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Hourly billing rates continue to climb for CPA firms of all sizes. This is good news, as most firms still bill primarily on an hourly basis.

AOMAR maintains—as we always have—that CPA firms should feel freer to raise rates, though some firms are still reluctant to do so from a fear of losing clients who might object to higher rates. But more firms are getting braver and savvier about increases, adopting the very wise view that satisfied clients will pay for value received, especially clients who have a long and strong relationship with their CPA firm.

The accompanying tables set forth our findings regarding billing rates from the annual CPA Firm Practice Management Survey. As always, these findings indicate trends—not absolutes—and we encourage our readers to consider as many sources of information as possible.

Owners’ billing rates. The average per hour billing rate for CPA firm owners among survey respondents is $229; for non-CPA owners it is $207, and for nonequity owners it is $235.
As expected, rates charged by owners tend to rise with the size of the CPA firm, both in terms of the responding firms’ average gross fees billed (see Table 1) and the total number of personnel at the firms (see Table 2).

For general comparison—although different firms participate in each year’s survey—owners’ per-hour rate last year averaged $214; non-CPA owners, $215; and nonequity owners, $210.
Staff billing rates. Supervisor and manager rates now average $167, while seniors are at an average $121 per hour, juniors at $102, and juniors who have not passed the CPA exam at $91. Other staff data appear in Tables 1 and 2.

Though it would seem that staff rates would rise with firm size as seen in the owner rates, this is not so in all cases. The reasons may be because of the differences in staffing make-up at CPA firms, which is becoming more marked as firms continue to struggle to find staff in the middle years of practice.

There are also discrepancies in billing practices depending on the type of practice. For instance, a firm that has large specialty practices with high revenues is likely to have a different billing structure than a generalist firm focusing on traditional audit and accounting services. These factors may explain why, for example, the average rate billed by supervisors and managers is $130 in firms with one to five people, but is slightly lower, an average $126 an hour, at firms with six to 10 people.

For comparison, last year’s research found the overall average rate billed for supervisors and managers was $152; for seniors, $114; for juniors, $94; and for non-CPA juniors, $86.
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Table 1. Billing Rates, Overall and by Gross Fees
$1M to $2M to $3M to $4M to $10M to
Overall < $1M $1.99M $2.99M $3.99M $9.99M $19.99M $20M +
CPA owners $229 $172 $200 $222 $211 $241 $293 $300
Non-CPA owners 207 109 NR 150 NR 168 NR 298
Nonequity owners 235 120 148 205 NR 218 274 287
Supervisors/managers 167 151 129 146 136 165 205 204
Seniors 121 107 104 105 106 124 141 140
Juniors 102 99 94 92 88 95 113 117
Non-CPA juniors 91 77 88 80 78 90 106 104
Consulting staff 176 141 NR 95 140 180 192 206
Firm administrator 99 70 81 72 63 101 147 154
Marketing director 115 NR NR NR NR 80 132 129
Paraprofessionals 81 67 66 73 66 87 104 91
(Source: AOMAR’s 2008 CPA Firm Practice Management Survey)

Table 2. Billing Rates, by Number of Personnel
1 to 5 6 to10 11 to 15 16 to 20 21 to 35 36 to 50 51 to 100 > 100
CPA owners $164 $197 $203 $211 $238 $243 $279 $290
Non-CPA owners 87 95 128 NR 125 210 297 247
Nonequity owners NR 145 135 NR 192 224 279 279
Supervisors/managers 130 126 132 145 153 190 193 196
Seniors 97 107 105 108 113 136 131 137
Juniors 65 92 85 95 93 93 115 116
Non-CPA juniors 65 77 84 75 85 72 104 102
Consulting staff 100 NR NR 90 146 205 189 194
Firm administrator 70 72 88 63 90 128 135 107
Marketing director NR NR NR NR 145 90 118 109
Paraprofessionals 49 75 82 68 76 97 95 86
(Source: AOMAR’s 2008 CPA Firm Practice Management Survey)

5 Tips to Help Raise Your Billing Rates
Thanks to the main story, you have the latest data on billing-rate trends. But now you’d like to boost your firm’s hourly rates—and right before the start of busy season is a good time to make changes.

Here are five pointers we have picked up in discussions with CPA firm leaders and advisers about the always-sensitive "dance" of how and how much to raise rates:
1. Do the math. Your costs have risen this year, as the costs of a business always do: salaries, facilities, travel, equipment, software upgrades—all of those expenses involved in running a business have probably gone up. An overall assessment of higher costs can help your firm get a sense of how much firm revenue needs to increase to cover these costs.
2. Consider an across-the-board hike—or not. There’s no law that says all hourly billing rates must go up—or that the rates must increase the same amount for every biller or in every billing category. For example, a fast-growing niche that produces tremendous demand for your firm’s services is practically asking for higher rates, since you are delivering exceptional and desirable value. You may want to raise those rates but make the increase a modest one. Or, you may raise the niche rates while staying flat with audits where you have strong competition from other local firms. Your strategic plan will help you consider these issues.
You can also assess whether this is a good time to add more set fees or value-based billing to your mix—which also will affect your billing-rate mix.

3. To surcharge or not to surcharge. That’s a question that many firms continue to bat around, and it is a good one. There is no right answer to whether or not you should list a separate charge for technology, mailings, or other activities. Local custom may help guide you—if you are the only one to try it, it may be well received. Try an experiment with one client group this year and see how it goes before converting the whole firm to a surcharge scenario.
4. Don’t apologize. CPA firms should take a tip from their lawyer friends and colleagues—law firms tend to be a lot firmer about price increases, and they don’t hang their heads. Yours is a professional and expert firm, and its owners and staff deserve to be compensated for your expertise, your knowledge, and your trusted adviser contributions to your clients’ success.
5. Communicate, communicate, communicate. Depending on the client, the market, and the increase, you may want to let clients know the price is going up this busy season. You have the client relationship, so you know best who may want more details about the increase, which clients may benefit from a more detailed bill, or who will simply accept that the best costs more. Always make sure to put increases in writing.

From the December 2007 issue of Accounting Office Management & Administration Report.