Organizational Structures for Accounting Firms
Choosing the right structure for your accounting firm depends on your customer base, services offered, and business goals. A growing firm easily adapts to new clients and increases workload, given it formalizes the right structure. This enables growth without sacrificing quality and efficiency.
Here’s how firms of different sizes can create suitable structures:
Small firms (1-5 employees)
Key Roles
Owner - oversees the strategic direction of the firm and may be involved in client relations, too
Partner/manager - manages operations, including client servicing and business development
Staff/administrative accountant - performs accounting tasks like scheduling, tax filings, and payroll releases
Suitable leadership style
The owner engages his employees through participative leadership, seeking input from staff, and even making strategic decisions. This fosters a collaborative environment.
Communication modes
In-person communication is more effective owing to a smaller team size. Project management tools can simplify processes.
Medium-sized firms (6-15 employees)
Key roles
- Partners - Cascade the strategic vision to employees. Oversee specific departments (such as tax or audit) or segments of clients
- Managers - Supervise accountants and ensure clients are serviced timely and efficiently
- Staff accountants - Executives specializing in different areas of accounting. Three-six of them may report to a manager
- Bookkeepers - Follow best practices to manage data and offer support to accountants
- Marketing and sales staff - Promote brand awareness and help in client acquisitions
Suitable leadership style
Situational leadership may be deployed. This doesn’t adhere to one style for all situations but is adaptive to evolving scenarios, departments, and follower work styles.
Communication modes
Department-level and partner-level meetings can boost the alignment of efforts. You may use collaboration tools, including messaging software like Slack or Microsoft Teams, and project management tools. Irregular firm-level all-hands meetings and bolster belongingness among employees.
Large firms (15+ employees)
Key roles
- Partners - They focus on strategic decision-making and offer course correction to different departments
- Directors - Lead different departments and ensure successful operations
- Managers - Supervise sub-teams within departments
- Staff accountants - Specialize in different accounting functions
- Support staff - This may include HR, IT, marketing, and sales teams that support the core accounting functions
Suitable leadership style
Transformational may be suitable here. It inspires employees to partake in a shared vision for collective success. Role modeling in larger organizations helps nurture internal talent for future leadership roles.
Communication modes
Vertical communication happens through formal channels, mainly with adherence to hierarchies. Project management tools are heavily relied on for task assignments, tracking progress, and team discussions. Periodic company, function, and team-level meetings also occur. Performing organizations focus on psychological safety in communication to foster open dialogue.
Key roles and divisions in an Accounting Firm
- Partners - Cascade the strategic vision to employees. Oversee specific departments (such as tax or audit) or segments of clients
- Managers - Supervise accountants and ensure clients are serviced timely and efficiently
- Staff accountants - Executives specializing in different areas of accounting. Three-six of them may report to a manager
- Bookkeepers - Follow best practices to manage data and offer support to accountants
- Marketing and sales staff - Promote brand awareness and help in client acquisitions
Features of a robust accounting firm structure
It's true that components of an accounting firm's design, such as roles and responsibilities, processes, and talent management practices, are important. But there’s more to a firm's successful performance.
According to Boston Consulting Group, the structures within the company should be strong enough to support desirable behaviors, that is, what people do: how they act, interact, and make decisions.
Here are the key components of a successful accounting firm structure:
System dependence over people dependence
This doesn’t mean eliminating human expertise. Structures shouldn’t make individuals indispensables. Rather, they must strengthen process and systems. This reduces reliable on specific staff members and ensures continuity in case of exits.
Define long-term goals
Organizations are living embodiments of their strategies, according to a Harvard Business Review article. That means aligning the hardware ( structures and processes) and software (values, leadership, culture) with a specific strategy.
Scaling accounting firms must adjust the organizational structure to shift priorities. They can deploy planned agility for this.
Role clarity
Everyone, including partners and support staff, must understand what they’re supposed to do and the reporting structure. Critical roles for organizational success must be identified. And you must take up succession planning for them. Spotting leadership talent internally may prove more fruitful here.
Chalk out SOPs
This captures the ‘how’ aspect of tasks and ensures everyone is on the same page. It also boosts consistency and quality. Even knowledge sharing becomes easier and the time-to-productivity of new hires reduces.
Creating avenues for mobility
This helps boost employee morale and retain top talent. Opening up such avenues can ensure cultural continuities with loyal employees. Regular shadowing and mentorship opportunities may help here.
Pro Tip: Do read this detailed guide if you are looking to buy an accounting practice to grow and scale.
Strategies to build the best structure for an accounting firm for scalability and functionality
Asses the firm’s size and stage of growth
Identify whether your accounting firm is in an early or growth stage or is an established entity. Project your firm’s growth trajectory over the next five years. Also, account for your risk tolerance. For instance, a sole proprietorship may be suitable for firms starting out, while a partnership may be suitable in the growth stage.
Evaluate market demand and client needs
Identify your ideal client persona and their accounting needs. They could be taxpayers, businesses with bookkeeping needs, or larger corporations requiring support for audits and tax filings.
The research here must also involve understanding the structures of your competitors. You must also consider setting up a client advisory board to gather feedback and zero in on their needs better.
