Accounting firms need to pay more to bring young people into the profession, as starting salaries are still lagging compared to other fields, and they have to make other changes in how the job is structured.
“We need an overhaul,” said Paul Peterson, managing partner at Wiss & Co., a Top 100 Firm based in Florham Park, New Jersey. “The first thing is just to recognize that we have a serious problem that needs to be solved, structurally, culturally, strategically.”
Firms will need to take a different approach if they want to entice more people to the profession.
“The strategy of many accounting firms like ours are very influenced by the Big Four and other national firms,” said Wiss. “For years, they have used the audit as almost a loss leader to get other work. Middle-market firms like ours and other firms that proliferate across the entire country smaller than the Big Four, are all impacted by that. If you’re unable to really charge and price an audit at a level that values the CPA profession, it sets a ceiling on what you can actually charge and also what you can pay people. We have to get back toward valuing the CPA and the trust that the public is relying upon us we have to get back to valuing more. You can see in studies that the salary of a CPA has not risen to a level that it should with inflation and other cost-of-living increases. Strategically, we have to rethink how we are looking at the value of what we provide, and there should be an increase in pricing as a result, which then should lead to an increase in salary.”
He believes firms should be paying their employees more fairly. “Quite honestly, the way accounting firms are making money is that you pay someone a fixed salary annually, but you’re asking them to work way more hours than, let’s say, 35 or 40 hours a week, and these people don’t get paid overtime,” said Peterson. “The hourly rate that’s being received by an individual is a lot lower than it should be. The firms were able to get away with that, and that’s what they’re not talking about. The truth is that firms have done a lot on the backs of a lot of people, and the people are not willing to do that anymore, especially since COVID.”
Firms need to be more candid with recruits about what’s expected of them. “Firms are saying one thing and doing another, and that’s not helping,” said Peterson. “We’re looking for leaders out there in other firms to say let’s change this. Let’s come together and do it in a way that’s going to be better for everyone.”
EY survey
Interest in pursuing accounting degrees and CPA certifications seems to be waning, but there is good reason for hope in the future of the profession, according to a new survey.
The survey, released last Thursday by Ernst & Young, found that 97% of senior executives expressed optimism about the future of the accounting profession, and 79% of the students polled believe an accounting degree will have long-term career benefits.
EY surveyed approximately 500 accounting and science, technology, engineering and/or math (STEM) students and 500 senior executives for the poll. Diversity is important to many students, and the survey found that 79% of the students polled say working in diverse teams and work environments is very or extremely important to their professional future. However, only 36% of senior executives surveyed promote DEI to recruits.
Over three-quarters (76%) of students indicated engagement and involvement in the local community is very or extremely important to their professional future within the accounting profession, but only 27% of finance, accounting and hiring professionals say they promote this to attract potential employees. Making positive environmental, social and governance impacts (81%) and organizational diversity (79%) were also ranked by students as very important to their professional future.
Only 29% of senior executives say they showcase positive ESG impacts as a selling point of a career in accounting; 27% say they promote local community engagement and involvement (i.e., corporate responsibility programs); and 36% highlight having a diverse and inclusive workforce.
Nearly 40% of senior executives surveyed predicted that artificial intelligence would enable professionals to focus less on mundane aspects of their work and use judgment and higher-level thinking, but only 19% of students shared a similar sentiment. Some 39% of students fear AI could make people more expendable or eliminate many jobs.
Alternative paths to a CPA license
The survey also found a general agreement that alternative paths to CPA licensure eligibility would help strengthen the talent pipeline. Nearly nine out of 10 senior executives believe creating more options for students to earn their CPA license would be a benefit, as do 58% of the students surveyed.
“Our survey findings underscore the importance of creating alternate paths for students to become CPAs. A career in accounting can open the door for many opportunities,” said Becky Burke, EY Americas assurance chief operating officer, in a statement Thursday. “Organizations, academic institutions and professional associations can collaborate to demonstrate the benefits that a career in accounting provides and remove potential barriers to entry. One of the ways we’re doing this is through the EY Career Path Accelerator, which offers an affordable alternative for students to meet the 150-credit hour requirement for a CPA licensure eligibility.”
The Ohio Society of CPAs announced an action plan Monday to attract more young people to accounting (see story).
Changing the 150-hour requirement
Most accounting firms are looking at ways to attract young people to the profession and the 150-hour requirement.
“That rule came into fruition in 1988, when there was quite a larger population of accountants,” said Peterson at Wiss. “They were saying there’s a surplus of accountants. Let’s add another year that could enhance the quality of the education value of the CPA. But the circumstances we find ourselves in now, where you have the opposite, where you have a shortage of accountants, it seems to me that the accounting bodies, and especially the state associations, should be recognizing that adding another year is not going to help with getting more accountants into the industry.”
He pointed out that the problem goes beyond accounting. “It’s not just a public accounting issue,” said Peterson. “It’s an issue every company out there is facing. There have been companies recently that are publicly traded reporting in their SEC filings that they don’t have enough people to get some of the work done on time. The way I look at it is we have to come together to make it so that it is encouraging more people to potentially enter the profession, not to discourage.”
