Despite rising demand, prices for bookkeeping services are expected to continue falling over the next three years as competition intensifies.
Los Angeles, CA (PRWEB) July 08, 2014
The bookkeeping services market has a buyer power score of 4.5 out of 5, representing a significantly favorable purchasing environment for buyers. Recently positive pricing trends have enabled buyers to negotiate from historically low prices. “Other factors that positively affect buyer power are low supply chain risk, low market share concentration and a high level of competition,” says IBISWorld procurement analyst Erick Delgado. “However, a lack of substitute services and the risks involved with switching providers negatively affect buying power.”
The market for bookkeeping services is highly fragmented. The top four suppliers (Ceridian Corp, Analytix Solutions, CFLbooks and AccountingDepartment.com) account for a small portion of the total market share in 2014, indicating a very low level of concentration. Low barriers to entry, combined with external providers adding bookkeeping to their service offerings, have intensified competition during the three years to 2014. As a result, prices have been pushed down even as demand for bookkeeping has increased. A growing number of established providers have had to cut prices to prevent their customers from switching to a lower-cost provider or in-housing their bookkeeping. This trend favors buyers' ability to negotiate prices. Wage costs are expected to increase over the next three years, shrinking supplier margins even further. However, because providers have control over their main input (i.e. labor), there is a low level of supply chain risk, which helps to protect buyers from large price fluctuations. “Low price volatility is conducive to buyer power because it allows them to accurately budget and evaluate service prices,” adds Delgado. “Prices are expected to continue falling over the three years to 2017 due to increased external competition, which will sustain the buyer's ability to negotiate.”
Because of buyers' limited ability to measure service quality beforehand, there are inherent risks involved with switching providers. Buyers should seek to include performance options in their contracts to protect themselves from a poor-performing supplier. Although bookkeeping is not a specialized service, it is labor intensive and requires training to ensure quality. As such, there are limited substitutes to outsourcing other than having an in-house accounting department, which can be far more expensive for buyers. These factors ultimately limit a buyer's negotiating power. For more information, visit IBISWorld’s Bookkeeping Services procurement category market research report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Like IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of bookkeeping services. This service mainly involves recording all financial transactions a business makes, particularly purchases, sales and other payments. While many providers also perform payroll services, this report does not focus on the procurement of payroll services.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.