It’s no secret that the accounting profession is facing a growth in demand, while suffering a shortage of available talent, creating pressure for multifaceted changes.

Shifting demographics in the workforce reveal evolving attitudes and priorities among professionals. Lucrative opportunities in adjacent industries lure CPAs away, forcing firms to offer more competitive compensation. As business clients become more data-driven, firms are increasingly recognizing that their own technology and data strategy will be table stakes for their success. The multipronged challenges involved require action on all these fronts—and more.

Meet Shifting Demographics Head-on

Demand for accountants is expected to grow 6 percent from 2021 to 2031, according to the U.S. Bureau of Labor Statistics (bls.gov/ooh/business-and-financial/accountants-and-auditors.htm). The talent shortage is on both ends of the demographic spectrum. The number of U.S. students completing bachelor’s degrees in accounting declined from 2016–20, according to the AICPA’s 2021 Trends Report. A wave of retirements is underway as well; nearly 75 percent of the CPA workforce met the retirement age in 2020.

While most American attitudes about work have evolved, the public accounting profession and firm leaders have tended to move more slowly when it comes to search for progressive answers. To effectively address the talent squeeze, firms need to listen to the interests, concerns and work priorities of clients and employees—and be willing to make adjustments to keep them engaged.

Attracting and Retaining Talent

Retain Experience Through Creative Alternatives: CPAs nearing retirement age may leave the field early rather than continue to endure the long hours and high pressure of the traditional firm model. Frustrated and disillusioned CPAs often consider starting their own firms to gain more control over their career path, but typically become just another independent contractor without a brand or power.

Look to innovations in your business model to keep these tenured employees engaged. For example, we created an innovative auditors-as-a-service concierge model to deliver audit and assurance services via subscription. The company offers flexible weekly passes without a long-term commitment that allow CPA firms and companies to reserve access to U.S. audit and assurance professionals.

We’ve also allowed seasoned auditors to scale back work hours while remaining active in the field, advising multiple CPA firms and offering mentoring to younger CPAs. The company also offers audit managers and seniors an opportunity to operate autonomously by building a book of business that they manage and control without the risk involved in hanging their own shingle. They benefit from the infrastructure and resources of an audit service center within an alternative CPA firm with a national presence.

Offer a Career Path to Students: A CPA license requires undergraduate and graduate-level course credits equivalent to five years of college—an immense amount of preparation by the candidate and at least one year of general accounting work experience to qualify. Future-looking firms that connect with students early and offer assistance in exam preparation, work experience and skill development may foster relationships and sustain student interest in joining the firm after completing their education.

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Provide Stability and Work-Life Balance: Accountants early in their careers have been disillusioned by the traditional accounting firm model. They see no alternative to the relentless hours, high-stress work environment and lack of work-life balance. Increasingly, CPAs will opt out for work-life balance, an engaging culture and a track that offers a growth path.

To keep them engaged, firms would do well to offer flexible hours, remote work arrangements and generous PTO and seasonal breaks. Opportunities to lead or participate in new initiatives to enhance business development, firm workflows or technology adoption will encourage innovation and build skills.

Compensation Correction

After a decade of sluggish salary growth, competition for skilled accountants has finally forced the largest CPA firms to boost pay, says Bloomberg Tax (https://news.bloombergtax.com/financial-accounting/accounting-faces-reckoning-after-years-of-sluggish-pay-growth). The Big Four U.S. accounting firms have offered repeated rounds of wage increases during the past two years, as well as other perks to retain staff and be competitive when looking to fill open roles.

Firms need to also address the compensation gap and improve firm profitability with an aggressive and transparent incentive compensation program. Set clear goals and objectives, and tie compensation increases or bonuses to achievements related to both quality and profitability by using client satisfaction ratings, retention, revenue per client or new client acquisition.

Fight Commodity Pricing with a Value Proposition

Cost of labor is just one side of the profitability equation. For too many years, firms have failed to differentiate services, undercutting fees with the hopes of making it up on the back end. Failing to charge what we’re worth has created a need to squeeze costs to maintain a level of profitability. When the greatest single expense is labor, firms don’t have much choice other than burdening their fixed-cost salaried people with excessive workloads.

The days of the generalist accounting firm are over. Carve out your firm’s area of expertise. Choose a particular business segment—health care, SaaS software, cannabis, real estate or nonprofits, just to name a few. Get to know the financial and regulatory landscape in that industry. The insights and advice you can then provide are of much higher value to clients, and they’ll appreciate your services more.

Mind the Metrics

If the only conversations you’re having with your teams are about chargeable hours and deadlines, then you’re measuring what doesn’t matter. Billable hour goals, utilization targets and realization are metrics that look in the rearview mirror. Migrating to the use of more advanced metrics focused on human capital as a key input to audit quality will undoubtedly lead to better results.

Measure indicators such as staffing leverage, partner workload, turnover and training hours per professional and in doing so, you’ll likely create a more engaged and productive team. Then, proudly report this data to prospective clients to differentiate your quality and command premium pricing.

Keep the focus on the client. Consider a monthly value report offering each client a summary of the services delivered and outcomes achieved. Run a regular survey to track client feedback on the team members, services delivered and level of satisfaction with the services they received. Ask open questions such as, “How could we improve on this project?” “Which of the following new services would be of interest to you?” or “Would you recommend our firm to others?”

Conduct the survey consistently, follow up on any negative client feedback, and track results and trends for insights on how to improve services.

Technology Is the Ticket

New recruits are light-years ahead of their predecessors when it comes to technology. It’s practically in their DNA. Consider that they weren’t even 10 years old when the iPhone was introduced in 2007. From drones to automated workpapers, there’s so much game-changing audit technology available to advance accounting, tax and audit processes that firms would do well to invest in and adopt.

Harness the energy and interest of team members who ask for collaborative tools, data analytics, CRM or other tech upgrades that will enhance client services. Listen to clients who want online chat or text messaging. Pay attention to vendors who may have innovative ideas for gathering insight from data that will help grow your firm. Spending on technology is an investment in the longevity of your firm.

Moving Forward

We are in the knowledge economy. Knowledge creates solutions. Solutions deliver outcomes, and outcomes drive value. Value generates profit. Know your employees, and understand what they value. Know your clients, and understand what they value. Tailor your accounting business to address their needs and you will succeed.