In the midst of the great resignation, the accounting industry is confronting a series of workforce challenges that demand innovative solutions. From the changing educational landscape to the increasing influence of technology, the industry must adapt to these dynamics to thrive in the face of significant talent shifts. We delve into the implications of the great resignation and explore how the accounting profession can navigate these turbulent waters to ensure future success.
Impact of Workforce Dynamics on the Accounting Industry and Business Challenges
Considering the accounting industry’s current challenges, we must look back to a pivotal change made by the AICPA in the 1990s. During that time, they raised the requirement for CPA candidates from 120 college credits to 150 college credits. This alteration had a significant impact on what students needed to accomplish to obtain their CPA designation. As a consequence, many students shifted their career paths away from accounting and CPA pursuits and redirected their focus toward finance and obtaining an MBA. The allure of finance lay in its higher trajectory and comparable costs to achieve compared to becoming a CPA.
Consequently, the compensation structures in both fields did not align, and the return on investment (ROI) appeared more favorable from a finance perspective. This shift started a downward cycle, resulting in a decline in the number of students entering the accounting industry. Presently, we are witnessing the lowest number of newly certified accountants and CPAs graduating from universities.
This scenario is exacerbated by the great resignation phenomenon, which is impacting our industry more significantly than others. The workforce is aging, and while this is a challenge across various sectors, the accounting industry faces an additional issue of limited new talent replenishing the talent pool. As a result, the overall knowledge base and institutional expertise in our field are diminishing.
Businesses now grapple with the challenge of maintaining the quality of their outsourced services. For small businesses, retaining and nurturing internal staff who possess valuable institutional knowledge has become a pressing concern.
Addressing these challenges strategically will be essential to maintain the accounting industry’s vibrancy and ensure the delivery of high-quality services in the future.
Influence of Shifting Job Market and Employee Turnover on the Accounting Profession
The job market has shifted due to increased demand for accounting, resulting in more competitive wages as the supply of professionals decreases. Consequently, employees, staff, and shift workers are frequently pursuing better-paying opportunities, as there is always someone willing to offer slightly more.
What’s interesting is that while compensation is not the top priority for employee retention (although it does have a major impact), it remains significant. Everyone has financial obligations and aspirations for growth and prosperity. However, the average tenure for accountants has become approximately two years. This high turnover rate poses challenges for organizations, requiring them to retrain employees from scratch every couple of years.
This continuous turnover raises an important question for organizations: How can they stay ahead in the forever-changing landscape of technology and competition if they are content with maintaining the same processes and constant retraining?
High Demand Skills in Accounting Amidst the Great Resignation
Over the past two decades, the field of accounting has undergone a significant transformation.
Initially, it was predominantly a tactical job focused on tax compliance and number crunching. However, there has been a shift towards a new expectation where accounting departments and professionals are now required to offer strategic advisory expertise, knowledge, and guidance to their organizations or clients, especially for outsourced services.
This changing expectation has led to a greater demand for qualified professionals in the workforce. Surveys indicate that approximately 17% of accountants are expected to retire in 2023 or around that timeframe, resulting in the departure of experienced talent from the top end of the talent pool. Despite this, the demand for high-level advisory services remains unchanged.
To address this talent gap, professional development becomes a essential aspect for both the industry and individual firms. Investing in professional development is essential to equip accountants with the necessary skills and knowledge to meet the industry’s evolving demands. Organizations can establish internal professional development departments or collaborate with accounting associations and other educational organizations to provide continued education opportunities for their staff. Supporting and sponsoring such initiatives will be pivotal in maintaining the expertise required to excel in this ever-changing landscape of accounting.
The Current Labor Shortage’s Impact on Accounting Departments
The landscape of accounting is evolving rapidly with the rise of AI and machine learning. Alongside these advancements, there is a growing market for third-party applications that streamline operational tasks with financial components. As accounting professionals, we are expected to be knowledgeable in utilizing these tools to incorporate relevant data into our accounting processes effectively.