The high cost of college tuition is another factor deterring students from taking another year of courses to get the necessary credits. “It’s definitely not getting to the economically disadvantaged, for sure,” said Peterson.
Diversity issues
Diversity continues to be an issue as well, and firms like Wiss are trying to recruit more widely. “As a firm, I think we’re trying to take responsibility ourselves to get to the high school levels, to try to evangelize about the opportunities that someone can have in the accounting industry to give exposure to it,” said Peterson. “We’re going to host events here where we bring some high school students in and get a sense of what it’s like to be here. I think, as an industry, that’s the thing we’re going to have to start doing is really looking at how do we start to promote our profession and get it down to the levels within schools? Not just waiting for them to possibly make a decision once they’re in college, but how can we do what we need to do to start looking at accounting as something they consider as a potential major.”
He believes that accounting firms and educators should perhaps start looking at the trade school model. “We’re also trying to think about maybe trade school, and getting someone to start maybe with bookkeeping or a basic accounting type of experience, and then maybe bring them through a training program where we can eventually get them, if they’re interested, into more of a CPA type role where they get more schooling, and then eventually, maybe they’re interested in becoming a CPA and taking the CPA exam,” said Peterson. “We’re looking at alternative ways.”
His firm is teaming up with a trade school in Jersey City that’s starting such a program. “We’re getting in on the ground floor to have a bookkeeping certification where someone can get certified in, say, QuickBooks, because that’s such a valued skill right now,” said Peterson. “It’s a good-paying entry level type position. We’re trying to look at different avenues to attract people into the profession.”
He’s seeing more demand for young accountants with technology skills. “The other area that’s starting to resonate is with more advisory areas where they’re dealing with technology, and reignite more of a data analytics approach to the profession,” he said. “I think that’s another area that, you know, students are interested in exploring.”
Retention issues
Attracting young people to the accounting profession is a problem, but retaining them may be an even bigger challenge. A study released last month by the Institute of Management Accountants and the staffing and consulting firm Robert Half, found that accounting and finance professionals between the ages of 18 and 36 experienced the highest turnover (39%) over the past 24 months and are most likely (26%) to leave their current employer in the next 12 months (see story). Around 8% of them are considering leaving the profession altogether in the next 12 months.
Nearly 30% of professionals who plan to leave their current employers within the next 12 months expressed dissatisfaction with their work and coworkers, according to the survey. They were also five times more likely than those intending to stay to feel disengaged at work. Over 80% of the professionals who expressed their intention to leave in the next six months don’t expect to advance in their current organization, and only one-quarter who intend to stay shared the same view.
“What can we do, especially from an employer or from a CFO or from the accounting and finance leaders perspective?” said Susie Duong, senior director of research and thought leadership at the IMA and co-author of the study. “We know that the baby boomers are retiring at a higher rate, and when we look at the statistics, young students are not interested in enrolling in accounting programs at universities. Our research showed that the younger generation are actually not interested in staying in our profession or staying with the employer. Our report is unique in the sense that we actually not only look at the problem and identify what could be the cause of the problem. We also provide solutions that the organizations and the leaders can consider. I wouldn’t say that our list of recommendations and strategies were supposed to be exhaustive, but at least that serves as a foundation for the leaders to initiate discussions to address the issues.”
To effectively retain accounting talent, the report suggests organizations can implement strategies by providing competitive compensation and benefits, fostering a supportive and inclusive workplace culture, recognizing outstanding performance, providing career growth and development opportunities, and promoting a healthy work-life balance.
Why are accountants leaving the profession? Older respondents typically cited retirement or early retirement. But for the younger generation, they said leaving accounting for a different field like finance, but it’s not necessarily capital market finance or investment banking.
“In their minds when they talk about finance, it was actually FP&A, budgeting, data analytics,” said Duong. “If you think about it, they are still within the CFO function. But to these young people, they are actually leaving the accounting profession to join finance, because in their minds at least the impression they have of accounting is the routine, tedious tasks where they don’t feel like they have a future.”
Young people are thinking of going into other fields after they leave accounting. “Some are interested in entering, for example, marketing, and some are interested in going back to school because of the uncertainty that they’re facing and then they just want to open up their options,” said Duong.
Compensation is only one factor. “When we look at the factors that drive or contribute to the turnover, we highlight that compensation is important, but compensation is not the only important factor that could trigger people’s decision to leave, especially for the younger generation,” said Duong. “For the five factors we have other than compensation, I would say that two of them are highly relevant to this younger group. One is career advancement. If you look at our statistics, career advancement concerns significantly influenced the respondents’ decision to leave their employer or the profession. And another one is actually the sense of belonging, which is related to organizational culture. The other factor that we also study in our report is satisfaction with your coworkers or with your supervisor. That to me is actually also a reflection of the organizational culture.”
