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There’s a Shortage of Accountants. What Can You Do About It?

Author

Raul Vega

https://www.linkedin.com/in/raul-vega-bab1478
raul.vega@auxis.com

Founder, CEO

In brief:

  • The accountant shortage has reached crisis levels in 2024, with more than half of financial-related jobs unfilled and accounting graduates dropping by the largest single-year percentage in more than a decade.
  • The lack of qualified talent is driving salaries sky high, impacting financial reporting, and forcing CPA firms to turn away work.
  • Finance leaders must completely reimagine how they source talent as the traditional accounting pipeline falls apart.
  • CFOs are increasingly turning to nearshore finance and accounting outsourcing to access deep pools of top-quality talent, solving the challenges of Asia-based solutions through time zone, cultural, and language compatibilities.

The accounting talent shortage has reached crisis levels – and it’s spilled over into financial reporting. Publicly traded Advance Auto Parts recently disclosed that turnover in key accounting positions created a material weakness in its financial reporting controls that stopped it from filing a 10-Q quarterly report on schedule.

As a key predictor of restatements, companies must disclose flaws in their internal control over financial reporting (ICFR) if there’s a reasonable chance a material misstatement could occur that they couldn’t prevent or detect in a timely manner. In its disclosure, Advance Auto said it was unable to attract and retain enough qualified people to fill its internal control responsibilities, requiring more time to assess the deficiency and remediation before filing.

Advance Auto’s struggles are far from unique. Through June 2023, nearly 600 U.S.-listed companies reported material weaknesses related to personnel predominantly in accounting or IT – an alarming 40.6% increase over 2019, according to a Wall Street Journal (WSJ) report.

The traditional accounting resource pipeline is crumbling in the U.S., forcing finance leaders to completely reimagine how they source talent. But confronting that challenge also creates an opportunity to reinvent outdated operating models and innovate a better way of working.

By leveraging the top-tier talent, labor arbitrage, and compatibilities of top Latin American markets with the digital capabilities and optimized operations of top nearshore finance and accounting outsourcing (FAO) partners, CFOs are transforming their organizations into the modern finance department the business demands while tapping into a deep new pool of certified accounting professionals.

The accounting talent shortage: Surging salaries and a dwindling pipeline

The statistics aren’t pretty. More than 300,000 U.S. accountants and auditors left their jobs within two years—a sharp 17% decline in talent from the profession’s peak in 2019—and the talent pipeline to replenish them is dwindling as the number of people seeking an accounting degree dropped by the largest single-year percentage since 1995.

In response, entry-level pay for accountants and auditors rose at its quickest pace in recent years – surging 21% in the first quarter of 2023, 13% in 2022, and 4% in 2021, according to a WSJ report.

Retaining talent is of equal concern as short-staffed teams burn out. In the first quarter of 2023, compensation climbed 9% for accounting-related roles across five seniority levels – nearly three times 2023’s annual inflation rate.

That doesn’t account for hefty signing bonuses and other pricey perks companies are dangling to lure and retain talent. In the red-hot job market, many finance managers feel forced to relax experience requirements as well, settling for entry-level workers who can learn on the job, states Robert Half’s 2024 Finance and Accounting Salaries & Hiring Trends report.

But assigning less-experienced people to critical accounting tasks brings significant risk: increasing the likelihood of errors, ICFR shortfalls, and fraud.