Why CPAs are Quitting En Masse and How Outsourcing Can Help Your Accounting Firm Win the Talent War
More than 300,000 U.S. accountants and auditors jettisoned their jobs in the past two years, according to a recent report Wall Street Journal report. Reasons are plentiful, including wage stagnation, stress and the highly resisted push by companies to have workers return to the office post-COVID. As in virtually all industries, attrition via Baby Boomer retirement also is a driver – nearly 75 percent of all CPAs reached retirement age in 2020. But statistics from the Bureau of Labor Statistics also reveal that young professionals in the 25- to 34-year-old range, and mid-career professionals between the ages of 45 and 54, also departed in high numbers, starting in 2019.
One recent report finds that turnover in the top 50 firms is 17 percent, and one in every six firms experiences an annual turnover of 20 percent or more. A Deloitte poll found that 82 percent of hiring managers for accounting and financial positions at public companies, and 69 percent at private companies, said talent retention is a challenge. And the issue is unlikely to let up anytime soon, as college students increasingly are opting out of accounting-related degrees, choosing those with less strenuous requirements and higher starting salaries.
There’s a lot at stake. Accountants help companies of all sizes and in all fields manage financial processes and financial reporting and ensure increasingly complex regulatory compliance. Without them, one can easily envision a financial wild west, with employers at ever-higher risk of costly mistakes and non-compliance penalties, as well as fraud. For small and medium-sized companies, any of these scenarios can prove disastrous legally, financially and reputationally.
Covid-19 Fallout and The Great Resignation
Industry experts say the COVID-19 pandemic exacerbated an already troubling issue when the IRS delayed filing deadlines. Those delays stretched a normally hectic but compact tax season from a few months to nearly a year. Clients needing help with the Paycheck Protection Program added to the pressure. Though these moves provided much needed help to businesses nationwide, it proved an extended, collective headache for those in the payroll and accounting industries and pushed many professionals out of the business.
“Remember, when COVID hit in March 2020, it was the middle of tax season,” Michael Platt, managing principal of INSIDE Public Accounting, which provides practice resources for the accounting profession, told Fast Company recently. “Generally, February 1 to April 15 has about 10 weeks of pretty high-pressure work. You know it’s coming, and you know it’s got an end. But when 10 weeks turns into 10 months, it takes its toll.”
Platt noted a spike in turnover that began in April 2021 and has yet to let up significantly. Primary drivers, experts say, include a work-life imbalance; the typically conservative corporate financial field’s reluctance to fully embrace remote work, fast-evolving technology; and pay increases that fail to keep up with rising costs of living. Research by Indiana University’s Kelly School of Business shows accountants’ pay has been relatively stagnant over the past 20 years and undoubtedly contributes to high turnover.
Why Students Are Opting Out of Accounting Majors
According to the American Institute of Certified Public Accountants, the number of people taking and passing the CPA licensing exam declined 36 percent between 2010 and 2021, falling from more than 50,000 in 2010 to 32,000 in 2021. Students surveyed cited a lack of passion, lower starting salaries than those of other majors, and the strenuous 150-hour additional credit requirement to become a CPA as reasons for opting against accounting majors.
Some states are considering changes to that requirement. Earlier this year, the Minnesota Society of CPAs introduced a proposal that would offer students an option of 120 units of education and two years of experience as an alternative to the state’s existing 150 units, and one year of experience rule for certification.
“The MNCPA does not believe that legislation to broaden the licensing requirements is a magic solution and candidates will flock to the CPA exam,” the organization said in a January blog post. “It is one part of a multi-layered campaign to promote the accounting profession and make it an attractive career choice to students.
Starting salaries in accounting tend to be lower than other financial careers. CPAs with less than one year of experience earn an average of $70,000 a year, while average starting salaries for financial analysts and financial managers are $95,570 and $131,710, respectively, according to the Bureau of Labor Statistics. Both require only a bachelor’s degree.
And then, there’s the Millennial factor. Millennials currently comprise the largest generation in the U.S. workforce, with Gen Z right on their heels. These generations simply aren’t buying into the traditional financial and payroll career achievement, built on long hours in the early years in pursuit of a high-dollar payoff later in their career. One AICPA survey that focused on younger industry staff showed that, for every person fired or laid off, another two people leave of their own accord.
Additional studies by PwC and Robert Half further confirmed that millennials are more concerned about work-life balance and want flexible work schedules, varied work opportunities, including assignments abroad, and access to the latest technology.
To attract younger employees, some firms are increasing salaries and paying for exam-test-prep materials and time off to study and take the exam. KPMG, one of the Big Four accounting firms, offers a CPA Kickstart Program, which pays new employees a full-time salary with benefits for two months to study to pass parts of the CPA exam.
The Outsourced Accounting and Payroll Solution
It’s long been a profitable practice for employers of all industries to outsource accounting functions to CPA firms. But with the staffing shortage forcing them to compete for top talent with higher starting salaries and increased benefits, it now makes sense for accounting firms, themselves, to outsource certain functions. Bookkeeping, payroll processing, tax preparation, management accounting and financial reporting all can be outsourced to help firms save money and focus on higher billable tasks.
Among the most compelling reasons to consider outsourced accounting and payroll are:
- Cost efficiency: Outsourcing can significantly reduce operational costs for CPA firms. It eliminates the need for hiring and training in-house staff and cuts overhead costs, including office space and in-house technology infrastructure.
- Expertise access: Outsourcing affords CPA firms access to highly specialized experts with up-to-date knowledge of specific functions like payroll, taxes and financial analysis and forecasting. This expertise enhances the quality and accuracy of services provided to clients, without the cost of hiring a staff of specialists.
- Scalability: CPA firms can scale their outsourcing services based on client demand. This flexibility allows them to adapt quickly to fluctuations in workload, providing a more responsive service without the constraints of in-house resources.
- Focus on core services: Outsourcing routine tasks enables CPA firms to dedicate more time and energy to strategic planning, client relationship management, and offering specialized advisory services. This can help them differentiate themselves in a competitive market.
- Risk Mitigation: Compliance errors in bookkeeping, payroll tax, and financial statements can result in costly penalties. Outsourcing firms assume some of this risk, as they are responsible for ensuring accuracy and compliance.
- Enhanced Client Service: With more time and resources available, CPA firms can deliver better client service, deepening relationships and potentially attracting more clients through word-of-mouth referrals.
Ryan Hudson of Howards Chartered Certified Accountants can attest to the benefits of outsourcing. His firm called on IRIS Software Group, parent company of Apex by IRIS, to handle multiple functions in order to boost client service while offering his own employees a better work-life balance.
“To implement a four-day week, we needed to make sure the team’s time was being used on higher-value work,” he said. “IRIS Outsourcing has been a key player in making that happen. We like the IRIS product, and we have a fantastic relationship with our account manager, who works with us in our mission to work efficiently.”
IRIS provides multiple accounting-related software and service solutions designed to boost your firm’s profitability and that can scale with you as you grow and your needs change. Whether you’re looking to fully outsource service offerings like payroll, tax preparation, bookkeeping, etc. or simply need a modern software solution that can automate a range of functions for you, IRIS can help.