The landscape of the U.S. accounting industry is experiencing seismic shifts as firms grapple with a burgeoning talent crisis.
- According to the Wall Street Journal, over the last two years, more than 3,00,000 lakh auditors and accountants have voluntarily resigned from their positions in the United States.
- Similarly, the U.S. Bureau of Labor Statistics projects an unfavorable future between 2021 and 2031, with an annual shortage of almost 136,400 accounting and auditing posts. This scenario is anticipated to intensify the rivalry for highly qualified professionals.
- In fact, the national unemployment rate in the U.S. is as low as 3.8% as of September 2023. This shortage of accountants in CPA and accounting firms can be due to the voluntary retirements of existing CPAs. This, coupled with an inadequate number of younger individuals, especially Generation Z, choosing to study accounting and take the CPA Exam, has undeniably created a talent gap.
- The scarcity of qualified personnel is specifically witnessed within the accounting and finance sectors, casting a shadow over a myriad of industries, with smaller, privately held businesses bearing the brunt of the impact.
Let us take a deep dive into the reasons behind the CPAs and accountants shortage and its impact on accounting firms. We will also discuss how this can directly and indirectly impact their businesses.
The Root Causes Contributing to the Accountant Shortage
Given below are the root causes that contribute to the accountant shortage in the U.S.:
The Widespread Retirement Wave of CPAs and Accountants
The majority of the accountants are baby boomers who are about to reach retirement age. Retirements often result in the loss of experienced professionals who have accumulated extensive knowledge and expertise. This leaves a gap in mentorship and leadership within firms. Moreover, as experienced accountants retire, accounting firms may need to reevaluate and adjust their service offerings in areas where expertise is lost, potentially diminishing their market competitiveness.The retirement of a growing number of accountants has intensified the challenge of finding younger replacements. This is largely due to their heightened interest in potentially more profitable sectors such as technology and banking.
- As per the American Institute of CPAs (AICPA), close to one-fourth of the CPAs in the U.S. are aged 55 and above.
- Additionally, according to the report published by Tax Advisor, 75% of CPA professionals have reached the age of 60 in 2020.
- Business Insider stated that many accountants left their respective organizations during the Great Resignation.
Decline in the Number of Accounting Graduates
Getting the Certified Public Accountant (CPA) degree in the U.S. involves clearing a stringent examination, coupled with fulfilling certain educational and professional experience prerequisites. The demanding nature of this process might discourage some individuals from choosing accounting as a career path. According to the data given by AICPA Trends Report 2021, the number of students who completed bachelor’s and master’s in accounting stood at 72,923 for the years 2019-2020. When compared to the last five years, the numbers show a downward trend, with the yearly count of accounting graduates ranging from 76,000 to 79,000.
Career Perception
Many people have the impression that accounting is a tedious, number-crunching profession. Some students who prefer a more dynamic and creative working environment may be discouraged by this feeling of monotony. It’s possible that many students are unaware of the entire scope of a profession in accounting. They might not be aware of the variety of jobs and sectors that accountants might work in, such as financial planning, management consulting, or forensic accounting, and only connect it with tax preparation or auditing.
Complex Financial and Accounting Regulations
People engaged in the accounting profession often face issues with increasingly complex financial and accounting regulations. For instance, New subscription-based IT arrangements (SBITAs), GASB accounting standards for leases, and various other regulations have made the job of accountants very challenging and time-consuming. In fact, these new complex regulations have made it extremely difficult to attract fresh accounting graduates or even retain the existing accountants driving them to retire early.
Stressful Deadlines
During busy periods such as tax season, accountants often work long hours to meet deadlines in accounting firms. This grueling schedule can lead to burnout, causing some professionals to leave the field. In addition, keeping up with constantly changing tax laws and financial regulations can be stressful. This complexity and the need for continuous learning and adaptation can make the profession less appealing to some individuals.
For instance, according to the latest study conducted by FloQast and the University of Georgia (UGA), the majority of accountants suffer from stress and burnout. The survey, which was conducted on more than 1,000 U.S. accounting professionals, revealed that 99% of respondents suffer from stress and exhaustion, which results in inefficiency in their jobs.
