxes of receipts
10.0%

Spreadsheets
Cloud accounting software (Excel or Google Sheets)
19.0% 21.0%

Figure 14: Proportion of clients using accounting methods

The impact of technology adoption

75% of practices said that their use of technology has been a positive change to their practice.
This is higher among the practices whose revenue increased (92%).

The top five positive impacts of technology adoption

1. It’s been easier and more efficient to collaborate: 48%

2. We’ve been able to increase the services we offer: 44%

3. We’ve saved time: 37%

4. It’s improved our client relationships: 37%

5. We can be available at a time that suits clients, rather than just working business hours: 36%

34
The top five negative impacts of technology adoption

1. Blurred line between work life and personal life: 46%

2. Clients find it hard to engage with us now: 43%

3. It’s been difficult to move the practice online: 42%

4. It’s been difficult to adjust to new ways of working: 37%

5. We struggled to get the hardware or devices we needed to be able to work online: 29%

Barriers to moving to cloud accounting software

The top five barriers to moving to cloud accounting

1. Clients are unwilling to change: 33%

2. Lack of trust surrounding the security of cloud software: 31%

3. It’s too expensive: 31%

4. Not enough knowledge of how to use cloud software: 28%. This is higher (37%) among
those who have fewer than 25% of their clients using cloud accounting software.

5. It would be a hassle to change: 26%

11% of practices said there were no barriers. This figure decreased to 7% of those with a smaller pool
of clients using cloud accounting software compared to 21% for those with a greater proportion of
clients using cloud accounting software.

35
Top priorities for the next
12 months
New client growth and introducing new services lines, such as advisory (both possibly related) are the
clear priority for practices over the next 12 months.

Average ranking
Practice priorities (from most important to least)

New client growth 3.1

Introduce new service lines such as financial advisory or app implementation 4.2

Support clients with applying for loans or government funding 5.1

Expand overseas 5.1

Digitally transform the practice 4.8

Resign from engagements with low payment recovery rates 6.1

Improve client retention 6.3

Hire more staff 6.6

Enhance HR practices 7.1

Cut costs 8.0

Sell or close the practice 9.4

Table 24: Priorities for the next 12 months

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37
How Xero can help
Once you’ve decided that Xero is the way forward for your practice, a Xero account manager is the
perfect person to help you get going. It’s the role of the Xero account managers and partner consultants
to help you with every aspect of the transition to Xero, and be there for you every step of the way.
If you’re not already a Xero partner, sign up to the Xero partner program at xero.com/partners or get
in touch by emailing partnerteam@xero.com. Benefits of the Xero partner program include:

• Complimentary software and tools, including conversion support from other

accounting software to Xero

• Education and training from Xero fundamentals to advanced tips and drinks

• Recognition as a Xero advisor, including access to the online Xero advisor

certification programme

• Dedicated account manager and partner consulting support

• Xero partner pricing plans and discounts

• Marketing support*, including a listing on the Xero advisor directory and access
to partner marketing funds

We understand that making a significant change within your practice isn’t easy, which is why we offer
online courses and learning programmes designed for accounting practices at Xero Central.

Talk to a Xero account manager today about your plans for 2022

We want to help you find the way forward for your practice in the coming years. Xero account managers
and practice consultants are standing by, ready to help you with everything from getting started in
the cloud to developing cutting-edge advisory services and creating a business plan for moving your
practice forward in 2022 and beyond.

*Subject to attaining specific partner status levels in the partner program

38
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