However, constant turnover in our workforce creates challenges in maintaining a high level of expertise. With new staff frequently needing training to meet basic standards, it becomes difficult for us to dedicate time to continuous learning, staying ahead of the industry, and providing valuable insights to our clients or internal organization.
To address this issue, we must focus on improving the staying power of our staff and team members. Encouraging longer tenures within our organization is key to ensuring professional development and expertise. Developing comprehensive and ongoing training plans that extend beyond the core basics of our processes is essential. By incorporating strategic and advisory components into our development initiatives, we can equip our team to handle the evolving demands of the industry more effectively.
Proactively Managing Knowledge Gap and Institutional Loss in Accounting Departments
One of the tools we utilize to enhance our accounting processes is a project management tool called FloQast, specifically designed for accounting closed management. With this tool, we create a structured set of tasks and reconciliation items, assigning due dates and documenting the processes. The primary goal is to consolidate the institutional knowledge of each client or company into a collective firm-level perspective, moving away from individual dependency.
By adopting this approach, we aim to ensure that critical knowledge is retained and accessible at the firm level, mitigating the impact of turnover and maintaining consistent efficiency across our accounting operations. FloQast is an excellent example of how we integrate technological solutions with our ERP, such as Sage Intacct at the GL level. It effectively identifies reconciliation issues and seamlessly becomes part of our accounting management enclosed process within our ERP products.
Strategies for Fostering Employee Loyalty and Reducing Turnover in Accounting Teams
Investing in professional development is a strategy that instills confidence in our team members, assuring them that they are on a growth path within our organization. Smaller businesses, including SMBs and mid-market companies, often face challenges in providing clear career progression opportunities for their accounting departments, which may consist of just a few people. However, we address this by actively promoting professional development and creating clear pathways for advancement.
We believe in documenting processes and offering support to our team members as they aim for the next step in their careers. This approach enables us to succeed as an organization while helping our employees achieve their goals. Fortunately, we have been fortunate to have team members who aspire to advance in their careers, even if it means moving on to new opportunities outside our organization. In such cases, we respect their choices and, thanks to their cooperation, are able to plan for a smooth transition, ensuring minimal disruptions.
Furthermore, we understand the significance of corporate culture. Many organizations fail to pay enough attention to aligning their hires with the company’s identity and culture. We believe that a thorough understanding of our organization’s identity is essential to ensure that new hires are a perfect fit. This alignment helps create a supportive and welcoming environment for our employees, fostering a sense of belonging and home.
Even though we are not perfect and have made hiring mistakes in the past, we have learned the importance of a strong cultural fit in employee retention. When employees resonate with our identity and values, they tend to stay longer, contributing positively to our organization’s growth.
In our day-to-day interactions, we prioritize providing constructive and positive feedback to our employees and team members. We understand that showing appreciation and recognizing their efforts go a long way in building a strong and committed team. We believe that these small gestures collectively add up to create a positive and rewarding work environment, encouraging our team members to remain part of our organization for the long term.
The Role of Outsourcing in Overcoming Challenges of the Great Resignation
Throughout our discussions, we have touched upon technology and turnover. Now, let’s explore what sets an outsourcing organization apart from many SMBs and mid-market organizations:
- Larger Group of Accountants: As an outsourcing organization, we have the capability to employ a significantly larger team of accountants compared to many SMBs and mid-market organizations. This scalability allows us to efficiently handle diverse accounting tasks for multiple clients.
- Professional Development Opportunities: We understand the value of continuous learning and growth. By being a dedicated organization of accountants, we can implement comprehensive professional development programs, ensuring that our team remains well-equipped with the latest industry trends and practices.
- Clear Paths of Growth: Within our organization, we can establish clear paths for career progression. This fosters motivation among our team members and provides ample opportunities for advancement based on merit and expertise.
Our large organization of specialized accountants enables us to effectively retain and manage institutional knowledge, ensuring consistency and efficiency in our processes. Additionally, we have access to third-party software products, transforming us into a knowledgeable base for the industry.