Align structure with goals and values
Some companies value upward management, flexibility, and employee autonomy, while others may prefer a command-and-control approach. These management styles stem from your core values and vision, and they will translate into a unique client experience, too.
In larger corporate structures, like limited liability companies, several chains of hierarchy and processes may hinder decision-making, which may be faster in partnerships or sole proprietorships. Larger firms also require a multi-channel communication strategy to cascade company vision, mission, and values for synergy.
Consider budget
You must consider both the set-up and maintenance costs. In addition to these costs, consider the tax implications for each structure, which may include tax benefits.
The setup cost includes:
- Securing licenses and permits
- Procuring hardware and software
- Marketing
- Talent
The maintenance cost includes:
- Office expenses
- Salaries, bonuses, and employee welfare
- Technology maintenance
- Taxes
- Professional fees
- Software subscriptions
Analyze for operational efficiency
Evaluate structures for their malleability with the growth of your firm. Will it respond to speedy client responses, the need for delegation of tasks, and market shifts?
You can examine the average time per task, the percentage of billable time for staff, client onboarding time and retention rates and staff productivity for different structures.
Benchmark against competitors
Research how successful accounting firms in your industry are structured and how their organization designs align with their offerings and market.
Don’t force-fit the same designs to your structure but account for your unique values, goals and market base. For instance, the Big Four accounting firms run a partner-led model. Partners lead departments and rely on managers to service clients and meet company goals.
Use tech to grow accounting firm
Automation is no longer a nice-to-have, it’s a must-have, writes a senior executive at Salesforce.
“Together, real-time data, automation, and AI enable organizations to deliver highly personalized customer experiences, at scale, while driving higher levels of productivity and efficiency,” he writes for Harvard Business Review.
Cloud accounting software
Today, 72% of small accounting firms report using cloud-based accounting software, according to CPA Practice Advisor. This signifies the transformative power of the solution.
Such software ensures secure access to client data from anywhere, anytime. They also help you automate repetitive tasks so your workforce could focus more on nurturing enduring client relations.
Even McKinsey Global Institute has testified to this. It found automation could free up to 25% of a professional’s time.
For instance, Cone, a unified practice management software, increases the productivity of your teams by 50% and fetches you 27% more revenue with automated proposals.
You can manage projects, draft proposals, track sales pipeline, process bills, and renew contracts on one platform. It also helps you migrate data from a previous setup for free.
Automating accounting processes can be your growth catalyst as it helps you process greater volumes of projects faster. Such software boost your client relationship too by providing them real-time access to updates on a dashboard.
Communication and collaborative tools
According to the American Institute of Certified Public Accountants, as many as 78% of accounting professionals believe technology is important for fostering collaboration across firms.
Collaboration tools include features like instant messaging, file sharing, and video conferencing. They are especially beneficial for a remote workforce because they boost company culture and values and ensure cohesion.
Communication channels for clients integrated with your practice management software can help enhance their experience.
Further, project management tools help you track individual, team, and department-level progress toward goals. They also boost transparency and accountability.
HRMS
Human resource management systems help you attract, develop, and retain talent that is suitable for your organization in simpler and faster ways.
The integrated platform covers the whole journey of an employee from hire to retire. On it, you can plan benefits administration, gamify learning and development, track time and attendance, and even release payrolls.
Today, people analytics are integrated into many HRMS. They help HRs identify trends, such as attrition, engagement, and productivity levels, and take corrective actions.
According to McKinsey, 56% of tasks HRs perform can be automated without drastic changes to processes. This leaves them with enough time and resources to boost employee engagement.
Client portal
Your clients can chat, make payments, upload files, submit forms, and sign contracts—all in one place.
Pro Tip: Learn also about how to grow your client base by implementing SEO for your accounting practice.
Automated proposals and engagement letters
You can create proposals and contracts in less than 10 seconds using branded templates. You may also track your sales pipeline for any leads. Use a proposal software like Cone.
Manage projects using practice management software
You can automate workflows, track time, and manage documents for greater efficiency. Pick the best accounting practice management software.
Also, you can explore Cone's unified proposal and practice management software starting at 10$ per user/month.
Frequently Asked Questions
What is the organizational structure of an accounting firm?
The structure depends on your goals, market, and budgetary constraints. Typically, partners oversee the structure, which is then staffed by managers and staff accountants. Smaller organizations have flatter designs for faster decision-making and flexible operations.
What is the legal structure of an accounting firm?
There are several legal structures. The sole proprietorship is ideal for solo practitioners starting out. Partnerships offer shared ownership and responsibilities. Whereas, a limited liability company combines liability protection with the flexibility of a partnership. A more complex structure involves an S corporation, better suited for larger firms.
What is the hierarchy of staff in an accounting firm?
The hierarchy differs with a firm's workforce size. But typically, partners or owners sit at the top, devising strategies and goals. Then come directors and managers who lead different departments, like audit or taxation. The executives under them include staff accountants who specialize in unique areas of accounting. Support functions like HR, marketing, sales, and IT may form parallel hierarchies. Some organizations, especially smaller ones, run on flatter hierarchies for greater agility and faster communications.