How the accountant shortage is affecting businesses, markets

The accounting industry is in a period of significant change.

Although one could point to a number of factors driving this change, one of the most significant is the general decline in the number of certified professional accountants (CPA) and the impact of this decrease on professional firms and businesses.

Since accountants provide a range of services relied on by businesses and markets, the decrease in the number of professional accountants is having ripple effects throughout the market and across industries. Here’s some context on this issue and suggestions for ways businesses can adapt successfully to the new market reality.

The accounting industry has seen an exodus of roughly 300,000 professionals since 2019, a decline in headcount of approximately 17% for the industry, according to a report in The Wall Street Journal. Furthermore, this is not simply a matter of more professionals stepping into retirement. The industry also is seeing a decrease in the number of young people entering the field of accounting.

For example, in 2018 accounting enrollments were down at the bachelor’s, master’s, and doctorate levels and the number of CPA exam candidates hit a 10-year low, according to the Illinois CPA Society. This trend has continued in recent years.

In the 2021-22 academic year, for example, the number of students graduating with a bachelor’s degree in accounting dropped about 7.8% relative to the 2020-21 academic year, according to a 2023 AICPA trends report.

This decrease in the availability of skilled accountants has significant ramifications for businesses. The first and most obvious implication is an increase in the cost of hiring and retaining qualified accountants. This may lead businesses to reduce overall headcount in their accounting function or to try to operate without a qualified accountant on staff.

This leads, however, to the second ramification. Accountants perform a range of vital roles for businesses. These roles include maintaining accurate financial data, providing timely and useful information to decision makers, and ensuring compliance with both internal and external rules and regulations. Problems in any of these areas could have ripple effects throughout the business.

In fact, it already has been noted that many businesses without fully staffed accounting departments now are reporting material weaknesses in internal controls, according to a Forbes report.

Businesses therefore need to be aware of the situation in the accounting industry and prepare strategically for the impact of a smaller pool of qualified professionals.

We list here a few considerations to help businesses adjust to the new market realities.

• First, reevaluate your need for professional accounting services and support. You will want to evaluate staffing levels, skill requirements, and time requirements to achieve business objectives and support the future goals of the business.

• Second, think differently. Specifically, consider technology solutions and outsourcing. Automation solutions, for example, may allow a business to reduce overall staffing levels while maintaining adequate procedures and internal controls. Alternatively, a fractional controller or CFO may be the perfect fit to keep an accounting team on track and to maintain performance to meet the needs of the business.

• Finally, maintain an open mind regarding external service providers. Smaller firms may be able to provide quality solutions at a more cost-effective price point and may provide more customer service, as well.

Businesses need to be aware of these industry changes and adapt accordingly. The general decrease in the number of qualified accountants may just be one of many challenges facing businesses, but it is important for businesses to be aware of this trend and adapt with it as a healthy accounting function is vital to the long-term success of business.

Brian Davidson is the founder and principal of XPECT, PLLC in Schaumburg.

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