MAPping it out.

Living up to its name, the MAP Survey continues to provide direction to scores of CPA firms, helping them find the most efficient routes of managing an accounting practice. The survey is a collection of dozens of indicators for CPA firms looking to benchmark their practices.

"Without the MAP report, it'd be like a boat without a rudder," says Thomas Vermeulen, CPA, chair of the San Joaquin Chapter MAP Committee. "We have to be fair to our clients with what we bill them, and to our staff with what we pay them, and I'd have little basis for determining whether or not I was being fair without this survey."

Before the MAP survey began, CPA firms had few methods of benchmarking their practices, says Frank Crowley, CPA, partner with Ventura-based Wolfe Emch & Crowley and a member of the CalCPA MAP Committee.

"There weren't too many firms that liked to talk about things like billing rates," says Crowley. "There was really no way of knowing how well you were doing; there was never any open discussions."

Antitrust laws prohibit billing rate and comparable data discussions. Only anonymous surveys may be used to collect data.

RECORD PARTICIPATION

A record 3,304 firms took part in the 2003 National MAP Survey. California led the nation with 575 valid responses out of 607 submitted. The sampling was evenly distributed, with responses from 194 small (less than $300,000 in revenue), 206 midsize ($300,000 to $1 million) and 175 large firms (more than $1 million).

Having the highest response rate entitled California to a customized MAP survey, which split the state into six geographic regions: Central Valley/Central Coast; Los Angeles; Orange County/Long Beach; Sacramento/North Coast; San Diego/Inland Empire; and Bay Area/Silicon Valley.

The following are some highlights from the survey. For a free copy of the California report, visit www.calcpa.org/MAP. For a copy of the national survey, visit http://map.pcps.org.

CHARGEABLE HOURS AND BILLING RATES

Although firm income and employee salaries rose last year, the survey found that owners saw a slight decline in both chargeable hours and billing rates.

At the national level, the average chargeable hours for owners reached 1,272 in 2003, down one hour from 2002. California had 1,268 average chargeable hours, down two hours from 2002.

The average hourly billing rate for owners at the national level in 2003 was $149.15, down almost $4 from 2002. That rate also declined in California--albeit only 25 cents--to $183.75, but still easily topped the national average.

CPA Joe Kovar, a partner with Danville-based Sweeney Kovar LLP, uses the survey to benchmark his firm's financial performance and adjust his firm's goals accordingly.

While his firm's billing rates are in line with his region. "I discovered that the chargeable hours for my team per professional is a little low, so that has become a firm goal: to get more chargeable hours per professional," says Kovar, a former chair of the East Bay Chapter MAP Committee and vice chair of the CalCPA MAP Committee.

REGIONAL OWNER BILLING RATES

Billing rates, especially by region, have proved a valuable part of the survey for many practitioners.

CPA Doyle Daniel, a partner with Fresno-based Daniel, Towle & Warkentine and chair of the Fresno Chapter MAP Committee, says the geographical splits are invaluable and he has used the survey to adjust his billing rates.

"California is the size of several states put together, and what's happening in LA or San Francisco just isn't applicable in Fresno," he says.

In California, the average billing rates for all firm owners totaled $149 in the Central Valley/Central Coast; $200 in Los Angeles; $190 in Orange County/Long Beach; $160 in Sacramento/North Coast; $183 in San Diego/Inland Empire; and $201 in the Bay Area/Silicon Valley.

FIRM INCOME

Total firm income in California averaged nearly $1.3 million in 2003--$1,277,154 to be exact--representing an increase of $194,390 from 2002. The average net remaining income for owners in California also increased in 2003, reaching $473,140 (or 37 percent of the firm's income), up $90,140 from 2002. The average gross compensation for an owner in California was $178,217.

Regionally, owners of large firms fared best in the Bay Area/Silicon Valley regarding gross compensation, posting a net remaining figure of $317,704. By contrast, their brethren in the Central Coast made the least, taking home about $203,213.

Nationally, owners took home an average of 36 percent of their firm's income, or about $150,000.

Where does all this revenue come from? Tax services comprised the largest source of income for CPA firms, accounting for 48 percent at the national level, followed by write-up/data processing (12 percent) and auditing and attestation (11 percent).

In California, tax services comprised 51 percent of a firm's income, followed by compilations (9.5 percent) and auditing and attestation (9.1 percent).

FIRM EXPENSES

On the other side of the coin, the largest expense facing firms nationally and statewide is total non-owner professional salaries. Nationally, total non-owner professional salaries in 2003 amounted to an average of $307,000, or 24 percent of total income.

In California, that figured averaged $289,003, or 22.6 percent of total income. Office rent/occupancy was second, averaging $84,265, or 6.6 percent of total income.

"I manage my largest expense using the MAP Survey," says Vermeulen, a sole practitioner with 11 employees in Ripon, located in San Joaquin County. "I look at the compensation per hour to make sure I'm compensating my staff fairly, and in fact, I've given some substantial raises on the basis of this survey."

COMPENSATION

"Staff compensation is probably the first place I look when the survey comes out," says Daniel. "We want to make sure we're competitive in the employment market."

Nationally, salaries rose an average of 5 percent in 2003, with bonuses averaging about 5 percent of compensation. Employees of California CPA firms had an average salary increase of 4.9 percent with bonuses averaging 4.6 percent of compensation.

Big Los Angeles firms had the greatest salary increases from 2002--6.7 percent. Large firms in the Sacramento/North Coast region came a close second, with an average annual salary increase of 6.3 percent. Midsize firms in the San Diego/Inland Empire region posted the third-largest annual salary increase of 6 percent.

BENEFITS

Nearly 74 percent of national firms have a retirement plan, and among all firms, 45 percent have a provision for partner retirement, of which 70 percent are funded plans.

Nearly 72.5 percent of California firms have a retirement plan and among all firms, 42.6 percent have a provision for partner retirement, of which 78.9 percent are funded plans.

Kovar says perusing the survey's list of benefits made him decide to increase the percentage the firm contributes to its employees' retirement plan "by a third."

He also uses the survey to help lure prospective employees. "I want to see how we compare with other firms that might be competing to hire the same staff," Kovar says.

E-FILING

In 2003, California lagged behind when it came to e-filing. Nationally, 78.9 percent of all respondents said they file returns electronically, compared with 72.4 percent of California respondents. Yet, California CPAs charged more for e-filing--an average of $34.97--$8 more than the national average.

RELATED ARTICLE: TOP 5

SPECIALIZED SERVICES

The top 5 specialized services offered by NATIONAL respondents:

75%  Estate Tax Planning
65%  Payroll Processing
48%  Personal Financial Planning
31%  M & A Consulting
25%  Forensic Accounting

The top 5 specialized services offered by CALIFORNIA respondents:

72% Estate Tax Planning
60% Payroll Processing
42% Personal Financial Planning
33% Forensic Accounting
24% M & A Consulting

Jerry Ascierto is CalCPA's associate editor. You can reach him at [e-mail].