In the business side of running an accounting firm, it’s easy to assume that higher billing rates mean higher margin, or that growing your team means growing your revenue.
The FY26 accounting firm data, drawn from over 250 Australian practices, tells a more complicated story. Firms with the highest billing rates aren’t the most profitable. Firms with the highest recoverability aren’t either. And headcount growth, the thing 70% of firms said they wanted last year, actually went backwards industry-wide.
This matters because most partners manage their firm one metric at a time. You look at your billing rate this month, your WIP next month, your P&L at year end. But the FY26 data, presented at Dashboard Insights in person roadshows and webinar, shows profitability isn’t the result of any single decision. It’s the compounded result of decisions made consistently across your entire firm value chain, from who you take on as a client through to how quickly you collect payment.
Here’s what the numbers actually show and where the leverage sits for firm leaders.
Why Growth in FY26 Didn’t Come From Where You’d Expect
A year ago, firms told us what they were planning for FY26. 40% wanted revenue growth above 10%. 91% were focused on operational improvement like productivity and recoverability. 54% planned modest price rises of 1 to 5%, more conservative than the year before. 70% wanted to grow their team.
What actually happened looked different:
For a firm leader, the lesson here isn’t that pricing or hiring don’t matter. It’s that the firms who improved their numbers this year did it by tightening operations and making deliberate decisions. For example, smaller and more productive teams converted more of their existing client base into billed, collected revenue. That’s a very different growth story to the one most firms plan for in July.
Understanding Where Your Revenue and Profit Actually Sit
One of the more confronting numbers in the FY26 data: the top 5% of clients by revenue generate 38.8% of total revenue and 40.9% of profit. Add the next 20% of clients, and roughly 77 to 79% of both revenue and profit sits inside the top quarter of the client base.
This is worth understanding properly, because it changes how you should think about client strategy. It doesn’t mean the other 75% of clients should be dropped. Many of them are profitable, low-effort, or clients you’ve served for a decade. But it does mean most firms are more exposed than they realise to a small number of relationships, and very few have a documented plan for what happens if one of those clients leaves.
Fee per client tells a related story. It doesn’t scale neatly with firm size. Median fees for 11 to 30 seat firms ($3,907) are actually the lowest of any size band, sitting below smaller firms and larger ones. That’s not a natural growth phase firms pass through. It usually points to a pricing or client-mix problem specific to that stage of growth.
Winning Move: Work out what percentage of your revenue and profit sits with your top 5% of clients. If you’re above the industry benchmark, put a service continuity plan in writing for your top three relationships this month.
Compliance Still Dominates
Compliance still accounts for 67.6% of industry revenue, almost unchanged from the year before. Advisory sits at 10.7%, SMSF at 10.4%, audit at 5.2% and bookkeeping at 6.1%. Larger firms do carry a bigger share of advisory and audit work, but for the industry as a whole, compliance remains the core of the business.
This is useful context for firm leaders weighing up where to invest. Building advisory capability is still a sound long-term move, particularly if you’re scaling, but it’s not a substitute for running compliance well. The firms extracting the most value in FY26 weren’t necessarily doing more advisory. They were running their existing service mix, whatever it was, with more discipline.
Winning Move: Review your current revenue mix by service line and compare it to your peer group. If one line is carrying more risk or effort than its revenue share justifies, that’s a conversation for your next partner meeting, not a reason to abandon compliance.
Billing Rate, Productivity and Headcount: Untangling the Real Drivers
Average billing rates rose from $209 in FY23 to $231 in FY26, a genuine 10% lift over three years, but only 0.9% of that came in FY26 itself. The spread in billing rates is concentrated almost entirely in the smallest firms. A 1 to 10 seat firm can sit anywhere from $208 to $349 an hour depending on its model. Once you get to 11 to 30 seats and above, that spread compresses and stays compressed. Firm size doesn’t reopen it.
Productivity is the more encouraging number here. It turned positive in FY26, moving from 60% to 62%. It still dips as firms scale, typically 64% median in the smallest firms down to around 60% in the mid-size bands, but interestingly, the gap between top and bottom quartile performers narrows the larger a firm gets. That suggests structure and process, not just headcount, are what separate high and low performers as firms scale.