She heard from a young person who attended one of the IMA’s recent conferences who believes the Certified Management Accountant credential would give them more opportunities and possibilities.
“There are a lot of options out there for this younger generation,” said Duong. “They are the generation of social media and they’re tech savvy. In their view, accounting is still number crunching and a lot of routine tasks, at least when you first enter accounting as a junior person. As a starting role, a lot of time that’s what you do. For this younger generation, that’s not attractive to them. And then they probably jump to the conclusion too soon that this whole profession is not that attractive. There are a lot of things that our leaders, our CFOs and other accounting and finance leaders, need to think about regarding what we can do to change the attractiveness of our profession to this younger generation because they are the ones entering the workforce now.”
Technology may draw more young people to the profession and convince them to stay there. “It seems like technology can play a significant role in attracting and retaining young talent,” said Duong. “Nowadays, people talk about AI and the fear that they’re going to be replaced by AI, but we learned from our survey respondents that they actually welcome this advanced technology to our profession. They are willing to embrace advanced technology and they are willing to work. They also realize the importance of upskilling and rescaling themselves to prepare themselves for the future of AI. Employers should provide opportunities to prepare them for the future, especially regarding upskilling in the current environment.”
Accounting as a STEM program
The American Institute of CPAs is supporting a bill in Congress that would make accounting part of the STEM curriculum in schools as a way to attract young people early in their education (see story).
“I guess from a pure just branding perspective, there’s a big interest in going into STEM fields,” said FloQast CEO Mike Whitmire, a former senior auditor at EY whose Los Angeles-based company makes accounting and close management software. “If you lump it in with the STEM umbrella, from a branding perspective, you’re going to get more applicants and more people interested in the field versus leaving it as just a standalone accounting role. That said, I do feel like it’s an appropriate time. Accounting is merging with technology and IT and software development and writing of code so much that there is a really good argument to be made that it’s more shifting into a STEM field, whereas in the past, when it was done on paper, and maybe with light technology, like Excel, it’s hard to make that argument, but based on what we’re seeing develop in the market, I think you can you can start to really rightly say it should be a STEM program.”
The AICPA’s 2023 Trends report found 47,067 students earned a bachelor’s degree in accounting in the 2021-22 school year, down 7.8% from the previous year (see story). The number of students who earned a master’s degree in accounting dropped 6.4% to 18,238.
Having accounting be considered part of the STEM curriculum by the federal government would allow federal grant funding to be used for K-12 accounting education. It could introduce young people to accounting sooner in life, and they might consider it a possible career option if it becomes part of the school curriculum.
“The impact will clearly be more people being interested in entering accounting and being more familiar with it as an actual field of study versus just being aware of the stereotypes of accountants when making the decision of whether they want to major in it or not,” said Whitmore. “Just having some actual familiarity with the field will be really helpful for people choosing what major they want to go in. Aside from that, though, I think it’s just really healthy to be introducing accounting and personal finance much earlier in the student’s career. To me this is something every student should learn in high school. The fundamentals of accounting really help you understand your own personal finances and a bit of how the world works. Then extending that out to how you write a check and how credit cards work, as just a baseline, is super healthy for people to be learning in high school. Aside from how much it helps to build the accounting profession and talent gap that we’re having right now, I think it’s great from all perspectives. It will help accounting and also just help people getting out of high school know this information.”
Such programs can also help with financial literacy in general for people coming out of school, whether or not they decide to major in accounting in college. “If you’ve done a couple of baseline accounting classes in high school, it’s easy enough for you to fire up, for example, a debt schedule and understand interest implications in looking at student loans and make a financial decision around that,” said Whitmire.”That’s something that you’re in a much better position to do. If you haven’t learned any of that information, you might not really be thinking about it that way.”
FloQast has also been offering courses in accounting studies through its own FloQademy program. “We’ve launched a big library of learning content that’s free to any accountant out there, and our customers leverage it as well,” said Whitmire. “We try to go for entertaining educational content. Some of it’s around broadly accounting, some of it’s around guidance, some of it’s around business development and personal development, and some of it’s of course around learning FloQast and how to use it. They’re all CPE-accredited courses, so any CPA who needs to remain active and would like to get their credits can log into FloQast’s FloQademy, get the 40 credit hours they need every year to remain active for free, and hopefully in a really engaging way. It’s something where we’ve created a content engine internally and we’re just regularly feeding that library. The amount of content there is going up on a weekly basis, based on all the work we’re doing across the company.”
FloQast has also been busy producing video content of another variety in recent years, debuting a sitcom called “PBC” last year from its FloQast Studios unit revolving around an accounting office. The first season featured cast members from “The Office,” Kate Flannery and Creed Bratton, along with movie stars like Danny Trejo from “Machete” (see story), and the second season debuted early this year on YouTube.
“Unfortunately, we couldn’t get that CPE certified,” said Whitmire. “We just greenlit season three.”
For someone whose career has led from auditor to technology entrepreneur to sitcom producer, he demonstrates how a career in accounting can lead to a wide range of possibilities.
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