The accounting profession is facing pipeline challenges, and what that will look like in the future depends on how firms and other employers of accountants rise to the occasion.
The good news: AICPA & CIMA’s recent 2023 National Management of an Accounting Practice (MAP) Survey shows some clear pathways both to making a job in accounting attractive to new graduates and in retaining the best talent to create long, fruitful careers.
This year’s MAP Survey revealed that the average annual base salary in 2022 rose by 6.1% for professionals across all firms. This rise was comfortably covered by a 16% increase in median net hourly billing rates between 2020 and 2022 — and survey data suggests there is leeway for even higher fees. Increasing salaries is perhaps the most tangible way firms can continue to attract the best talent
Despite year-on-year increases, average annual salaries for accountants have lagged behind those in data science, engineering and financial analysis. While accountants hover in the mid-$80,000 range, people in those fields make an average yearly salary of $108,000-$117,000. This disparity certainly has an effect on attracting folks to an accounting career and is a significant area in which the profession can make improvements in order to boost the pipeline.
Salaries are absolutely trending in the right direction, so I am excited to see firms continue to prioritize this area. Stronger starting salaries not only make the profession attractive, they also rightly value the expertise accounting professionals bring to the table from day one.
Are we ready for value pricing?
I encourage firms to continue to focus on fees. Fees are up — the net hourly billing rate rose to $157 in 2022, compared to $137 in 2020 — and realization rates are positive, which suggests there is room for even more increases. But while rates are up, actual number of hours billed, as well as staff utilization, is down.
While the profession at large may not be ready for value pricing just yet, such a model could address these challenges that are arising as a consequence of serving clients more efficiently. As technology and other advances in work make accountants more efficient with their time, billing based on expertise rather than hours makes a lot of sense.
Expanding service lines
The MAP Survey showed the percentage of revenue coming from fees per tax form has fallen, declining by nearly 10 percentage points since fiscal 2015, while the use of fixed pricing has risen.
Part of the reason for this is likely tied to the rise of services beyond the traditional audit and tax business lines. In 2022, there was significant growth in newer consulting areas such as system and organization controls (SOC) reporting, client accounting/advisory services, business valuation and forensic accounting. Firms also posted strong growth in audit and attest services, as well as individual and business tax compliance and planning services.
Just as rethinking and improving billing models supports increased compensation, new service lines can naturally lead to updated billing practices, improved or more evenly spread cash flow, and reduced busy season hours — win-wins for staff, partners and clients. This in turn supports better work-life balance for staff, which is one of the key motivators for the millennial and Gen Z workforce.
Beyond compensation
Beyond making firms more attractive to work for, firms still need to find ways to address the talent shortage. A moderate percentage of firms has found success outsourcing work either domestically or overseas. Approximately 40% of MAP Survey respondents say they plan to outsource work domestically in the future, and 34% foresee using offshore talent. Although there are logistical and other challenges with outsourcing, this is one option for shifting unbalanced workloads away from internal staff.
And just as finding the right staff is essential to success, so is finding the right clients who are in line with a firm’s business model and available resources. More than 60% of firms separated from clients in 2022, and 82% plan to do so going forward. By being judicious about which clients they take on, firms can benefit from a more manageable workload and also cultivate more meaningful, longer-term relationships with the clients they retain.
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