Prices are forecast to continue rising, driven by the growing number of businesses, greater corporate profitability and more international trade, all of which will require accounting services.
Los Angeles, California (PRWEB) July 30, 2014
Accounting services have a buyer power score of 3.4 out of 5, indicating that buyers have greater negotiation power than suppliers. According to IBISWorld business research analyst Aileen Weiss, “Buyer power is strengthened by recent price trends, supplier competition and high profit margins; however, it is weakened by product specialization and a lack of service substitutes.” Major players in the accounting services market include CBIZ Inc., Eide Bailly LLP, CliftonLarsonAllen LLP and Wipfli LLP.
The price for accounting services has not been volatile, which has strengthened buyer power. Despite the rise in labor costs and demand for services, price growth has not grown rapidly. “Suppliers must compete intensely to earn revenue because of the highly fragmented market and low market share concentration, which slightly decelerate price growth,” says Weiss. Thus, buyers can avoid long-term contracts and reassess their supplier regularly. Additionally, suppliers have high profit that is forecast to rise as suppliers continue to focus on operational efficiency. As such, suppliers are more willing to negotiate prices.
Nonetheless, product specialization and a lack of substitutes have weakened buyer power. Accounting services are the same across suppliers, but performance varies depending on the buyer's business model, industry and size. As a result, service is specialized and requires professional expertise and experience. Suppliers are able to charge a premium for their qualifications because demand for their services continues to grow. Thus, buyers have less negotiation power over price. Moreover, buyers cannot exercise leverage with less costly substitutes. The alternative is to implement in-house accounting services, but that method is time consuming and costly.
Buyers can improve their negotiation position by bundling services or investing in a long-term contract. Oftentimes, suppliers offer related services, such as tax and payroll accounting. Buyers can receive discounts by sourcing these services through one supplier. Although buyers are in a position to avoid a long-term contract, they may gain more benefits if they agree to one. In doing so, buyers can develop a close relationship with their supplier and potentially obtain discounted pricing. For more information, visit IBISWorld’s Accounting Services procurement category market research report page.