Direct Impact of Accountant Shortage on CPA and Accounting Firms
The shortage of accountants has a direct impact on CPA and accounting firms in various ways:
Increased Errors and Omissions in Financial Statements
With fewer accountants, each individual may need to handle a larger workload. This increase can lead to more stress and less time for each task, potentially resulting in more mistakes being made. Additionally, with less staff, there may be less time available for thorough checks and reviews of financial statements. As a consequence, errors or omissions may go unnoticed. Due to a shortage of staff, accountants may need to take on tasks outside their areas of expertise. This lack of specialization can increase the likelihood of errors.
Delayed Financial Reporting
Accountants may be forced to perform duties outside their areas of expertise if the CPA and accounting firms are understaffed. This may cause the process to lag since they will require extra time to comprehend and finish these responsibilities. There can be less time and funding available for ongoing professional development in a company with a low staffing level. Accountants may take longer to finish financial reports in order to assure compliance if they are not aware of the most recent accounting standards and procedures. When tax season rolls around, a lot of CPA firms bring on more accountants. Such seasonal workforce shortages may affect the company’s capacity to generate reports on time.
Operational Inefficiencies
Potential shortcomings and significant flaws can impair financial reporting systems’ effectiveness. This can cause errors and delays when producing crucial financial records,which would, therefore, impair decision-making and the seamless running of the company. An accountant shortage may interfere with succession planning, creating openings in management and leadership positions that may have a detrimental effect on operations.
A decline in Client Satisfaction and Loyalty
Clients expect a certain level of personal attention and prompt responses to their queries. If accountants are stretched thin, they may not be able to provide the level of service that clients are accustomed to, which could impact client satisfaction and loyalty. In some cases, CPAs and accounting firms might increase their fees to compensate for the shortage of accountants. This could lead to client dissatisfaction and reduced loyalty. In some cases, CPA firms might increase their fees to compensate for the shortage of accountants. This could lead to client dissatisfaction and reduced loyalty.
Intensified Audit Inspection
When material weaknesses are identified, auditors must conduct a more comprehensive review of the company’s financial records. This heightened level of scrutiny involves thoroughly examining of financial statements, internal controls, and supporting documentation. As a result, the auditing process becomes more time-consuming and consequently more costly. This additional cost places a strain on the company’s financial resources, which could have been allocated to other essential business activities.
The Difficulties Associated with Recruiting Accountants in a Short Supply
Recruiting accountants in a situation of short supply presents several challenges for CPA and accounting firms:
Investment Associated With Training and Development
The continuous training and development necessitated by evolving financial regulations and accounting practices notably increase the overall cost of hiring for CPA and accounting firms. This cost isn’t confined to the direct expenses associated with organizing the training sessions, such as the cost of training programs, course materials, software, and other necessary tools. It also includes the costs ofhiring external instructors or allocating internal staff to conduct the training, which could have been otherwise engaged in revenue-generating activities.
Lengthy Recruitment Process
Recruiting an accountant involves several stages, such as advertising the vacancy, shortlisting candidates, conducting interviews, performing background checks, and negotiating the job offer. Each step takes time, and the entire process can stretch over weeks or even months. In the context of a shortage, this delay can be especially problematic as the demand for accountants exceeds the supply, meaning the most qualified candidates are likely to receive multiple job offers and might be taken by other firms before the process concludes.
Employee Retention Challenges
During a shortage, accounting firms might be so focused on filling vacant positions that they overlook the career development needs of their current employees. If employees feel their career progression is stagnating, they might be enticed to leave for opportunities that offer better growth and learning opportunities.
Takeaways From the Accountant Shortage
There is no one-stop solution to deal with the shortage of accountants. While technological developments have helped a lot to tackle these challenges, there will still be a constant demand for a skilled workforce. Traditionally, companies relied on in-house accountants to manage their financial operations. However, as the business landscape of the U.S. is shifting, the majority of CPA and accounting firms have found it cost-effective and hassle-free to outsource CPA and accounting services. And in the coming years, we are going to witness more of this trend.
Struggling with accounting demands? Simplify by outsourcing your accounting tasks now!
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