It’s a scenario that fans of “The Office” can easily picture. The Dunder Mifflin accounting team is knee-deep in tax season, but they’re short-staffed and struggling to keep up. While the show may be fictional, the struggle is all too real in 2023.
The accounting industry is at a precarious crossroads. In the last two years, more than 300,000 accountants and auditors have quit their jobs in the U.S. And this widening talent crunch is showing no signs of abating.
As tax season approaches, this problem becomes a disconcerting headache for companies around the globe. With fewer professionals available to tackle increasingly complex and challenging work, businesses may struggle to meet their financial obligations and maintain the integrity of their financial reporting. This could mean costly compliance slip-ups, susceptibility to fraud, and a serious risk of inaccurate reporting.
Where have all the accountants gone?
The accounting shortage of 2023 is a culmination of what has been a few years in the making. The growing problem is underlined by the massive drop in the number of accounting graduates sitting for the Certified Public Accountant (CPA) exam over the past few years.
Like with many other things, the pandemic may not have been the cause of these declines, but it certainly accelerated them. The stresses accounting professionals underwent since COVID wreaked havoc exacerbated already harsh conditions – high work-hours, high stress, high risks, and lower wages compared to other jobs in finance.
Moreover, baby boomer CPAs are retiring in increasing numbers, leading to an ever-widening gap in the number of skilled accounting professionals available to replace them. According to a Bloomberg Tax analysis, there was a 17% drop in employed accountants and auditors from a 2019 peak.
But this is just the tip of the accountant-shortage iceberg. Down-at-heel pay is something that the industry has struggled with for long. Starting salaries are lower than other financial careers. The median salary for accountants and auditors is $77,250, compared to $95,570 for financial analysts and $131,710 for financial managers, according to the Bureau of Labor Statistics. This disparity often leads to a lack of motivation and drive.
The lack of diversity within the accounting industry is another thorn. In 2019, the AICPA trends report found that white people make up 84% of CPAs in the U.S. Women, too, are a minority in the industry. With Millennial and Gen Z professionals actively seeking companies that espouse the causes of workplace equality and diversity, the accounting profession remains low on the priority list.
Despite this, the demand from companies trying to hire accountants has shown no signs of slowing.
Thriving amidst the talent shortage, how are companies trying to cope?
There is no clear answer and that’s precisely why the shortage has reached critical levels. A Deloitte survey revealed that more than four in five hiring managers for accounting and financial positions in public companies believe that recruitment is a “big challenge”. Talent retention is another major challenge for 69% of the hiring managers.
Companies are taking several steps to try and address it. From interim staffing solutions to hiring contractors, they are looking at unconventional methods to overcome the shortage. The rise in remote work has also helped companies offer better benefits and the promise of a more flexible working environment.
Small and medium-sized organizations have more flexibility related to their workforce. These organizations can consider outsourcing accounting and finance functions to specialized firms that can provide the necessary expertise and support.
Additionally, firms are getting creative in their recruiting and hiring, offering bigger bonuses for referrals to try and optimize their employee network. More and more firms are changing the model and looking at how to do things differently and get creative when it comes to retention and recruiting.
Surviving the great accountant shortage, is there a magic fix?
The accounting shortage is not just a short-term problem; it could have long-term implications. The lack of new accountants entering the field will only worsen the shortage in the future as the aging workforce retires.
According to the United States Bureau of Labor Statistics (BLS), approximately 136,400 accountant and auditor vacancies will be created each year over the next decade. This could lead to a scramble for top talent; the longer it persists, the more significant its impact will be. The shortage can lead to a decline in accountability and integrity in businesses, which could mean a rise in fraud and compliance issues. Accounting errors, however miniscule, can cause a company’s stock price to drop, leading to further financial problems.
Steven Kachelmeier, the chair of the accounting department at the University of Texas, told Business Insider, “I think that the quality of reporting, the quality of controls, the quality of checks on these controls, would start to suffer.”
Hiring from outside the country’s border has the potential to alleviate the accountant shortage. However, it’s no magic fix that will cure talent difficulties.
According to Korn Ferry, India is the only country that is expected to have a surplus of highly skilled financial and business services labor by 2030. With the U.S., U.K. and several European countries facing an impact of over USD 600 billion because of talent crunch in the finance sector, there will be a great rush to tap into the Indian talent pool before it starts to run dry too.
Engaging in overseas hiring can certainly help businesses fill immediate vacancies and get through critical phases such as the upcoming tax season. However, in the long term, businesses need to focus on developing a robust talent pipeline, investing in training and upskilling current employees, and improving diversity and inclusion within the profession.
Incompetent accounting and outright fraud can be laughed away in Dunder Mifflin’s Scranton branch. But in the real world, the consequences of not properly dealing with an accountant shortage can be damning. Time’s running out for businesses world over.