Moreover, we believe in a blended approach to our departments. We strive to create a balanced mix of internal and external resources through outsourcing. By having core, exceptional individuals who understand our vision and organizational culture, surrounded by outsource organizations with subject matter expertise that would be challenging to maintain in-house, we form a powerful team.
This approach allows us to focus on driving our vision and culture while leveraging the specialized knowledge and experience brought by external outsourcing partners. It empowers us to maintain a competitive edge in the industry.
Effective Evaluation and Selection of Outsourced Accounting Providers for Seamless Transitions
The evaluation process is critical when selecting an accounting provider. Ensuring that the provider possesses the necessary skill set and a team of qualified staff, including CPAs with ample experience, is of utmost importance to receive a quality product.
Assuming you have three providers with similar skill sets, the next important step is to assess their alignment with your organization’s culture. Just like hiring employees who fit your company’s culture, it is essential to ensure that the outsourced provider’s values and beliefs align with yours. The outsourced provider becomes a part of your team and organization, making this alignment essential for a successful partnership.
As an outsourced provider, we understand the significance of being culturally aligned with our clients. It is our responsibility to ensure that our beliefs and communication styles are compatible with our client’s values and understanding of success. When both parties share a common belief system and approach to business, a long-lasting and fruitful partnership is fostered.
If you find an outsourced provider with the right skill set and cultural alignment, you will have a reliable partner for the long term. On the other hand, opting for the cheapest or flashiest option without considering cultural fit may lead to receiving decent service in the short term, but you might eventually realize that the lack of alignment hinders achieving your long-term goals.
Leveraging Outsourced Accounting to Navigate the Great Resignation and Achieve Growth
Over the past few years, we’ve encountered numerous organizations facing a common challenge. Many of them had long-term bookkeepers, controllers, or internal accountants who served them for decades but left their positions a year or two ago. Upon hiring new personnel, they found it challenging to find the right fit. As business owners or managers without an accounting background, they struggled to manage this process effectively.
Outsourcing offers a compelling solution, as it allows organizations to shift the burden from their shoulders to a professional firm. By leveraging outsourcing, they no longer need to worry about the recruiting process, training, or developing internal accounting processes. We have witnessed instances where organizations came to us from other outsource providers, seeking help to resolve these challenges. Additionally, we have success stories of organizations transitioning smoothly after the retirement or departure of their internal accounting personnel.
Outsourcing empowers organizations to focus on their core competencies while entrusting their accounting functions to a dedicated and experienced firm. This not only ensures the continuity of accounting operations but also enables businesses to save time and resources that would have been otherwise spent on recruiting and training in-house staff.
Technology and AI’s Role in Addressing Challenges of the Great Resignation and Enabling Subject Matter Expertise
The impact of technology and AI on the accounting industry is undeniable, and it can play a significant role in mitigating the challenges brought about by the “great resignation.” Studies suggest that approximately 50% of accounting tasks can be automated using generative AI.
It’s essential to clarify that 50% automation doesn’t pertain to half of the tasks performed by any single individual in a day. Instead, it encompasses various accounting functions, including tax preparation, auditing, and outsourcing, across the entire spectrum of accounting services.
Automating these tasks will undoubtedly relieve accountants from mundane and repetitive work, enabling them to collaborate with AI technology to provide strategic and advisory services. This synergy between accountants and AI is incredibly potent and is something that accounting professionals should not only embrace but also actively bring to their client base. Embracing and leveraging AI solutions will position accounting professionals as subject matter experts, enhancing their value proposition to clients.
Despite the automation and technological advancements, it’s important to note that this transformation doesn’t spell doom and gloom for the accounting industry. On the contrary, it presents a plethora of opportunities for growth and development. Organizations and firms that have not yet started considering the impact of technology on their operations should do so promptly. Failing to adapt and leverage AI solutions may lead to negative consequences rather than positive outcomes in the future.