At a glance
- UK accounting practices are experiencing strong revenue and profit growth.
- Cloud technology adoption is driving success, with 87% of users reporting increased client satisfaction and 86% noting more time for practice growth.
- This follows concerns about costs and skills shortage in the profession.
The figures coincide with greater rates of digital transformation as the industry prepares for regulatory shifts, according to Xero’s comprehensive 2025 Accounting and Bookkeeping Industry Report.
Despite reports of accounting firm numbers falling last year, Xero’s data paints a rosy picture for the accounting profession.
Some 79% of accounting practices are experiencing revenue growth, with 74% enjoying higher profits as the sector embraces digital transformation. This report, commissioned by Xero and facilitated by Quadrant Strategies, is based on an online survey of 250 accountants and bookkeepers from independent panels.
This follows cautiousness in the wider business sector, with an index that measures confidence across the British manufacturing industries falling in February for the fourth consecutive month. And optimism among CFOs of larger companies slumped to a two-year low earlier this year, according to Deloitte data.
A net 26% of CFOs reported feeling more pessimistic about the outlook for their companies compared to three months ago, the first time sentiment has tipped into negative territory since the second quarter of 2023. Even so, confidence is above the lows in 2020 and 2022.
It coincides with the Bank of England slashing prediction for UK growth this year by half to 0.75 per cent, with inflation forecast to climb to 3.7 per cent this year.
Client growth and revenue drivers
Despite this broader economic outlook, the Xero survey found nearly half (49%) of practices gained new clients over the past year, with average client numbers growing by 15%. Sole practitioners and small practices reported slightly larger increases than medium and large firms.
Three key growth drivers included:
- Expanding existing client relationships (reported by 73% of practices with revenue growth);
- Streamlining workflows (34% of revenue-growing practices); and
- Boosting service offerings (35% of revenue-growing practices).
Advisory and bookkeeping
Advisory services now contribute 32% of practice revenue on average, surpassing bookkeeping at 31%, highlighting opportunities for small practices to develop higher-value service offerings.
Meanwhile, nearly a quarter of clients (24%) have all their bookkeeping handled by their practice, 20% receive only advice and guidance and the remaining 55% split bookkeeping tasks with their accountant in various arrangements. This flexibility in service delivery should encourage micro practices to develop models tailored to their strengths.
Technology adoption
Technology adoption played an important role in success, with 42% of respondents citing it as the most significant change in their practice over the past year. Practices using cloud-based software reported benefits including:
- 87% report increased client satisfaction
- 86% report more time to focus on practice growth
- 86% report time saved on manual daily tasks
- 84% report improved billing approaches.
Cloud software users are also more likely to experience client growth (51%) compared to desktop-only users (38%), and 44% of practices reported greater efficiency from adopting cloud-based software.
Cloud adoption
While 86% of practices use cloud software for at least one client, 59% of their bookkeeping work is delivered using cloud platforms. The study showed connected bank feeds are used for just 40% of clients, payment tools for 33% and data capture tools for only 31%.
Data security concerns are a barrier for some practices, but addressing these through training and systems could unlock efficiency gains.
Despite current external challenges, 77% of accountants and bookkeepers express confidence in the future of their practice. Technology adoption correlates with optimism, with 32% of cloud software users report feeling very optimistic compared to 25% of desktop-only users.
Practical implications for small practices
For accountants operating small practices, relevant insights include:
- Focus on advisory: With advisory services now generating slightly more revenue than bookkeeping, developing higher-value consultancy offerings represents a clear growth opportunity.
- Embrace cloud technology: There is a correlation between cloud adoption and practice growth, with modest technology investments yielding significant returns.
- Prepare for MTD: While sole practitioners may need different service models than larger firms, preparing now for MTD implementation creates competitive advantage.
- Deepen client relationships: Strengthening existing client relationships is an effective growth strategy.
- Optimise cloud usage: Simply adopting cloud software isn’t enough – practices that fully utilise features like bank feeds and data capture tools stand to gain the most.
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