Headcount is where the sharpest reversal sits. Firms wanted to grow their teams by 70% last year. Instead, average headcount fell 3.1%, with the steepest cuts at both ends of the size spectrum, down 7.1% in the smallest firms and 5.3% in firms with 65+ FTE. Firms chose efficiency and, in many cases, AI over hiring, and productivity numbers suggest it’s working.
Winning Move: Compare your billing rate to your own size band’s median. If you’re sitting near your band’s P25, that’s often the fastest lever available to lift margin, no new clients, no new services, and no extra headcount required.
Where WIP, Recoverability and Lockup Are Actually Costing You
This is the section most firm leaders should read twice. Average WIP days sit at 83, debtor days at 29, and total lockup at 112 days industry-wide. WIP alone makes up roughly 71 to 79% of that lockup figure across every size band. In plain terms, many firms don’t have a collections problem. They have a job turnaround problem.
Recoverability drops steadily as firms scale, from a median of 115% in 1 to 10 seat firms down to 84% in 65+ seat practices. But the more useful pattern is the timing. Work billed within 30 days recovers at well over 100% industry-wide. Anything sitting past 90 days recovers closer to 72 to 85%. Almost half of all jobs (44.4%) and WIP value (48%) clear within that first 30-day window, and efficiency drops away sharply after that.
Debtor days behave less predictably. They peak at 35 days for 31 to 65 seat firms, the slowest of any band, and actually improve again at 65+. Smaller firms collect fastest, largely because the person billing the client is often the same person chasing the payment.
Winning Move: Build a process to flag any job that hasn’t moved in 30 days, and put it on the agenda in your regular workflow meetings. Then check your own WIP and debtor days against your band’s median. If WIP makes up more than 75% of your lockup, the fastest fix is shortening the gap between job start and invoice, not chasing debtors harder.
Why There’s No Single Formula for Profitability
Here’s the finding that should reshape how firm leaders think about their own KPIs. Profitability doesn’t track cleanly with any single metric in the FY26 data, and understanding why matters more than the numbers themselves.
Bottom-quartile firms actually post a higher average billing rate ($237 an hour) than second-quartile firms ($213), despite earning less than a third of the margin. Recoverability peaks not in the top-performing group, but in the 26th to 50th percentile band, at 88%, ahead of the top group’s 84%. WIP and debtor days run higher for top-performing firms too, likely because lower-margin firms are under more cash flow pressure and chase harder out of necessity.
None of this means billing rate, recoverability or WIP don’t matter. It means no single one of them, chased in isolation, will move your margin. What separates top-quartile firms (averaging 36%+ margin) from bottom-quartile firms (around 21%) is coherence across the whole value chain: client strategy, pricing, workflow, billing and collections all pulling in the same direction, rather than one metric being optimised at the expense of the rest.
Winning Move: Find your firm’s FY26 year-to-date profit margin and identify which quartile you sit in. If you’re uncomfortable with the answer, resist the urge to fix it purely through your P&L. Look upstream, at how deliberately you’re managing client strategy, pricing and workflow.
What This Means Heading Into FY27
Firm priorities are shifting for the year ahead, and the shift itself is informative. 90% still aim to grow revenue, and 40% want growth above 10%, almost identical to FY26’s ambition. But 68% are now targeting the same or increased revenue with a better margin, a genuine move toward discipline over pure expansion. 60% plan to grow by upselling existing clients into new service lines rather than chasing new clients, and only 62% plan to raise prices at all, despite 23% naming undercharging as their single biggest obstacle. Headcount ambition has cooled too, from 70% wanting to grow their team down to 59%, with more firms leaning on efficiency and AI instead of hiring.
Read together with the FY26 Benchmarking Report results, the direction for firm leaders is clear. Margin is being protected through operational discipline, not price. And the firms leading their peer group aren’t necessarily the ones with the highest billing rate or the biggest team. They’re the ones making deliberate, connected decisions across the entire practice.
For a full breakdown of every metric in this article by firm size and quartile, the FY26 AU Accounting Benchmarking Report is worth downloading in full.
Whether your firm runs on XPM, Karbon or FYI Elite, the same principle holds across every size band in this data. Firms that connect client strategy, pricing, workflow and billing into one view consistently outperform those managing each in isolation.
If you want to see where your firm sits against these benchmarks and what to prioritise next, book a strategy session with our team.
