The accounting shortage crisis: Do we need a paradigm shift?

The accounting profession is facing an enormous shortage, with recent projections showing that we could have a deficit of up to 3.5 million accountants by 2025. This is a big problem for the industry and poses a risk to financial reporting and compliance across various industries. The crisis is largely driven by an aging workforce, a decline in the number of new graduates entering the field, and a skills gap exacerbated by technology that is developing rapidly but not necessarily being harnessed in the correct way alongside regulatory changes. 

On the education side, the number of candidates taking the CPA exam decreased by nearly 50% from 1990 to 2021, which goes some way to demonstrating the severity of the situation. Whether businesses decide to employ large auditing firms or prefer the independent accountant route, it will affect all of them and will be particularly difficult when tax season comes.

There are lots of potential solutions to dig into that have been discussed by industry professionals to get this paradigm shift in motion. From automation to cloud solutions to data analysis, there are plenty of businesses to work with. Let’s dive into how leveraging technology through specialized software and artificial intelligence can avert the crisis.

The impact on corporations and how technology can be a solution

The shortage of qualified accountants has already impacted corporations in various ways. Companies are struggling to fill the most important positions, leading to increased workloads for existing staff and reducing the quality of financial reporting and compliance. On top of that, the shortage is leading to delays in financial audits and reporting, which inadvertently harms investor confidence and puts issues like regulatory compliance into question. In the Wall Street Journal report from last year, Advance Auto Parts, electric-air-taxi firm Joby Aviation, and German biotech company Evotec all reported a lack of accounting staff was making reporting a real difficulty.

Additionally, one of the often unspoken downsides of the scarcity of accounting talent is that it can bump up salaries, which while being great for those individuals who benefit, obviously has a negative effect on operational costs for businesses. In some cases, companies can be forced to rely more heavily on external consultants, which is very costly and much more time-consuming than an in-house professional.

To address the accounting shortage, technology offers a potential avenue in the form of automation, cloud solutions and advanced data analytics. Automation can handle routine tasks such as data entry and basic reporting, which leaves more space for accountants to focus on more complex and strategic activities. Cloud-based accounting platforms can then provide scalability and flexibility, which allows firms to streamline their operations and reduce costs. These platforms can also facilitate real-time access to financial data to make more timely decisions.

Advanced data analytics can improve risk management and decision-making processes, whereby sophisticated algorithms and data modeling techniques can give companies better predictions of financial outcomes and the opportunity to identify potential risks at an early stage. This analytical capability could be crucial for maintaining financial stability and compliance, particularly where there are increasing regulatory changes popping up at any given moment

The implementation of AI in accounting is still evolving, so it is not a surefire problem eraser, and current applications need to focus on augmenting rather than replacing human expertise. The adoption of AI and other technologies is expected to keep growing — 80% of credit risk organizations expect to implement gen AI technologies within a year — but it must be approached strategically to ensure that it doesn’t hinder the skills of existing professionals.

Strategic adaptations that firms can consider

While technology can alleviate some of the pressures, it also presents a challenge by potentially reducing the number of entry-level positions available. And we do not want to diminish the pipeline of future senior accountants and managers.

To address these issues, some experts suggest the profession needs a rebranding to attract new talent. However, this must be done carefully to ensure new entrants have a realistic understanding of the field. Efforts to make accounting education and certification more aligned with technological advancements could also help. For example, making some changes to the CPA exam and accounting curricula to emphasize technology and data analytics could make the profession more appealing and relevant to a younger, broader set of professionals.

If firms are honest with themselves, they find that half of the tasks within any given firm don’t require a CPA’s expertise. These tasks are often repetitive and can potentially frustrate a CPA who wants to focus on client-facing work and more challenging work.

Ultimately, the key to overcoming the accounting shortage can boil down to a fundamental shift in how accountants are trained and utilized. The focus needs to shift from routine compliance tasks to strategic, technology-driven roles that still add value to the business without wasting time on necessary tasks. To achieve this, we need a coordinated effort from all within the industry to recognize we are on a dangerous path and need schools and industry leaders to start making changes.